Southwest Securities, Inc.
Identification Theft

What to do if you're a victim of Identity Theft

If you are a client of and feel you may be a victim of identity theft, please contact your financial advisor immediately.

In addition, take the following four steps as soon as possible, and keep a record with the details of your conversations and copies of all correspondence.

• Place a fraud alert on your credit reports, and review your credit reports.

  Fraud alerts can help prevent an identity thief from opening any more accounts in your name. Contact the toll-free fraud number of any of the three consumer reporting companies below to place a fraud alert on your credit report. You only need to contact one of the three companies to place an alert. The company you call is required to contact the other two, which will place an alert on their versions of your report, too. If you do not receive a confirmation from a company, you should contact that company directly to place a fraud alert.

  • TransUnion: 1-800-680-7289;
    www.transunion.com;
    Fraud Victim Assistance Division,
    P.O. Box 6790, Fullerton, CA 92834-6790
  • Equifax: 1-800-525-6285;
    www.equifax.com;
    P.O. Box 740241, Atlanta, GA 30374-0241
  • Experian: 1-888-EXPERIAN (397-3742);
    www.experian.com;
    P.O. Box 9532, Allen, TX 75013

  Once you place the fraud alert in your file, you're entitled to order one free copy of your credit report from each of the three consumer reporting companies, and, if you ask, only the last four digits of your Social Security number will appear on your credit reports. Once you get your credit reports, review them carefully. Look for inquires from companies you haven't contacted, accounts you didn't open, and debts on your accounts that you can't explain. Check that information, like your Social Security number, address(es), name or initials, and employers are correct. If you find fraudulent or inaccurate information, get it removed. See Correcting Fraudulent Information in Credit Reports to learn how. When you correct your credit report, use an Identity Theft Report with a cover letter explaining your request, to get the fastest and most complete results.
  
  Continue to check your credit reports periodically, especially for the first year after you discover the identity theft, to make sure no new fraudulent activity has occurred.

• Close the accounts that you know, or believe, have been tampered with or opened fraudulently.

  Call and speak with someone in the security or fraud department of each company. Follow up in writing, and include copies (NOT originals) of supporting documents. It's important to notify credit card companies and banks in writing. Send your letters by certified mail, return receipt requested, so you can document what the company received and when. Keep a file of you correspondence and enclosures.
  
  When you open new accounts, use new Personal Identification Numbers (PINs) and passwords. Avoid using easily available information like your mother's maiden name, your birth date, the last four digits of your Social Security number or your phone number, or a series of consecutive numbers.
  
  If the identify thief has made charges or debits on your accounts, or has fraudulently opened accounts, ask the company for the forms to dispute those transactions:

  • For charges and debits on existing accounts, ask the representative to send you the company's fraud dispute forms. If the company doesn't have special forms, use the sample letter to dispute the fraudulent charges or debits. In either case, write to the company at the address given for "billing inquires" NOT the address for sending your payments.
  • If you want to file a dispute directly with the company, and do not want to file a report with the police, ask if the company accepts the FTC's ID Theft Affidavit . If it does not, ask the representative to send you the company's fraud dispute forms.
  • However, filing a report with the police and then providing the company with an Identity Theft Report will give you greater protection. For example, if the company has already reported these unauthorized accounts or debts on your credit report, an Identity Theft Report will require them to stop reporting that information. Use the cover letter to explain to the company the rights Identity Theft Report. More information about getting and using an Identity Theft Report can be found here.

  Once you have resolved your identity theft dispute with the company, ask for a letter stating that the company has closed the disputed accounts and has discharged the fraudulent debts. This letter is your best proof if errors relating to this account reappear on your credit report or you are contacted again about the fraudulent debt.

• File a complaint with the Federal Trade Commission.

  You can file a complaint with the FTC using the online complaint form; or call the FTC's Identity Theft Hotline, toll-free: 1-877-ID-THEFT (438-4338);TTY: 1-866-653-4261; or write Identity Theft Clearinghouse, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. Be sure to call the hotline to update your complaint if you have any additional information or problems.
  
