PEATS LOW-PRICED DIGITAL ASSET SECURITIES DISCLOSURE
Penny Digital Asset Securities
Digital asset securities that meet the definition of penny stocks are securities of small companies not listed on an exchange or quoted on NASDAQ. Prices are often not available. Generally, a penny stock is a security that:
i) Is priced under five dollars;
ii) Is not traded on a national stock exchange or on NASDAQ; and/or
iii) May be listed in the “pink sheets” or on the Over The Counter (OTC) Bulletin Board.
A penny stock is also generally issued by a company that has:
i) less than $5 million in net tangible assets and has been in business less than three years;
ii) under $2 million in net tangible assets and has been in business for at least three years; and/or
iii) revenues of $6 million for three years For the purposes of this disclosure, “digital asset security” and “digital asset securities” mean one or more securities under Section 2(a)(1) of the Securities Act that is a digital representation of value and may function as a medium of exchange or medium for investment, and which are evidenced on, and may be electronically received and stored using distributed ledger technology, also known as blockchain.
Investments in digital asset securities that meet the definition of penny stocks are extremely speculative and involve considerable risk.
Digital asset securities that meet the definition of penny stocks frequently exhibit high price volatility and erratic market movements. Often, when investors buy or sell these securities, they affect the quoted price significantly. In some cases, the liquidation of a position in a penny stock may not be possible within a reasonable period of time or at all, and is subject to additional fees.
Keep in mind, it may be difficult to properly value an investment in digital asset securities that meet the definition of a penny stock. Reliable information regarding issuers of these securities, their prospects, or the risks associated with investing in such securities may not be available. Certain issuers of digital asset securities that meet the definition of a penny stock have no obligation to provide information to investors.
Some issuers register securities with the Securities and Exchange Commission (SEC) and may provide regular reports to investors. Others, however, may not be required to maintain such registration or provide such reports.
Digital asset securities may continue to be traded if issuers are delinquent in their reporting obligation to the SEC or other federal or state regulatory agencies.
Digital asset securities that meet the definition of a penny stock haven’t been approved or disapproved by the SEC. The SEC hasn’t passed upon the fairness, the merits, the accuracy or adequacy of the information contained in any prospectus or any other information provided by an issuer or a broker or a dealer of penny stocks.
Low-priced digital asset securities are subject to significant risks, increasing regulatory requirements and oversight, and may incur additional fees. In addition, low-priced securities may be more likely to be subject to scams and investor fraud.
For more information, please see https://www.sec.gov/reportspubs/investor-publications/investorpubsmicrocapstockhtm.html
PEATS Business Continuity Plan Summary
Prometheum Ember ATS Inc. (“PEATS”) has developed a Business Continuity Plan (the “BCP”) to provide procedures for response and recovery in the event of a significant business disruption. Our goal is to ensure our continued ability to serve our customers and to protect their assets and information and the people and assets of our firm.
Events creating a disruption of business may vary in nature, and the PEATS BCP has been developed to provide commercially reasonable assurance of business continuity in the event that there are disruptions of normal operations at the firm’s critical facilities. The timing and impact of disasters is unpredictable and the BCP emphasizes a flexible approach.
The BCP addresses interruptions that are either localized or regional in scope, whether short or long term, regardless of the cause. PEATS believes that through its BCP, it will be able to conduct a securities business during periods of business disruption ranging from disruptions that only affect PEATS to disruptions that have regional impact. However, the PEATS BCP is not a guarantee that the firm will be able to conduct securities business during every business disruption.
The BCP is reviewed and tested annually and has been approved by senior management.
Business Continuity Plan ‐ Overview
FINRA Rule 4370 requires each member firm to create and maintain a business continuity plan. In accordance with this rule, PEATS has developed a plan designed to allow PEATS to continue operating during business emergencies, as permitted by conditions on the ground.
