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Financial Referral Product Compliance

Updated

Directive

In an effort to remain compliant with federal and state laws and regulations, as well as to eliminate confusion with the public about an HGI Associate's capacity when referring prospects or clients to our Financial Referral companies, the following policies have been implemented.

Applicability

  1. This policy shall apply to all active and inactive HGI Associates in all jurisdictions
  2. This policy no longer applies when an HGI Associate is terminated or resigns as an HGI Associate
  3. This policy applies to Financial Referral Products that may be regulated by state securities departments, FINRA, SEC, state banking departments, state insurance departments, or any other Self-Regulatory Organization (SRO) or other federal, state or local governmental entity.

About Hegemon Group International

First and foremost, Hegemon Group International (HGI) is Not a FINRA licensed broker-dealer nor a state or Securities and Exchange Commission (SEC) licensed Registered Investment Advisor (RIA) and therefore does not sell any registered or unregistered securities.

HGI does utilize an Unregistered Solicitor’s arrangement with B. Riley Financial, an SEC registered RIA and a separately managed account money manager. HGI and B. Riley Financial operate under the Unregistered Solicitor designation per the SEC’s code 590-4-4-.12 exclusions from the definition of Investment Adviser Representative (IAR) and 275.206(4)-3 Cash payments for client solicitations. Under Rule 275.206(4)-3, the Unregistered Solicitor HGI’s Associate must disclose to the referred prospect the Unregistered Solicitor’s relationship with the investment advisor. The details are outlined in the Unregistered Solicitors Relationship with B. Riley Financial section in the HGI Back Office.

Qualified HGI Associates can be designated as a Referral Contractor for Resolute Capital Partners (RCP). It is understood that the HGI Referral Contractor is not securities’ licensed, and shall not undertake any action that would be construed as sales activity in violation of Section 15 of the Securities and Exchange Commission (SEC) Act, which makes it unlawful for anyone engaged in the business of effecting transactions in securities to do so without being registered with the SEC. The qualified HGI Referral Contractor must follow RCP’s rules and guidelines outlined under the “Resolute Capital Partners’ Referral Contractor Role and Responsibilities” section in the HGI Back Office.

HGI also provides Land Banking opportunities for HGI Referral Contractors through CalChoice Investments, Inc. CalChoice is a premier California Real Estate company that purchases pre-developed land in the path of urban California growth. Their real estate offerings are an alternative, non-correlated hard asset class. Once the referral prospect is introduced, CalChoice has a turnkey process, which includes educating a referral prospect, for the nature of direct ownership in real estate property and their responsibilities once they are a landowner. This is not an investment in a land partnership but is direct ownership of titled real estate with the responsibilities of owning such an asset.

CalChoice handles the entire process and delivers all their necessary documents. Once again, HGI is acting strictly as a Referral Contractor and/or a Finder and our associates’ sole purpose is to make introductions.

Definitions 

HGI Associate

  1. Any person that has registered as an independent contractor with Hegemon Group International, LLC (HGI).
  2. Any HGI Associate who may or may not be a licensed Insurance Producer.

Financial Referral

  1. A referral of an HGI Associate's prospect or client to a company that provides products and services that HGI or HGI Affiliated Companies do not provide.
  2. Financial Referral products include, but are not limited to: Promissory Notes of Any Kind (including but not limited to Land Leases, Trust Deeds, Commercial Paper), Equity Interests (including but not limited to Oil & Gas Interests, Real Estate Interests, Land Banking, Active Money Management)
  3. A Financial Referral can only be introduced to a company without further involvement in any discussions with the Referral Prospect and without giving any advice or determining suitability.