  By sharing your identity theft complain with the FTC, you will provide important information that can help law enforcement officials across the nation track down identity thieves and stop them. The FTC can refer victims' complaints to other government agencies and companies for further action, as well as investigate companies for violation of laws the agency enforces.
  
  Additionally, you can provide a printed copy of your online Complaint form to the police to incorporate into their report. The printed FTC ID Theft Complaint, in conjunction with the police report, can constitute an identity Theft Report and entitle you to certain protections. This Identity Theft Report can be used to (1) permanently block fraudulent information from appearing on your credit report; (2) ensure that debts do not reappear on your credit report; (3) prevent a company from continuing to collect debts that result from identity theft; and (4) place an extended fraud alert on your credit report.

• File a report with your local police or the police in the community where the identity theft took place.

  Call your local police department and tell them that you want to file a report about your identity theft. Ask them if you can file the report in person.
  
  If you cannot, ask if you can file a report over the Internet or telephone. See below for information about Automated Reports.
  
  If the police are reluctant to take your report, ask to file a "Miscellaneous Incident" report, or try another jurisdiction, like your state police. You also can check with your state Attorney General's office to find out if state law requires the police to take reports for identity theft. Check the Blue Pages of your telephone directory for the phone number or check www.naag.org for a list of state Attorneys General.
  
  When you go to your local police department to file your report, take a printed copy of your FTC ID Theft Complaint form, your cover letter, and your supporting documentation. The cover letter explains why a police report and an ID Theft Complaint are so important to victims.
  
  Ask the officer to attach or incorporate the ID Theft Complaint into their police report. Tell them that you need a copy of the Identity Theft Report (the police report with your ID theft complaint attached or incorporated) to dispute the fraudulent accounts and debts created by the identity thief. (In some jurisdictions the officer will not be able to give you a copy of the official police report, but should be able to sign your Complaint and write the police report number in the "Law Enforcement Report" section.)

Southwest Securities, Inc.
Investment Advisor
Form ADV Part II

Contact the Southwest Securities Investment Management Group at (214) 859-6735

Southwest Securities, Inc.
Callable Securities Disclosure

Southwest Securities Impartial Lottery Process: When a security is subject to a partial redemption, pursuant to FINRA Rule 4340, which has been incorporated into the FINRA Consolidated Rulebook, SWS must have procedures in place that are designed to treat clients fairly in accordance with an impartial lottery process. Below is a description of the impartial lottery process:

When an issuer initiates a partial call of securities, the depository holding such securities (typically, the Depository Trust Corporation "DTC") conducts an impartial computerized lottery using an incremental random number technique to determine the allocation of called securities to its participants (including SWS) for which it holds securities on deposit. Because DTC's lottery is random and impartial, in the case of a partial call, Depository Participants may or may not receive an allocation of securities selected for call.

When SWS is notified that it received an allocation of called securities, SWS conducts a similar computer-generated random lottery. The lottery determines the accounts that will be selected and the number of securities in the account that will be redeemed. Allocations are based on the number of trading units (e.g $1,000 lots for bonds) that the accounts hold. The probability of any trading unit held by an account being selected as called in a partial call is proportional to the total number of trading units being held through SWS. Once the lottery is completed, SWS notifies any brokers whose client accounts have received an allocation. Securities registered in customer name, either in transit or held in custody, are excluded from the SWS lottery process.

SWS systems initiate the lottery process by identifying the accounts that hold the called security, the total par value of the called securities held in the accounts and the trading unit of such security (e.g. $1,000).

Example (unit of trade = $1,000)

In brief, that allocation process involves the following steps:

• Each account gets identified with the number of trading units held.
• Each trading unit gets a sequential number assigned. (e.g, Acct 789101112 would get 150 numbers assigned to it.)
• A random number is generated that will result in one of these trading units being the first unit in the selection process.
• Thereafter, the trading units participating in the allocation are based on an incremental random number technique until the number of trading units allocated for SWS is exhausted.