PEATS’s plan is designed to address key areas of concern including, but not limited to, the following:
● Books and records recovery; ● All mission critical systems; ● Financial and operational assessments; ● Alternate means of communication between PEATS and its customers; ● Alternate means of communication between PEATS and its employees; ● Alternate physical locations of employees; ● Critical business constituent, bank and counterparty impact; ● Regulatory reporting; and ● Communications with regulators.
For example, to address potential disruptions, PEATS has arranged for an alternate local physical location, for both employees and key technology infrastructure. PEATS believes that in the event of a disruption, this alternate location will allow the firm to promptly relocate its key employees and critical information technology systems in order to provide services for its clients.
The PEATS BCP is designed to facilitate our employees’ ability to work remotely from a non-impacted, internet-connected site and to maintain operations and communications with customers and regulators. In the event of a national disruption, PEATS will contact and follow the instructions of FINRA, the SEC, and state and national authorities.
Please be advised that business continuity plans are subject to change and modification. PEATS intends to update and test its business continuity plan as business conditions and technology change.
Material changes to the PEATS BCP will be posted to the firm’s website located at www.prometheum.com/riskdisclosures.
A copy of the firm’s complete BCP can be obtained by contacting PEATS at: CustomerSupport@emberats.com.
PEATS Customer ID Program Notice
Important AML and USA Patriot Act Information
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. These requirements apply to new and current customers.
What this means for natural persons or trusts for which a natural person or any such relatives are the only beneficiaries: we will ask for a customer’s name, address, Social Security Number and other information that allows us to confirm your identity and other signatories (if applicable).
What this means for corporations, general partnerships, limited partnerships, limited liability company or other legal organizations: we will ask for the name, address, Employer Identification Number and other information that allows us to identify the entity and signatories. We may also ask to see other identifying documents showing the existence of the entity.
Applicants must supply one or more of the following Valid Government Issued ID Documents or forms of information:
· Passport · Social Security Number · Employer Identification Number · National ID Card · Drivers’ License · Alien ID Card · Proof of Residence (the legal physical address must match the address on the residency document that you are required to provide. See ‘Proof of Residence Document Requirements’)
Other valid government-issued ID may be accepted if it has your full legal name, photo, date of birth and issue and expiry dates all on the front of your ID. Firearm licenses are NOT accepted.
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, certified articles of incorporation, government-issued business license, a partnership agreement or a trust agreement.
Proof of Residence Document Requirements: Proof of residence documents must contain your name and address and be dated less than 3 months ago from the date of submission. We do NOT accept P.O. Box addresses from any country.
Valid documents include, but are not limited to:
· Bank statement · Credit card statement · Utility bill (water, electricity, gas, internet, phone) · Payroll statement -or- Official salary document from employer · Insurance statement · Tax documents (e.g. W-8BEN) · Residence certificate · Correspondence between the Applicant and a government authority regarding the receipt of benefits such as a pension, unemployment benefits, housing benefits, health insurance, voter registration, etc. · Mortgage statement · Current lease agreement · University enrollment documents There may also be other situations where we will require the Applicant to submit to one or more of the following: · Submission of either a supplementary Face Photo or an ID Confirmation Photo. · Web-based, recorded video conferencing meeting (i.e. Zoom, Skype, etc.) · Telephone-based conference call
PEATS FORM CRS - CUSTOMER RELATIONSHIP SUMMARY
Prometheum Ember ATS Inc. (“PEATS” or “PEATS ATS”) is registered with the Securities & Exchange Commission as a broker-dealer that provides brokerage accounts and services. PEATS is a member of FINRA as well as SIPC. Brokerage and investment advisory services and fees differ; it is important for you to understand the differences.
Free and simple tools are available to research firms and financial professionals at: www.investor.gov/CRS
What investment services and advice can you provide me?
PEATS serves as an introducing and executing broker and operates an alternative trading system (the “ATS”) for the purpose of providing customers, who have been granted access to the ATS, the ability to enter, transact and match orders for digital asset securities. Customers will be required to open an account with an approved qualified digital asset security custodian and cash custodian prior to interacting with the ATS.
