Michael Andrew Maxworthy

There are important differences in fees and costs associated with brokerage services and investment advisory services. 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.

The primary fees and costs you will incur are transaction-based fees, such as commissions. Depending on your investments, we will charge brokerage commissions or similar fees to your account (hereinafter referred to as “brokerage commissions”), or we will receive sales commissions and/or sales concessions or similar fees (hereinafter referred to as “sales commissions”) from the investments you buy.

We charge you a brokerage commission each time you instruct us to buy or sell investment products we offer on the secondary market in your brokerage account, such as stocks, ETFs, ETNs, closed-end funds, REITs, or options.

When you buy or sell certain other investments, including bonds, structured products, and CDs, we typically charge your account a “mark-up” or “mark-down” adjustment from the market price, meaning we keep the difference as our fee. Mark-ups and mark-downs are also charged on “principal” trades for various security types (including equities), meaning where you buy investments from us, or sell investments to us, rather than a third party.

Where we distribute/sell newly issued shares of individual equities (stocks), bonds, mutual funds, UITs, closed-end funds, REITs, structured products, and alternative investment funds, instead of brokerage commissions we receive sales commissions from the underwriter, the funds, or their sponsors. For some, we only receive up-front sales commissions. For others, we also receive ongoing payments such as “trailing” commissions as long as you hold them. Insurance companies also pay us sales and trailing commissions for selling annuities and other insurance products.

D.A. Davidson generally shares the brokerage commissions, mark-ups and mark-downs, and sales commissions we receive with our financial professionals. However, D.A. Davidson also receives certain other types of compensation that we do not share with our financial professionals. For example, we do not pay our financial professionals any portion of the compensation we receive from the third-party banks that participate in our cash management program, which is available to you if you choose an account with our Firm.

Some investment product sponsors contribute to or reimburse D.A. Davidson for the cost of educational and marketing events for our clients and financial professionals. Subject to approval by our Firm, others pay for travel, meals, entertainment and attendance at conferences, training events, and due diligence trips for our financial professionals, but these payments are not made to our financial professionals directly.

The payments summarized above create incentives for us to recommend that you trade often, make large trades, and invest in specific products in your brokerage account, for which we receive more compensation and other benefits.

Other Fees and Costs

For both brokerage services and investment advisory services (other than financial planning, Davidson Private Wealth Services, and retirement plan services), you will pay some additional charges. Examples include management, distribution, and administrative fees charged by investment funds, fees charged within annuities and other insurance products, handling fees, wire transfer fees, fees for transferring your account to another firm, IRA maintenance fees, and charges for non-publicly traded securities or special services you request. More detailed information on these fees and costs is described in our Fee and Services Information disclosure found at dadavidson.com/Disclosures. Additionally, if we provide services to you with respect to investments that are not within our custody, your third-party custodian will likely charge you additional custody and brokerage fees.

For additional information about fees and costs, please visit dadavidson.com/Disclosures to review the Regulation Best Interest Disclosures, the Form ADV Part 2A Firm Brochure, and the Form ADV Part 2A-1 Wrap Fee Program Brochure.

When we provide you with a recommendation as your broker-dealer or act as your investment adviser, we must act in your best interest and not put our interest ahead of yours. At the same time, the way we make money may create 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 to you. Here are some examples to help you understand what this means:

• Proprietary Products Our Firm receives more compensation and benefits if you invest in products that are issued, sponsored, or managed by us or our affiliates — for example, a mutual fund managed by Davidson Investment Advisors. This creates an incentive for us to recommend or select proprietary products over others.

• Third Party Payments We receive compensation such as sales commissions for certain investments we sell including mutual funds, UITs, closed-end funds, REITs, structured products, alternative investment funds, annuities, and other insurance products. This creates an incentive for us to recommend or select products that pay us these fees (and that pay them in greater amounts) over those that do not pay us or that pay us lower fees.

• Revenue Sharing The sponsors of some investments (for example, fund companies), participating banks in our cash management program, and other third parties share with our Firm a portion of the revenue they earn. This creates an incentive for us to recommend or select investments that share revenue with us (and those that share more revenue with us than others) and recommend or allocate any cash balances in your account to our cash management program.

• Principal Trading and Underwriting When we sell stocks, bonds, CDs, UITs, closed-end funds, and certain other investments from our Firm’s inventory to you, or buy them from you, or where we are a member of an underwriting group we usually receive more compensation and benefits (sometimes as a “mark-up” or “mark-down” adjustment to the price of the investment) than if the trade were between you and a third party in the secondary market. This creates an incentive for us to recommend principal trades or securities issued by us as a member of an underwriting group.

For additional information about our conflicts of interest, please visit dadavidson.com/Disclosures to review the Regulation Best Interest Disclosures, the Form ADV Part 2A Firm Brochure, and the Form ADV Part 2A-1 Wrap Fee Program Brochure.

The primary cash compensation we pay to each of our financial professionals is a share of his or her production. “Production” means the commissions, asset-based wrap fees, and certain other revenues that the financial professional generates for our Firm by providing services to investors. Our financial professionals receive between 25% and 51% of their production in most cases, and the rest is kept by our Firm. The percentage that your D.A. Davidson financial professional receives depends on his or her production over the previous six (6) months, and tenure with our Firm. Some revenues paid to our Firm, such as payments from banks in our cash management program, do not count toward our financial professionals’ production. Our financial professionals can also earn performance awards and bonuses payable in cash or stock of our parent company, as well as non-cash compensation, larger expense allowances, and support services. These awards and bonuses are based largely on the financial professional’s production. Because the compensation we pay to our financial professionals is based largely on their production, how much each individual financial professional is paid depends on several factors, including the following:

• Level of client assets serviced More client assets generally mean an opportunity to earn more compensation. This creates a conflict of interest when our financial professionals make recommendations to bring more assets to our Firm.

• Products sold (differential compensation) For brokerage services, we receive different levels of sales commissions from different investments. While we are required to act in your best interest when we recommend investments to you, you should understand that we still receive different rates of compensation for selling different types of investments, and in some cases, even between competing products of the same type. Thus, our financial professionals have conflicts of interest when they recommend investment types or specific products. Some will generate more sales commissions for our Firm, meaning higher production and pay for a financial professional, than others.

• Revenues our Firm earns from advisory services and investment recommendations Both commissions and other charges for brokerage services, and asset-based wrap fees, count toward our financial professionals’ production. For brokerage services, while we are prohibited from recommending an excessive level of trading, you should understand that both our Firm and our financial professionals will receive more compensation if you buy and sell securities often and buy and sell larger amounts of securities. For investment advisory services, the frequency and amount of trades does not affect our financial professionals’ production. However, we generally receive higher fees for investment advisory services than brokerage services, and higher fees for some advisory programs than others. This creates conflicts of interest when our financial professionals make recommendations about account types (brokerage vs. advisory), and different advisory programs. Each financial professional’s production, and thus his or her compensation, will be higher for some services and programs than others.