• The allocation of called securities is not made on a pro rata basis. Therefore, it is possible that a customer may receive a full or partial call or may not have any securities selected for call at all.
• Each trading unit gets a sequential number assigned. (e.g, Acct 789101112 would get 150 numbers assigned to it.)
• When a partial call is deemed favorable to the holders of the called security, in accordance with FINRA Rule 4340, SWS will exclude any proprietary and Associated Person accounts of SWS or Broker/Dealers for which it clears from the lottery. No allocation will be made to SWS proprietary or Associated Person accounts until all other customer positions in such securities have been called. Conversely, when a partial call is deemed unfavorable to holders of the called security, SWS will not exclude proprietary or Associated Person accounts of SWS or Broker/Dealers for which it clears from the lottery.
• Generally, a partial call will be deemed favorable if the call price is above the current market price as captured in SWS's price reporting system. If the partial call is made at a price that is equal to or below the current market price of the security, as captured in SWS's price reporting system, the partial call will be deemed as unfavorable to holders of the security.
• You have the right to withdraw uncalled fully paid securities from SWS at any time prior to the cutoff date and time established by the issuer, transfer agent and/or depository with respect to the partial call, and also to withdraw excess margin securities provided that your account is not subject to restriction under Regulation T or such withdrawal will not cause an under margined condition.

Southwest Securities, Inc.
Investment Protection Principles

We have adopted procedures to conform to the six "Investment Protection Principles" for investment banks that were recently announced. The six principles are:

• Sever the link between compensation for analysts and investment banking
• Prohibit investment banking input into analysts' compensation
• Create a review committee to approve all research recommendations
• Require that upon discontinuation of research coverage of a company, firms will disclose the termination and the rationale for such termination
• Disclose in research reports whether the firm has received or is entitled to receive any compensation from a covered company over the past 12 months

We will continue to remain on the forefront of all aspects of corporate governance.

Southwest Securities, Inc.
Our Customer Protection

Safeguarding Your Assets

Southwest Securities, Inc. is committed to safeguarding your assets. In addition to the firm’s capital strength, we offer account protection through: Securities Industry Protection Corporation (SIPC), underwriting syndicates at Lloyd's of London and Federal Deposit Insurance Corporation (FDIC).

Securities Industry Protection Corporation (SIPC)

Southwest Securities, Inc. is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). An explanatory brochure is available upon request or at www.sipc.org.

Excess SIPC

In addition, Southwest Securities, Inc. has purchased additional security protection to cover the net equity of customer’s accounts up to an aggregate of $100 million from underwriting syndicates at Lloyd's of London.

SIPC and Excess SIPC covers accounts of the member firm in the event of a member’s bankruptcy or insolvency. Coverage does not apply to losses due to market fluctuation or to any decline in the market value of your securities.

Federal Deposit Insurance Corporation (FDIC)

The FDIC insures bank deposit accounts such as checking, interest-bearing checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs) if an insured bank or savings association fails. Your bank deposits are generally insured up to $250,000 per depositor, while your IRA and other qualifying self-directed retirement funds on deposit are separately insured up to $250,000. The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased those products from an insured bank. Additional information regarding FDIC coverage is available at www.fdic.gov.

Southwest Securities, Inc.
Privacy Policy

At Southwest Securities, Inc. (Southwest), we are committed to protecting your privacy and the confidentiality of your personal and financial information. The measures we take to keep your personal information private and secure are outlined below.

Southwest Securities, Inc. has multiple affiliates, including SWS Financial Services, Inc., Southwest Insurance Agency, First Southwest Company, LLC and PlainsCapital Bank. These companies, along with Southwest Securities, Inc., are wholly owned subsidiaries of Hilltop Holdings Inc., a financial holding company whose stock is listed on the New York Stock Exchange under the ticker symbol HTH. Since the affiliates are all part of one corporate family, they work with one another and may work together to service your financial needs. The sharing of your information among our affiliates enables us to serve you more efficiently and makes it more convenient for you to do business with us. We are permitted by law to share information with our affiliates about your account history and your experiences with us. All of our affiliates follow similar privacy policies.

How We Protect Confidentiality

When we enter into agreements with other companies to provide services to us or to make products and services available to you, we include a confidentiality clause. Under such an agreement, these companies may receive information about you, but they may only use it for the intended purpose - to benefit you. 