The ATS only accepts orders that are routed to it at your direction, and PEATS does not offer advice, recommendations or strategies involving digital asset securities, and does not monitor the performance of your account except for its own risk purposes.
For more information about our services, please visit our website at https://www.Prometheum.com
Given my financial situation, should I choose a brokerage service? Why or why not? How will you choose investments to recommend to me? What is your relevant experience, including your licenses, education and other qualifications? What do these qualifications mean?
If you make all of your own investment decisions, have a high risk tolerance and desire to transact in the digital asset securities that are eligible to trade on PEATS ATS, then choosing a self-directed brokerage firm such as ours may be a good choice. As previously mentioned, PEATS does not provide recommendations or advice about whether to buy or sell digital asset securities, on account types, investment strategies or provide monitoring of account performance.
What fees will I pay?
PEATS does not currently charge its customers liquidity/execution fees or commissions for matching orders on the ATS. Please note that PEATS reserves the right to modify its commission and fee schedule at any time. All customers will be notified upon any modification to PEATS’ Commission and Fee Schedule prior to the effective date.
Help me understand how these fees and costs might affect my investments. If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?
PEATS is a self-directed, broker-dealer ATS platform designed to transact and match orders in digital asset securities and will not invest your money for you. If you open an account with PEATS with $10,000 and want to invest in digital asset securities, you will not pay liquidity/execution fees or commissions on your trades until further notified.
What are your legal obligations to me when providing recommendations? How else does your firm make money and what conflicts of interest do you have?
PEATS does not provide recommendations or advice about whether to buy or sell digital asset securities, on account types, investment strategies or provide monitoring of account performance.
Prometheum Inc, our parent company and our affiliates have a great interest in the growth and adoption of the trading of digital asset securities underpinned by distributed ledger technology, or blockchain. Our digital asset security operations currently include PEATS as the introducing/executing broker operating the PEATS ATS.
Our ATS is designed to maximize efficiencies and investor experience in the burgeoning landscape of digital asset securities. Our affiliate broker-dealer, Manorhaven Capital, LLC and transfer agent, Spark Transfer Services Inc. are currently not conducting digital asset securities business. As a result, we do not believe that the roles played by our affiliates presents a conflict of interest because all trading by you on our ATS platform is entirely self-directed.
How might your conflicts of interest affect me, and how will you address them?
A conflict of interest is a potential situation in which PEATS would engage in a transaction or activity where our interest is materially adverse to your interest. The mere presence of a conflict of interest does not imply that harm to your interests will occur, but it is important that we acknowledge the presence of potential conflicts. Moreover, our regulatory obligations require that we establish, maintain, and enforce written policies and procedures reasonably designed to address conflicts of interest associated with the brokerage services being provided to you.
PEATS addresses these relationships and a full description of our business by making available all of the disclosures and other materials in the “Disclosure Library” located on our website. PEATS encourages you to read and familiarize yourself with all disclosures and other materials that are relevant to your investment relationship with us.
How do your financial professionals make money?
PEATS professionals do not receive commissions or other compensation related to our customer’s trading activity. PEATS professionals receive salaries and bonuses that are based on their overall job responsibilities and performance.
Do you or your financial professionals have legal or disciplinary history?
No. Please visit https://www.investor.gov/CRS to research Prometheum Ember ATS LLC and Prometheum Ember ATS LLC professionals.
As a broker-dealer, do you have any disciplinary history? For what type of conduct? No. Please visit https://www.investor.gov/CRS to research Prometheum Ember ATS LLC and Prometheum Ember ATS LLC professionals.
For additional information about our firm and associated professionals and services, please visit www.brokercheck.finra.org
Who is my primary contact person? Is he or she a representative of an investment adviser or a broker-dealer? Who can I talk to if I have concerns about how this person is treating me?
