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.

CITIGROUP GLOBAL MARKETS

CAMERON PARK, CA

Mario A Farfan

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