Ethical Behavior

  1. HGI Associates must follow the rules, guidelines and regulations of every regulatory body that oversees Financial Referral Products, including but not limited to the state securities departments, state banking departments, the Security Exchange Commission (SEC), FINRA. Failure to comply with all regulations will result in immediate termination from HGI.
  2. HGI Associates must maintain high standards and must have ethical behavior with prospects, clients and product providers.
  3. HGI Associates may not sell, promote, advertise, market or otherwise solicit registered or unregistered securities.
  4. HGI Associates may not make false, misleading, or unsubstantiated claims about any product or service.
  5. HGI Associates are responsible for following the rules, guidelines and instructions of each Financial Referral Provider.

Implying, Suggesting, Directly or Indirectly Making a Financial Referral Product Recommendation is Not Allowed

  1. Do not imply, directly or indirectly, that you are able to make recommendations on any Financial Referral products.
  2. Prospects and clients must be told by the HGI Associate that they are being referred to a company that may have products and solutions that they may be interested in, but that you, the HGI Associate, are strictly prohibited to discuss products and services of any Financial Referral provider and that you, the HGI Associate are merely introducing The Financial Referral provider.

Implying, Suggesting, Directly or Indirectly Stating a Rate of Return, Annual Percentage Rate (APR), Annual Percentage Yield (APY) or Return on Investment (ROI) Claim is Not Allowed Under Any Circumstance

  1. HGI Associates are strictly prohibited from making statements or claims that any prospect or client will earn any Rate of Return, Annual Percentage Rate (APR), Annual Percentage Yield (APY) or Return on Investment (ROI) on any Financial Referral product.

Implying, Suggesting, Directly or Indirectly Stating That Any Financial Referral Product Offers Any Type of Guarantee is Not Allowed

  1. HGI Associates are strictly prohibited from making statements or claims of any type regarding guarantees of safety, economic benefit and client qualification.

Providing Advice or Analysis on any Security is Prohibited

  1. HGI Associates are not allowed to give any advice on the merits of any Financial Referral Product.
  2. HGI Associates are only acting to make introductions and must avoid any active participation with a Referral Prospect.
  3. HGI Associates may refer someone you know to a Referral Company but that is all you are allowed to do. You cannot give any advice, discuss the company’s product or be involved in any discussion.

Taking an Application for a Financial Referral Product is Prohibited

  1. HGI Associates are strictly prohibited from completing an application for any Financial Referral product on behalf of any prospect or client.
  2. HGI Associates are strictly prohibited from allowing prospects or clients to complete an application for any Financial Referral product on the HGI Associate's computer or other internet-enabled device.
  3. HGI Associates are permitted to use a method approved by the Financial Referral provider to refer potential prospects or clients. The HGI Associate is bound by the rules and regulations of the Financial Referral provider.

Providing a Prospect or Client Sales Literature for a Financial Referral Product is Prohibited

  1. HGI Associates are strictly prohibited from providing any Financial Referral product sales literature of any kind, whether directly or indirectly, to a prospect or client.
  2. HGI Associates must only make the referral to the Financial Referral provider. The prospect or client must receive sales literature directly from the Financial Referral provider.

Providing a Prospect or Client Specific Product Names or Solutions of a Financial Referral Product is Not Allowed

  1. HGI Associates are strictly prohibited from providing specific product names of any kind, whether directly or indirectly, to a prospect or client.
  2. Since HGI Associates are referring the prospect or client to the Financial Referral provider and not to any specific product or service, this practice is strictly prohibited.

Prohibited Words & Phrases

The following are examples of prohibited words and phrases that are strictly prohibited to use in connection with any Financial Referral product to any HGI Associate prospects or clients:

  1. “Guarantee”, “Assurance”, “Certainty” or any other words or phrases implying a guarantee of a particular product.
  2. “Safe”, “Safe Investment”, “Safe Product”, “Secure”, “Protected” any other words or phrases implying the level of safety of a particular product.
  3. “No Risk”, “Low Risk” or any other words or phrases implying the level of risk of a particular product.
  4. Any reference to specific portfolios offered by B. Riley Financial, such as “Value Stock Strategy”, “Trends ETF Strategy”, “Conservative Bond Alternative Investment Strategy” or “Balanced Value Stock Strategy”, or other products.