Because your account is entirely self-directed and our platform is fully-integrated online through our website, you should please direct any questions and concerns you may have by emailing PEATS at CustomerSupport@emberats.com and PEATS will address your questions or concerns quickly, professionally and appropriately.
PEATS does not provide investment advisory services, therefore the appropriate personnel of PEATS will address questions as required, be it in a customer services, operational or technical capacity.
PEATS Platform Disclosures
Digital asset securities may not be suitable or appropriate for everyone.
Investors should note that investing or trading in digital asset securities could involve substantial risks, including no guarantee of returns, costs associated with selling and purchasing, and no assurance of liquidity which could impact their price and investor's ability to sell, and possible loss of principal invested. Further, an investment in a single digital asset security could mean lack of diversification and, consequently, higher risk.
Past performance of a digital asset security does not guarantee future results or returns. You should not invest any funds in which you require the ability to withdraw, cash-out, or liquidate within a certain period of time. Market volatility and volume may delay systems access and trade execution. There is always the potential of losing part or all of your money when you invest in digital asset securities.
Prometheum Ember ATS, Inc. (“PEATS” or “PEATS ATS”) does not give any financial, legal, tax, investment, accounting or other advice. Certain transactions give rise to substantial risks and are not suitable for all investors. Prior to the entering of a transaction, you should consult your business advisor, attorney and tax and accounting advisors, as appropriate, with respect to the price, suitability, value, risk or other aspects of any digital asset, digital asset security or any other investment.
With respect to any digital asset security available to trade on PEATS ATS, we urge you to carefully evaluate its appropriateness for your specific financial situation with your financial advisor if you deem appropriate. No reference to any specific digital asset security constitutes a recommendation to buy, sell or hold that digital asset security or any other digital asset security. No reference to a digital asset security constitutes investment advice or offers any opinion with respect to the suitability of any digital asset security, and approval of your account should not be taken as advice to buy, sell or hold any digital asset security.
These are sophisticated investments with inherent risks.
The USA PATRIOT Act (the “Act”) imposes anti-money laundering (“AML”) requirements on brokerage firms and financial institutions. Under the Act’s provisions, all brokerage firms are required to have comprehensive anti-money laundering programs. As part of PEATS’ required program, the firm may request that you provide various identification documents or other information. PEATS will not be able to open an account or effect any transactions on your behalf until all required information and/or documentation has been provided and reviewed.
Market Access Risk Controls and Customer Risk Management Controls
SEC Rule 15c3-5 requires broker-dealers with access to exchanges or alternative trading systems to establish, document and maintain a system of risk management controls and supervisory procedures reasonably designed to manage financial, regulatory and other risks in connection with market access.
PEATS utilizes risk controls (including but not limited to those controls required under Rule 15c3-5) to help:
(i) identify and prevent orders that it determines, in its sole and absolute discretion or upon client confirmation, are erroneous or potentially erroneous,
(ii) enforce credit, capital, and quantitative thresholds,
(iii) comply with regulatory requirements,
(iv) otherwise control the operation of its trading systems and activities for any other purposes including controls designed to prevent potentially manipulative trading.
If a customer-directed order triggers one of these controls, PEATS reserves the right to reject the order.
In order to establish appropriate limits for our customers, we may periodically request that you provide additional information, including but not limited to an updated FOCUS report or other comparable financial document.
As a user of PEATS’s services, you are responsible for ensuring that you, your investors, customers, clients, employees, principals, officers, directors, and/or agents (the “Users”) abide by applicable laws and rules when submitting orders to PEATS.
If you are a broker-dealer or other securities institution, you are reminded to establish your own risk management policies, procedures, and/or controls and to monitor your investment and/or trading activities closely. Moreover, you should maintain these policies, procedures and controls independently from any market access or risk-management checks that are employed by PEATS. PEATS’ risk management checks may result in the rejection of an order or prevent an order from being executed.