Persons Covered by the Privacy Policy

The Southwest Privacy Policy applies to anyone who is a current or former Southwest brokerage or investment advisor client or who registers with one of our services or promotional offers. We provide you with a copy of this policy when you open an account, and we send you annual notifications thereafter. If we change our policy regarding the sharing of information, we will notify you in advance and give you the opportunity to "opt out" of such disclosure.

How We Obtain Information About You

In the normal course of business, we collect, retain and use information about you to serve your financial needs, administer your account(s) and inform you of products and services that may be of interest. This data, known as non-public personal information, may be collected from several sources, including: applications and other forms you file with us (e.g., name, assets, and income), records of transactions with us, our affiliates, non-affiliated third parties and others (e.g., credit report). Because we strive to provide you with the best possible service, the accuracy and completeness of your personal information is important to us. We ask that you review your information regularly to ensure that it is correct. Please contact your account representative or Southwest directly if you need to correct or update your personal information.

Sharing Information-With Whom and Why

Southwest does not sell your personal information to anyone. We restrict the types of information we share and the types of entities with whom we share it. The primary reason for sharing information about you is to increase your convenience in transacting business with us and to give you more financial service choices.

We do not disclose your personal information to non-affiliated third parties, unless one of the following exceptions applies: We disclose personal information to service providers that assist us in processing your transactions or servicing your account(s). An example would be the company that prints and mails your account statement. We disclose or report personal information in limited circumstances when we believe in good faith that disclosure is required or permitted under law. For example, we would provide information in cooperation with securities regulators or law enforcement authorities, to resolve consumer disputes, or to perform credit evaluations and authenticate checks.

Internet Security

We do not retrieve account or personal information from visitors who browse the public (pre-logon) areas of our websites. Clients who have the ability to access their accounts online are required to log on with their user name and individually selected password. Your password is known solely to you, the client, and should never be shared with anyone. You may change your password as often as you wish.

When you access your account online, it is through a Secure Socket Layer-encrypted session between your browser and our servers. We will continue to enhance security procedures as new technologies become available. Each time you access your account please don't forget to log off when you are finished. This will prevent someone else from accessing your account if you leave your computer and your session hasn't automatically shut down. Southwest employees use information about you to respond to your needs and to provide you with information about specific products in which you may have an interest. We instruct our employees to use strict standards of care in handling the personal, confidential information of customers and remind them on a regular basis of their obligations with regard to the confidentiality of customer information.

Option to Opt Out and Change Notices

If for any reason at any time in the future, we find it necessary to disclose any of your personal information in a way that is inconsistent with this policy, we will give you advance notice of the proposed change and the opportunity to opt out of such disclosure. For your reference, this policy has been posted to our Web site at www.swst.com. If you have questions or concerns, please contact us via email at info@swst.com.

Special Statement to Customers Maintaining Margin Accounts

Securities purchased on margin are the firm's collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan and, as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member firm, in order to maintain the required equity in the account. It is important that you fully understand the risks involved in trading securities on margin. These risks include the following:

You can lose more funds than you deposit in the margin account; The firm can force the sale of securities or other assets in your account(s); The firm can sell your securities or other assets without contacting you; You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call; The firm can increase its house maintenance margin requirements at any time and is not required to provide you advance written notice; You are not entitled to an extension of time on a margin call; Southwest can loan out the securities that collateralize your margin debit. If it does, you may not receive, with respect to securities that are lent, certain benefits that normally accrue to a securities owner, such as the ability to exercise voting rights, or to receive interest, dividends, or other distributions. Although you may receive substitute payments in lieu of distributions, these payments may not receive the same tax treatment as actual interest, dividends, or other distributions, and you may therefore incur additional tax liability for substitute payments. Southwest may allocate substitute payments by lottery or in any other manner permitted by law, rule, or regulation. Please note that any substitute payments we make are voluntary and may be discontinued at any time.

