Patrick David Little

Charges Associated with Brokerage Services

• For brokerage services, we typically charge a transactionbased expense each time you buy or sell an investment. For purchases and sales of stocks, ETFs, options, and bonds traded on an agency basis, this amount is charged separately and is referred to as a “commission;” for purchases of mutual funds, this charge is commonly called a “load” and liquidations of mutual funds may bear other charges. For purchases and sales of bonds traded on a principal basis, the charge is incorporated into the security price and is known as a “mark-up” or “mark-down,” respectively.

• The amount you pay as a commission varies according to the particular investment and/or amount invested. In addition, the transaction-based cost for certain transactions is negotiable, which may result in some clients paying a lower amount than others for transactions in the same or similar investments. The more investment transactions (“trades”) you make, the more transaction-based revenue we earn. This gives us an incentive to encourage you to trade often.

Other Fees and Costs

In addition to the principal fees and costs described above, you may pay fees and costs at the account- and investment-levels. The form and amount of your other fees and costs will vary depending on the product, account, and relationship you have with us.

• Account-Level Fees: Account-level fees and costs include: (1) account maintenance fees, such as custody fees; (2) account management fees, such as electronic fund, account transfer and wire transfer fees; (3) fees for transactions involving certain types of investment products, such as foreign securities; (4) fees and other costs, such as interest payments, for margin or other loans obtained from us through our clearing firm, Pershing LLC (“Pershing”), or one of our affiliates that are secured by the assets in your account; and (5) advisory fees for third-party investment advisers. Account-related services fees (e.g., wire transfer fees, account transfer fees) are set at amounts higher than the amount that Pershing charges us for those services to compensate us for our part in providing those services.

• Investment-Level Fees: Investment-level fees and costs are charged by the particular investment product in which you are invested and are typically charged by mutual funds, ETFs, alternative investment funds, variable insurance products and annuities. Therefore, if you invest in these products, there may be two or more layers of fees and expenses for those investments: the fees charged by the investment product, including advisory fees and other fees and expenses, and any fees charged by us. In addition to advisory fees, certain investment products or their sponsors or affiliates charge fees based on the product’s investment performance.

You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying. Detailed information about fees and costs associated with our advisory services can be found in our Firm’s Brochure. Detailed information about fees and costs associated with our brokerage services can be found in our Regulation Best Interest Disclosure Statement and Related Information for Retirement Accounts. You can find more information on Citi Private Bank (“CPB”), Citi Global Wealth at Work (“WaW”), Citi Personal Wealth Management (“CPWM”), Citi Personal Investments International (“CPII”) and Citi’s Banking and International business (“CBI”) on their websites.

• Detailed information about fees and costs can be found by accessing Parts Two and Four of our Regulation Best Interest Disclosure Statement and Related Information for Retirement Accounts, Item 4 of our Forms ADV for wrap fee programs and Item 5 of our Forms ADV for financial planning. Links to those documents are included on page 4.

When we provide you with a recommendation as your broker-dealer or act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations and investment advice we provide you. Here are some examples to help you understand what this means. Conflicts of interest will vary depending on the product, account, and relationship you have with us.

• Proprietary Products: In some instances, we will recommend, or invest your assets in, investment products and lending products (including purpose and non-purpose loans through Pershing) that are issued, sponsored, or managed by us or our affiliates. We, our affiliates and Pershing receive compensation from these proprietary products. This compensation gives us, and if shared with your financial professional, gives him or her an incentive to favor proprietary products over non-proprietary products. Your investment in an affiliated alternative investment fund, for example, would increase the fund’s assets, and, as a result, increase the asset-based fee (and potentially any performance fee) we earn from the fund. We have taken steps to mitigate the conflicts of interest that arise from proprietary products. For example, if you invest in an affiliated alternative investment fund through an advisory account with us, you will not pay any additional management fee to the affiliated adviser. However, if you enter into a separate contract with an affiliate of ours to invest in alternative investments, you will pay an additional management fee to the affiliated adviser.

• Third-Party Payments: We and our affiliates receive compensation from some investment products, such as mutual funds and their sponsors, in connection with investments you make in those products. We may receive a one-time payment (known as a “sales load” or a “sales charge”) related to your purchase of a new investment or your purchase of an additional amount in an existing investment. We may also receive ongoing compensation in the form of fees that the products charge you and then pay to us. This compensation may be based on the amount you invest in a product or how long you hold the investment. In addition, we receive fees from investment products and their sponsors for providing certain services related to those products — such as distribution, administrative, and shareholder services. Our receipt of third-party payments gives us an incentive to favor investment products that make these payments. Also, when we share some of these payments with our financial professionals, they have a similar incentive to favor investment products that generate third-party payments.