Trade Execution and Price
You understand that, whether you place a market or limit order, you will receive the best price at which your order is able to be executed in the marketplace, subject to any clarification stated below. You understand and agree with all of the following:
● Particularly during periods of high volume, illiquidity, fast movement or volatility in the marketplace, the execution price received may differ significantly from the quote provided on entry of an order, and you may receive partial executions of an order at different prices. PEATS is not liable for any price fluctuations. Price quotes generally are for only a small number of digital asset security as specified by the marketplace, and larger orders are more likely to receive executions at prices that vary from the quotes or in multiple lots at different prices.
● Digital asset securities may open for trading at prices substantially higher or lower than the previous closing price or the anticipated price. If you place a market order (whether during normal market hours or when the market is closed), you agree to pay or receive the prevailing market price at the time your market order is executed. The price you pay may be significantly higher or lower than anticipated at the time you placed the order. To avoid buying a digital asset security at a higher price, you have the option to enter a limit order. Limit orders may not be executed at any particular time, or at all if there is not sufficient trading at or better than the limit price you specify, and are only good until the end of the trading day in which they are entered unless such order is placed on a “Good-Til-Canceled” (“GTC”) basis. The Website contains further information regarding order types and limitations, which you agree to read and understand before placing such orders.
● A limit order may be placed on a GTC basis, which means the order remains valid and is reentered on a daily basis until (A) it is executed; (B) you cancel the order; or (C) there is an event which impacts the pricing of the digital asset security (e.g., share or token split or a hard fork). PEATS will cancel a GTC order at the end of every trading day (on the exchange on which the instrument to which the contract relates is traded) and then place such order again at the start of the following trading day. This process will be repeated every day for as long as the GTC order remains valid.
● As a customer of PEATS, your order may fail to be sent to the market due to unforeseen circumstances or technical issues, and PEATS is not liable in the event your order fails to be sent.
Temporary Restriction and Settlement
You understand that PEATS is not responsible for settlement, but instead that settlement will be the responsibility of the applicable custodian of each party to a trade. Upon your entering an order, information about the order will be sent to your custodian, and using this information, the custodian will place a temporary restriction on movement of the cash, digital assets, and/or digital asset securities (together, “Property”) out of your custodial account necessary to settle such order, which will continue until the order either expires or is completed.
This temporary restriction placed by your custodian will only apply to that portion of your account necessary to satisfy the order placed by you in the timespan between the placement of the order and settlement (if any) or cancellation, and may prevent you from withdrawing, re-trading or otherwise transferring or disposing of assets or cash in your account, for any reason, to the extent that the transfer or disposition would leave you unable to consummate any trade that is executed pursuant to your order.
Until an order is executed, the restriction placed by the custodian may be modified by you if you change or cancel your order, or may expire throughout the order process as trades are executed or trading orders change; otherwise it will remain in place through the execution of all potential trades included in the customer’s order. Once the order is executed and becomes an executed trade, however, you may not cancel the executed trade or remove the restriction. This may leave you unable to access cash or assets that you wish to use, because a transaction in which you are a party to has not yet settled and you do not yet have access to the cash or assets that you will receive in that transaction.
All temporary restrictions will be lifted at the end of a trading session, unless your order includes specifications regarding trading activity that is to continue after the specific trading session, in which case the temporary restrictions will remain on the account until the subscriber’s order is executed. Restrictions on Property may also be released upon a government or court order.
The ATS will record the executed trade information at the time execution and send real time settlement instructions to the applicable custodians. The custodians immediately settle transactions based on these instructions. At the end of each trading session, and in addition to the real time messages sent to the custodian, the ATS will send an end-of-day file to the applicable custodians based on the trades executed during such trading session.