Callable Securities Disclosure

Southwest, in accordance with FINRA Rule 4340 (Callable Securities), has a lottery process in place which will allocate among its customers, on a fair and impartial basis, the securities to be redeemed or selected as called in the event of a partial redemption or call. You may access the firm’s allocation procedures on the firm’s website at http://swst.com/pages/SwstCorporateGovernance.aspx. The firm will provide hard copies of the allocation procedures upon request.

Disclosure of Order Routing Information

Under SEC Rule 606, Southwest Securities is required to prepare quarterly reports of orders routed on behalf of client orders that disclose the following information: the venues to which it routes orders for execution; the percentage of total customer orders that were non-directed; the percentage of total customer orders that were market orders, limit orders or other order types; the percentage of routed orders to each venue; and any terms of the material aspects of Southwest's relationship with each venue. These reports are made public quarterly and are published no later than one month after the end of the quarter. These reports can be accessed by clicking on: www.swst.com and then select "Institutional Services" and then select "Agency Trading". You will have direct access to the current quarterly Rule 606 report in .PDF format. Pursuant to the rule, a client can request details from Southwest Securities on the identity of the venue to which a client order was routed for execution.

FINRA BrokerCheck

The Financial Industry Regulatory Authority (FINRA) publishes an investor brochure that describes FINRA BrokerCheck. The FINRA BrokerCheck Hotline Number is 1-800-289-9999. The FINRA website address is www.finra.org.

Customer Complaints

Clients may submit all complaints to the Compliance Department by calling telephone 800-957-2999, or by writing Southwest Securities, Inc., Attention Compliance Department, 1201 Elm Street, Suite 3500, Dallas, Texas 75270.

Southwest Securities, Inc.
Anonymous Reporting Hotline


Report It

Have you noticed an issue of workplace misconduct such as theft, fraud, dishonesty, harassment, unethical behavior or improper accounting practices? Then we urge you to report it.

You are never required to provide any personal identifying information to access the system online or by telephone - it is all done by access code. The hotline and the Website link are completely confidential, and are administered by an independent third-party to ensure full anonymity for anyone who uses them. The toll-free hotline number, and the link to file a report online are both available 24 hours a day, 365 days a year.

Call the hotline number 877-778-5463, give your username (swsgroup), and password (swsgroup), and the operator with the reporting service will help you submit your report. The operator then files the report and sends it to the company for you so that you may maintain complete anonymity. You will never have to speak to anyone affiliated with SWS Group, and no one at the company will ever contact you, it will all be done through the reporting service.

You may also file a report from any computer with online access. Go to www.reportit.net and click on the Report it Online button, enter your username (swsgroup), and password (swsgroup). Simply type in your answers to the given questions to submit your anonymous report. Try to be as clear and complete as possible so that your concerns may be properly and thoroughly investigated.

Southwest Securities, Inc.
Sweep Account Disclosure

For new accounts, if no selection of a money fund is made, your account will default to sweep cash balances to the Dreyfus General Money Market Fund. For existing accounts, please notify your Broker if you wish to sweep balances to the Dreyfus General Money Market Fund, the Bank Insured Deposit or other selection. The Bank Insured Deposit is an FDIC-insured account administered by Reich & Tang Insured Deposits that sweeps funds to participant banks in increments of $250,000, to achieve FDIC insurance coverage up to $2.5 million depending on the number of participant banks in the program. Deposits in these participant banks are generally insured up to $250,000 per depositor, while your IRA and other qualifying self-directed retirement funds on deposit are separately insured up to $250,000. Prior or additional bank accounts at any participant bank may affect insurance coverage. If your funds on deposit at the participant bank exceed the applicable FDIC insurance limit of $250,000 per depositor ($250,000 for qualifying retirement accounts), the FDIC will not insure your funds at that participant bank which are in excess of the limit. If you have a deposit with one of the participant banks that is separate from a balance in the Bank Insured Deposit, please notify your broker if the combined deposits are in excess of $250,000.

For a list of Bank Insured Deposit participant banks, please click here: Participant Banks

For the BID Terms and Conditions document, please click here: BID Terms and Conditions

It is important that you understand the unique nature, insurance coverage and risk associated with each type of account. SIPC coverage does not protect cash balances created and maintained solely for the purpose of earning interest, so funds in money market or CIP accounts must be intended for future reinvestment.