• Revenue Sharing and Other Compensation: We and our affiliates receive revenue sharing payments from certain investment product sponsors. Revenue sharing payments are payments from investment product sponsors for administrative and other services we provide for their products (such as mutual funds and variable annuities). Unlike the third-party payments described above, these payments are typically not paid directly from the product but instead from the product sponsor’s own assets. Revenue sharing payments generally are not shared with your financial professional, but such payments give us an incentive to favor the products of sponsors that participate in revenue sharing, especially those product sponsors that share more revenue with us. Under our arrangement with Pershing, we receive revenue sharing payments and other forms of compensation, that create a financial incentive to continue our relationship with Pershing. For example, we receive revenue when cash balances in your brokerage account are deposited/invested in the bank deposit program or money market mutual fund cash sweep options.

• Principal Transactions: In our capacity as broker, we sometimes buy securities from you for our own account, sell securities to you from our own account, or engage in derivative transactions with you for our own account. We engage in these transactions, known as principal transactions, in various contexts and they create conflicts between our interests as buyer or seller — to buy from you at the lowest possible price or sell to you at the highest possible price — and our responsibility not to put our interests ahead of yours. We also are incentivized to use principal transactions to sell you securities that we no longer want, or that others in the market won’t purchase, or buy from you securities that are in high demand, in each case at prices that are advantageous to us. We have policies and procedures in place to mitigate the risk that we could take advantage of you using principal transactions, including an outright prohibition against engaging in principal transactions in certain circumstances.

• Transactions with Other Customers: From time to time, we facilitate securities transactions between you and our other customers. These transactions involve conflicts between our responsibilities to you, as our customer, and our responsibilities to other customers.

• Hedging Transactions: From time to time, we take positions in relation to our principal transactions with you to hedge our financial risks relating to the transactions, or we engage in hedging transactions on behalf of our other customers. These hedging transactions can affect the price of the securities that you are purchasing or selling.

• Cash Credits and Rebates: Certain venues, such as alternative trading systems and exchanges, offer cash credits or rebates for orders that provide liquidity to the venue and charge explicit fees for orders that extract liquidity from the venue. Other venues are inverted, meaning they offer those benefits for orders that remove liquidity and charge fees for orders that provide liquidity. We route orders to exchanges that provide these programs and we may be eligible for these benefits under the relevant exchange rules. For any execution, you may request that we identify the venue where your transactions were executed, and advise whether we netted a rebate from the venue during the relevant time period. These benefits incentivize us to route trades through venues that provide the benefits.

Detailed information about our conflicts of interest can be found by accessing Parts Three and Four of our Regulation Best Interest Disclosure Statement and Related Information for Retirement Accounts and our Forms ADV. Links to those documents are included on page 4.

Our financial professionals earn a salary and typically receive variable compensation, such as incentive compensation or a discretionary bonus or both. The amount of variable compensation is based on a combination of a variety of factors — such as the size of the total annual revenue attributed to the financial professional, the performance of our business, and the growth in revenue or maintenance of certain amounts of assets under management. The way we compensate our financial professionals creates a conflict of interest because our financial professionals receive compensation that is tied, directly or indirectly, to the revenue he or she generates. This type of compensation arrangement influences the advice or recommendations that our financial professionals make to you including with respect to the type of account you open, the amount of assets you invest and the type of product or service they recommend.

Our financial professionals receive a portion of their compensation based, in part, on the fees or commissions that you pay for our services. As a result, our financial professionals have an incentive to encourage you to increase your investment advisory account size and, specific to brokerage accounts, an incentive to encourage you to trade more frequently. In addition, our financial professionals receive different amounts of compensation for selling different types of investment products or services. There is a conflict of interest when our financial professionals recommend an account type, product or service to you where it is expected that we will earn greater revenue over another account type, product or service. This influences our financial professionals to favor one type of product or service over another, or even the type of account they recommend. For example, the conflict of interest arises because financial professionals earn more for selling products and services that charge ongoing fees. This type of compensation arrangement creates an incentive to recommend an advisory account instead of a brokerage account because advisory programs and services generally generate higher ongoing fee revenue than a brokerage relationship. Similarly, our financial professionals earn more for selling alternative investment funds than other types of products or securities.

We provide recruitment compensation to assist newly associated financial professionals transition their business to CGMI. This compensation includes loans which are generally based on the financial professional’s business at their prior firm, as well as the amount of investment assets from new clients, and quarterly bonuses based on reaching or maintaining certain amounts of assets under management and other criteria. This type of arrangement creates an incentive to provide advice or make recommendations, including to transfer your account and investments to CGMI, to qualify for quarterly bonuses which could be used to repay the loans.

Investment product sponsors and third-party investment advisers that participate in our account programs provide our financial professionals occasional meals, leisure or entertainment outings, small gifts, and promotional items. In addition, these third parties pay for certain expenses — including travel, lodging, meals, presentation materials, and room rentals — that are related to training meetings or meetings with clients or prospective clients where their investment product or service offerings are discussed or promoted. The benefits that these investment advisers and product sponsors provide to our financial professionals present a conflict of interest and incentivize our financial professionals to favor one investment manager or product over another that does not provide the same benefits.

Although your financial professional must make recommendations and provide advice that is in your best interest, these forms of compensation create a conflict of interest and encourage your financial professional to act in a way that maximizes his or her compensation.