Clearly Erroneous Filings Guidelines
Bona fide errors can result from human error or system issues that affect entry and/or the execution of an order. Such errors can also result from general market volatility, communications or system breakdowns, or other conditions over which PEATS has no control. PEATS reserves the right at its sole discretion to cancel or price-adjust any trade that is deemed by PEATS to have been the result of an error, including the result of any of the above or an incorrect security symbol or name, size, and/or prices that are unrelated to the market. In the event that PEATS exercises this right, the firm will use reasonable efforts to inform its customers in a timely manner.
In addition, if a self-regulatory organization (“SRO”) or any other regulatory body makes a determination that any executed trade(s) must be cancelled based upon being ruled as clearly erroneous or for any other reason, PEATS will be required to cancel the subject trade(s) and thus will not honor any related executed trade(s).
It is the responsibility of the customer to timely identify and notify PEATS of executions which may be deemed “clearly erroneous.” If a customer wishes for PEATS to submit a clearly erroneous filing in an attempt to break an erroneous transaction on its behalf, it may request a filing be submitted if the circumstances are appropriate and the transaction meets the numerical guidelines as set forth by PEATS and/or SRO rules.
All requests must be received in writing within ten minutes of the filing deadline in order to allow time to complete and submit the required submission. Requests are not considered to be valid until receipt thereof is acknowledged by authorized PEATS support staff. PEATS reserves the right to refuse to file clearly erroneous requests in its sole and absolute discretion.
Payment for Order Flow
The Securities and Exchange Commission (“SEC”) requires all registered broker-dealers to disclose their policies regarding receipt of “payment for order flow.” The Commission defines “payment for order flow” as “any monetary payments, services, property, or other benefits that result in remuneration, compensation, or consideration to a broker or dealer from any broker or dealer, national securities exchange, registered securities association, or exchange member in return for the routing of customer orders by such broker or dealer to any broker or dealer, national securities exchange, registered securities association, or exchange member for execution, including but not limited to research, clearance, custody, products or services, reciprocal agreements for the provision of order flow adjustment of a broker or dealer’s unfavorable trading errors, effort to participate as underwriter in public offerings: stock loans or shared interest accrued thereon: discounts rebates, or any other reductions of or credits against any fee to, or expense or other financial obligation of, the broker or dealer routing a customer order that exceeds that fee, expense or other financial obligation.”
PEATS does not receive payment for order flow.
Order Routing Policy
SEC Rule 606 (formerly known as Rule 11Ac1-6 under the Securities Exchange Act of 1934) requires all broker-dealers that route customer orders in certain equity and option securities to make publicly available quarterly reports that disclose how broker-dealers route their customers’ orders to enable customers to evaluate order routing practices.
All orders routed to PEATS ATS are customer self-directed, and PEATS ATS does not route customer orders to any other market center, therefore PEATS is not required to publish quarterly 606 disclosures.
FINRA BrokerCheck Hotline
The Financial Industry Regulatory Authority, Inc. offers investors information and education through the FINRA BrokerCheck Hotline at 800-289-9999 and the FINRA website at www.finra.org.
An investor brochure that includes information describing FINRA’s BrokerCheck is available on FINRA’s website.
As a member of SIPC and pursuant to FINRA Rule 2266, PEATS discloses to new customers, and annually to all customers, that they may obtain information about SIPC, including the SIPC brochure, by contacting SIPC at the following address:
Securities Investor Protection Corporation 1667 K St. N.W., Suite 1000 Washington, DC 20006-1620 Tel: (202) 371-8300 Fax: (202) 223-1679 Email: firstname.lastname@example.org Website: http://www.sipc.org
PEATS Digital Asset Securities Risk Disclosure
Trading in digital asset securities entails significant risk of financial loss. You should not commit funds to trading in digital asset securities that you are not prepared to lose entirely. Market prices for digital asset securities can be volatile and highly unpredictable. Whether the future market price for a digital asset security will move up or down is a speculation and unknowable.