SWST may temporarily suspend or discontinue the sweep arrangement, or change the timing or frequency of the sweep, anytime without advance notice to you. SWST may change your sweep account terms by giving you written notice. If SWST fails to sweep your uninvested funds in the manner described in the Customer Account Agreement, SWST's liability is limited to the actual amount of the dividends or interest you would have earned had the sweep been performed. SWST may automatically sweep funds from your sweep account to your brokerage account anytime without advance notice to you to pay for securities transactions and withdrawal requests, satisfy a debit balance, settle any other obligation you owe SWST, pay your margin loan, provide necessary collateral in your margin account, or for any other permissible purposes. Should you wish to access these funds or information regarding the fund rates, contact your Broker or registered representative. With ongoing changes to the rates of return for the available sweep options, your personal financial circumstances and market conditions, you should always consider all of your investment options.

Bank Insured Deposit

We anticipate receiving fees, including fees for administrative services, and other financial benefits for providing sweep funds on deposit with the Bank Insured Deposit. A portion of fees received may be paid to your Broker. The FDIC insures bank deposit accounts such as checking, interest-bearing checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs) if an insured bank or savings association fails. Your bank deposits are generally insured up to $250,000 per depositor, while your IRA and other qualifying self-directed retirement funds on deposit are separately insured up to $250,000. The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased those products from an insured bank. Prior or additional bank accounts at the Bank may affect insurance coverage. If your funds on deposit exceed the applicable FDIC insurance limit of $250,000 per depositor ($250,000 for qualifying retirement accounts), the FDIC will not insure your funds in excess of the limit. Additional information regarding FDIC coverage is available at www.fdic.gov. Please consult your broker, as certain types of accounts may not be eligible to invest in the Bank Insured Deposit.

Interest on funds in a bank deposit account is accrued daily, compounded monthly and credited to your account monthly. Interest begins to accrue on the date of deposit in the Bank up to, but not including, the date of withdrawal. The daily balance method is used to calculate the interest on these accounts. The daily rate is 1/365 (or 1/366 in a leap year) of the interest rate. Account rates are set in accordance with other Bank products and may be changed at any time. The rate of return paid on Bank Insured Deposit funds may vary from the rates of return available to depositors making deposits with the Bank directly, through other types of accounts at your brokerage, or with other depository institutions in comparable accounts. The bank deposit account may be more profitable to SWST and its affiliates, than other available sweep options. You should compare the terms, rates of return, required minimum amounts, charges and other features with other accounts and alternative investments.

Money Market Funds

Money market mutual funds, which may also be available as customer selected sweep options, are treated as securities and are registered with the Securities and Exchange Commission (SEC), pursuant to the Investment Company Act of 1940. The Securities Investor Protection Corporation (SIPC) covers most customers of failed brokerage firms when assets are missing from customer accounts. If sufficient funds are not available to compensate customers fully, the reserve funds of SIPC are used to supplement the distribution. There is a limit of $500,000 per customer, including a maximum of $250,000 paid for cash claims. Additional funds may be available to satisfy the remainder of customer claims after the cost of liquidating the brokerage firm is taken into account. Additional information regarding SIPC coverage is available at www.sipc.org. Supplemental coverage by SWST through an Excess Securities Bond further additionally protects your securities, up to an aggregate of $20 million, against physical loss or misplacement. Certain types of accounts, including corporations, partnerships and employee benefit plans, are not eligible to invest in the funds, please consult your broker for additional information. We anticipate receiving fees or other financial benefits based on your sweep account balance. For money market funds, those benefits can include annual payments based on the amount you invest in the sweep account. A portion of fees received may be paid to your broker. Please note that shares in a money market fund are not FDIC-insured, not guaranteed by the Federal government, and are not deposits or obligations of any bank or guaranteed by any bank. There can be no assurance that a money market fund will be able to maintain a stable net asset value of $1 per share. Tax-exempt money market funds may be subject to the alternative minimum tax. See the money market fund prospectus for more complete information, including terms, management fees, prevailing rates and expenses. You can obtain a prospectus by contacting your registered representative. You should consider the fund's investment objectives, risks and expenses carefully before investing.