For the purposes of this disclosure, “digital asset security” and “digital asset securities” mean one or more securities under Section 2(a)(1) of the Securities Act that is a digital representation of value and may function as a medium of exchange or medium for investment, and which are evidenced on, and may be electronically received and stored using distributed ledger technology, also known as blockchain.
Risks of trading digital asset securities include, but are not limited to, the following:
Digital Asset Securities Market Risk: Market Prices for digital asset securities can be volatile and highly unpredictable. Volatility in the price of digital asset securities may increase your exposure and your risk of experiencing significant losses in trading digital asset securities, and these risks and exposure may be significantly greater than those you would face in trading traditional securities. Whether the future market price for a digital asset security will move up or down or even sustain a market value is speculation and unknowable. PEATS makes no representations or warranties about whether a digital asset security will always continue to trade in the digital asset security trading market. Any digital asset security is subject to delisting without prior notice at the sole discretion of PEATS.
Price Risk: There is not currently a proven valuation methodology for reliably and accurately analyzing the valuation of a digital asset security or its related blockchain network. While traditional valuation methodologies are often applied to digital asset securities, digital asset securities have some key distinctions in relation to traditional securities. For example, many digital asset securities and their related networks derive value from networks effects, whereby once a critical mass of users or digital asset security holders is reached, the value of an additional user or digital asset security holder joining the network may have an outsized impact on the value of the network as a whole. This, along with other unique characteristics of digital asset securities as an asset class and particular characteristics of specific digital asset securities, makes it difficult to accurately assess the valuation of any digital asset security or its related network. Digital asset security prices may be extremely volatile. A customer’s decision to buy, sell or hold a particular digital asset security for a short period of time may result in a significant or complete loss in value of such digital asset security. Many digital asset securities are subject to great amounts of investor speculation and therefore, frequent and, at times, large price fluctuations. Additionally, because the volume of digital asset security units in circulation may be small, one trade or a group of trades may have a significant impact on the price of a digital asset security. This could result in a large holder of a particular digital asset security having an outsized influence over its price, which may give such a holder the ability to manipulate the price of that digital asset security.
Liquidity Risk: Markets for digital asset securities can at times become “illiquid,” which means there can be a scarcity of persons who are willing to trade at any one time, regardless of price. Thinly traded or illiquid markets have potential increased risk of loss because they can experience high volatility of prices and in such markets market participants may find it impossible to liquidate market positions except at very unfavorable prices. There is no guarantee that the markets for PEATS or for any digital asset securities will be active and liquid or permit you to establish or liquidate positions in the digital asset securities when desired or at favorable prices. If an investor holds a certain digital asset security and there is not sufficient demand for that digital asset security, an investor may not be able to sell such digital asset securities and have liquidity over his, her or its digital asset securities.
Legal Risk: The legality of digital asset securities and their trading may not be clear and may vary under the laws of different jurisdictions throughout the world. This can mean that the legality of holding or trading digital asset securities is not always clear. Whether and on what basis a digital asset security may constitute property, an asset, or a right of any kind might vary from one jurisdiction to another. You are responsible for knowing and understanding how the laws applicable to you or your property, your rights, your assets, or to lending address, limit, regulate, and/or tax the digital asset securities you trade or hold.
Digital Asset Security Technology Risks: The technology on which we and your custodian rely to execute and settle trades of digital asset securities, including communications between our systems, the custodian’s systems, and the blockchains or distributed ledgers underlying these digital asset securities, may not function properly. This may be because of problems internal to PEATS and our ATS, including a failure relating to API integrations, or problems outside of our control, responsibility and ability to guard against or remedy, including a failure of your custodian to properly safeguard “private keys” providing control over such digital asset securities, cyber-attacks or external security breaches at your custodian, or malicious attacks against the relevant blockchain. Any such malfunction may adversely affect the ability of our customers to execute trades of digital asset securities on our ATS or access their digital asset securities held at their custodian. Moreover, our ATS order matching system may not function properly in cases of increased trading volume. Furthermore, your custodian’s security systems and custodial procedures may have undetected defects that could make them vulnerable to malicious attacks, hacking and the potential theft of digital asset securities held in the custody of your approved custodian, and we will have no control or responsibility over such failure or any ability to remedy or guard against such attacks. If the technology used by PEATS or your custodian does not work as anticipated, trading of digital asset securities on our system could be limited or even suspended, and it is possible that your digital asset securities may be stolen or become inaccessible.
Digital Asset Security Vulnerabilities Risks: Your digital asset securities are held at your custodian, and any failures in maintaining the security of those digital assets are outside of our control and we will not be able to remedy them. Furthermore, we do not maintain and are not responsible for the safety and security of the blockchain networks on which ownership of and transactions in your digital asset securities will be recorded, and the protection of these blockchains against attack and theft, and are therefore unable to mitigate these risks on your behalf. Specifically, these blockchain networks are vulnerable to hackers and cyber-attacks, and may themselves be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of digital asset securities or the decline in value of digital asset securities. Transactions in digital asset securities on these blockchains may also be irreversible, including mistaken transactions or theft. The blockchain technologies on which digital asset securities are ultimately recorded are also susceptible to mining attacks, including but not limited to double-spend attacks, majority mining power attacks, selfish-mining attacks and race condition attacks. Any successful attacks present a risk to these blockchains’ expected proper execution and sequencing of digital asset securities transactions and expected proper execution and sequencing of contract computations, which could have an adverse effect on the value of the underlying digital asset securities. Although there are ways to limit such risks, including through the use of certain consensus mechanisms that could reduce the risk of mining attacks, there can be no assurance that such measures, if implemented, will successfully defend against known or novel mining attacks, and in any event, we are unable to take such measures ourselves and therefore cannot control, mitigate, and do not take responsibility for any of the foregoing risks.
Digital Asset Security Wallet Risks: We are not responsible for your digital asset security wallet (“Wallet”) held at the custodian. Moving and storing digital asset securities in your Wallet exposes your digital asset securities to risks of total loss from, among others things, security breaches from cyber-attacks that hack and steal digital asset securities, electronic or technological failures that impede or prevent market access and market performance, recordkeeping errors and any insolvency, bankruptcy or material financial losses of the custodian. Any failures in digital asset security vulnerabilities of your Wallet are out of our control, and we will not be able to remedy or guard against such failures.
Market Default Risk: PEATS operates and administers the trading platform for digital asset securities. PEATS is not a counterparty to any trade and has no financial responsibility or liability for any failure of market participants to honor their financial obligations; there is always a risk that one or more market participants will renege, default, or otherwise fail to honor their financial obligations or will be unwilling or unable to abide by the terms of their agreements. In the event that risk materializes, other market participants can and likely will incur financial losses or reductions in gains from their own open positions in digital asset securities.
Conflicts of Interest: PEATS may charge fees for trading and therefore benefits from trading activity (sometimes called volume) regardless of whether the trading is profitable to you. PEATS and its affiliates and personnel have certain actual or potential conflicts of interest related to the decision to support or not support a digital asset security or increase or decrease the scope of the services made available for such digital asset security. PEATS personnel may trade or operate businesses that trade in the peer-to-peer market and use other services on a proprietary basis or on behalf of others in compliance with the federal securities laws and FINRA rules and regulations. These offers and trades are not distinguished from other offers and trades in the peer-to-peer market, and PEATS personnel may be a counterparty to any trade executed by you without your knowledge.
For clarity, PEATS does not operate a peer-to-peer market.
FINRA Public Risk Disclosure Program
FINRA BrokerCheck Hotline
The Financial Industry Regulatory Authority (“FINRA”) offers investors information and education through the FINRA BrokerCheck Hotline at 800-289-9999 and FINRA website at www.finra.org.
An investor brochure that includes information describing FINRA BrokerCheck is available on FINRA’s website.