Southwest Securities, Inc.
Mutual Funds Breakpoint Discounts
Disclosure Statement

Before investing in mutual funds, it is important that you understand the sales charges, expenses, and management fees that you will be charged, as well as the breakpoint discounts to which you may be entitled. Understanding these charges and breakpoint discounts will assist you in identifying the best investment for your particular needs and may help you reduce the cost of your investment. This disclosure document will give you general background information about these charges and discounts. However, sales charges, expenses, management fees, and breakpoint discounts vary from mutual fund to mutual fund. Therefore, you should discuss these issues with your financial advisor and review each mutual fund’s prospectus and statement of additional information, which are available from your financial advisor, to get the specific information regarding the charges and breakpoint discounts associated with a particular mutual fund.

Sales Charges

Investors that purchase mutual funds must make certain choices, including which funds to purchase and which class share is most advantageous. Each mutual fund has a specified investment strategy. You need to consider whether the mutual fund’s investment strategy is compatible with your investment objectives. Additionally, most mutual funds offer different share classes. Although each share class represents a similar interest in the mutual fund’s portfolio, the mutual fund will charge you different fees and expenses depending upon your choice of share class. As a general rule, Class A shares carry a “front-end” sales charge or “load” that is deducted from your investment at the time you buy fund shares. This sales charge is a percentage of your total purchase. As explained below, many mutual funds offer volume discounts to the front-end sales charge assessed on Class A shares at certain pre-determined levels of investment, which are called “breakpoint discounts.” In contrast, Class B and C shares usually do not carry any front-end sales charges. Instead, investors that purchase Class B or C shares pay asset-based sales charges, which may be higher than the charges associated with Class A shares. Investors that purchase Class B and C shares may also be required to pay a sales charge known as a contingent deferred sales charge when they sell their shares, depending upon the rules of the particular mutual fund.

Breakpoint Discounts

Most mutual funds offer investors a variety of ways to qualify for breakpoint discounts on the sales charge associated with the purchase of Class A shares. In general, most mutual funds provide breakpoint discounts to investors who make large purchases at one time. The extent of the discount depends upon the size of the purchase. Generally, as the amount of the purchase increases, the percentage used to determine the sales load decreases. In fact, the entire sales charge may be waived for investors that make very large purchases of Class A shares. Mutual fund prospectuses contain tables that illustrate the available breakpoint discounts and the investment levels at which breakpoint discounts apply. Additionally, most mutual funds allow investors to qualify for breakpoint discounts based upon current holdings from prior purchases through “Rights of Accumulation,” and future purchases, based upon “Letters of Intent.” This document provides general information regarding Rights of Accumulation and Letters of Intent. However, mutual funds have different rules regarding the availability of Rights of Accumulation and Letters of Intent. Therefore, you should discuss these issues with your financial advisor and review the mutual fund prospectus to determine the specific terms upon which a mutual fund offers Rights of Accumulation or Letters of Intent.

• Rights of Accumulation – Many mutual funds allow investors to count the value of previous purchases of the same fund, or another fund within the same fund family, with the value of the current purchase, to qualify for breakpoint discounts. Moreover, mutual funds allow investors to count existing holdings in multiple accounts, such as IRAs or accounts at other broker-dealers, to qualify for breakpoint discounts. Therefore, if you have accounts at other broker-dealers and wish to take advantage of the balances in these accounts to qualify for a breakpoint discount, you must advise your financial advisor about those balances. You may need to provide documentation establishing the holdings in those other accounts to your financial advisor if you wish to rely upon balances in accounts at another firm.
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  In addition, many mutual funds allow investors to count the value of holdings in accounts of certain related parties, such as spouses or children, to qualify for breakpoint discounts. Each mutual fund has different rules that govern when relatives may rely upon each other’s holdings to qualify for breakpoint discounts. You should consult with your financial advisor or review the mutual fund’s prospectus or statement of additional information to determine what these rules are for the fund family in which you are investing. If you wish to rely upon the holdings of related parties to qualify for a breakpoint discount, you should advise your financial advisor about these accounts. You may need to provide documentation to your financial advisor if you wish to rely upon balances in accounts at another firm.
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  Mutual funds also follow different rules to determine the value of existing holdings. Some funds use the current net asset value (NAV) of existing investments in determining whether an investor qualifies for a breakpoint discount. However, a small number of funds use the historical cost, which is the cost of the initial purchase, to determine eligibility for breakpoint discounts. If the mutual fund uses historical costs, you may need to provide account records, such as confirmation statements or monthly statements, to qualify for a breakpoint discount based upon previous purchases. You should consult with your financial advisor and review the mutual fund’s prospectus to determine whether the mutual fund uses either NAV or historical costs to determine breakpoint eligibility.
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  Letters of Intent – Most mutual funds allow investors to qualify for breakpoint discounts by signing a Letter of Intent, which commits the investor to purchasing a specified amount of Class A shares within a defined period of time, usually 13 months. For example, if an investor plans to purchase $50,000 worth of Class A shares over a period of 13 months, but each individual purchase would not qualify for a breakpoint discount, the investor could sign a Letter of Intent at the time of the first purchase and receive the breakpoint discount associated with $50,000 investments on the first and all subsequent purchases. Additionally, some funds offer retroactive Letters of Intent that allow investors to rely upon purchases in the recent past to qualify for a breakpoint discount. However, if an investor fails to invest the amount required by the Letter of Intent, the fund is entitled to retroactively deduct the correct sales charges based upon the amount that the investor actually invested. If you intend to make several purchases within a 13 month period, you should consult your financial advisor and the mutual fund prospectus to determine if it would be beneficial for you to sign a Letter of Intent.

As you can see, understanding the availability of breakpoint discounts is important because it may allow you to purchase Class A shares at a lower price. The availability of breakpoint discounts may save you money and may also affect your decision regarding the appropriate share class in which to invest. Therefore, you should discuss the availability of breakpoint discounts with your financial advisor and carefully review the mutual fund prospectus and its statement of additional information, which you can get from your financial advisor, when choosing among the share classes offered by a mutual fund. If you wish to learn more about mutual fund share classes or mutual fund breakpoints, you may wish to review the investor alerts available on the FINRA Web site.

See http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/MutualFunds/p006022, and
http://www.finra.org/InvestorInformation/InvestorAlerts/MutualFunds/
MutualFundBreakpointsABreakWorthTaking/p006008
or visit the many mutual fund Web sites available to the public.

Southwest Securities, Inc.
USA Patriot Act Customer Identification Program Notice

Important Information You Need to Know About Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, federal law requires financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.

Types of Information You Will Need to Provide

When you open an account, our firm is required to collect information such as the following from you:

• Your name
• Date of birth
• Address
• Identification number:
  U.S. Citizen: taxpayer identification number (Social Security number or employer identification number)
  Non-U.S. Citizen: taxpayer identification number, passport number and country of issuance, alien identification card number, or government-issued identification showing nationality, residence, and a photograph of you.

You may also need to show your driver's license or other identifying documents. We may also screen your name against various databases to verify your identity. All information and documentation will be treated in a manner so as to protect your privacy.

A corporation, partnership, trust or other legal entity may need to provide other information, such as its principal place of business, local office, employer identification number, articles of incorporation, government-issued business license, a partnership agreement, or a trust agreement.

Securities and Exchange Commission, FINRA, and New York Stock Exchange rules may also require you to provide additional information, such as your net worth, annual income, occupation, employment information, investment experience and investment objectives.

If Your Identity Cannot Be Verified

In certain circumstances we may not be able to open an account or conduct any transactions for you until we have obtained and verified the necessary identification information. If we have opened an account for you, we may have to restrict trading or close it if you do not supply the necessary information or documents, or if we are unable to verify your identity.

We thank you for your patience and hope that you will support our firm's efforts to deny terrorists and money launderers access to America's financial system.