Regulation Best Interest FAQ

Overview

These FAQs expand upon the topics addressed in Secfi Securities, LLC’s (“Secfi Securities”) Customer Relationship Summary ("Form CRS”), a copy of which is available online. Secfi Securities is registered as a broker-dealer with the U.S. Securities and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority (“FINRA”). Secfi Securities is a wholly owned subsidiary of Secfi, Inc. (“Parent”), a technology company that operates and manages the https://secfi.com website and platform (the “Platform”).

Brokerage and investment advisory fees and services differ, and it is important for you to understand these differences. The SEC has made available free and simple tools for you to research firms like Secfi Securities and financial professionals at https://investor.gov/CRS, which also provides educational materials about broker-dealers, investment advisers, and investing.

Secfi Securities operates as a private placement broker-dealer. Specifically, Secfi Securities brings together buyers and sellers of private securities contracts (“private securities contracts”) and secured loans (“loans”). Typically, private securities contracts and loans are between (1) current and former employees or investors (collectively, “Shareholders”) of primarily mid- to late-stage start-up companies that hold privately held shares or stock options of those start-up companies (“Portfolio Companies”) and (2) institutional investors that seek to acquire exposure to Portfolio Company stock (“Investors”). The private securities contracts are structured to preserve the private placement exemptions provided under the Securities Act of 1933, as amended.

The Platform contains Investor and Shareholder educational materials. The Platform allows Shareholders to provide certain information and to request Secfi Securities’ personnel to contact them for additional information. Secfi Securities personnel may also prospect certain Shareholders and Investors.

Capacity

In what capacity does Secfi Securities operate when facilitating execution to Shareholders?

Secfi Securities operates solely on an agency basis as a private placement broker-dealer to broker private securities contracts and loans between Shareholders and Investors. Affiliates of Secfi Securities - also wholly-owned subsidiaries of the Parent - provide some services to Shareholders in connection with or related to the execution services provided by Secfi Securities. These services and affiliates are described below.

In what capacity does Secfi Securities operate when facilitating execution to Investors?

Secfi Securities operates solely on an agency basis as a private placement broker-dealer to broker private securities contracts and loans between Shareholders and Investors. Similar to the services provided to Shareholders, affiliates of Secfi Securities provide services to Investors in connection with or related to the execution services provided by Secfi Securities. These services and affiliates are detailed further below.

Does Secfi Securities clear, or hold customer securities?

Secfi Securities does not perform any type of clearing functions for itself or others and does not handle or hold customer funds or securities.

Does Secfi Securities provide recommendations to customers?

With respect to Shareholders, Secfi Securities may recommend that a Shareholder enter into a private securities contract or loan based upon the Shareholder’s investment profile and what it believes is in the Shareholder’s best interest. Secfi Securities does not have discretion over a Shareholder’s account and therefore the decision to enter into a private securities contract and/or a loan is up to a Shareholder. Secfi Securities does not trade principally for its own account, but it may facilitate private securities contracts and loans between Shareholders and Investors to which an affiliate of Secfi Securities is an investment adviser with respect to the transaction.

Does Secfi Securities actively monitor its customers’ accounts?

Secfi Securities may periodically monitor a Shareholder’s account to determine whether services that its affiliates offer may be appropriate. This monitoring is not done on a regular basis and therefore the absence of further information from Secfi Securities should not be relied upon as an implicit recommendation to hold a position.

Secfi Securities bases all investment recommendations on each customer’s investment profile. It is important to note that Secfi Securities offers a narrow selection of securities consisting solely of private securities contracts. All recommendations provided as a broker-dealer shall be in the best interests of Secfi Securities customers.

Secfi Securities personnel may solicit potential Shareholders or Investors. When reaching out to these prospective customers Secfi Securities will provide appropriate disclosure such as Form CRS and these FAQs.

What is Secfi Securities’ relevant experience, including your registrations, education, and other qualifications? What do these qualifications mean?

Secfi Securities is a SEC-registered broker-dealer and FINRA member. As such Secfi Securities is subject to review and examination by these various regulators and subject to their laws, rules, regulations and bylaws, as applicable. Additionally, all Secfi Securities employees who solicit, propose and/or consummate transactions with customers are registered representatives with FINRA and certain states and jurisdictions, and must meet certain exam qualification and continuing education requirements.

Fees

What type of fees and costs are associated with Secfi Securities?

Secfi Securities typically charges Shareholders a brokerage commission that is the greater of a minimum fixed dollar amount, and a percentage of the notional value of the private securities contract or loan amount. The brokerage commission is based upon the size, complexity and other varying factors and will be prominently displayed to a Shareholder prior to entering into a private securities contract or loan. Customers may also be subject to additional associated administrative fees such as trust administration, transfer taxes, and wire charges. These fees may be charged by an affiliate or related entity and will be disclosed when applicable.

How might these fees and costs affect a Shareholder’s return on a private securities contract or loan? For example, if a private securities contract or loan has a notional value of $100,000, how much will go to fees and costs, and how much will be received by the Shareholder?

Any fee or cost incurred by the Shareholder will reduce the amount that a Shareholder receives in connection with a private securities contract or loan. Shareholders will pay fees and costs whether they make or lose money on a private securities contract or repay a loan. For example, if a Shareholder enters into a private securities contract or loan with a value of $100,000, Secfi Securities will typically charge a $5,000 brokerage commission. In connection with entering into a private securities contract, Shareholders often enlist additional services that are provided by the Parent such as trust set up, administration, and ongoing maintenance fees. While these fees are not charged by Secfi Securities it is important to understand all applicable fees as this may affect your return. Fees charged by the Parent will be disclosed to you at the time, or prior to a Shareholder entering into a securities contract. As a Shareholder, please make sure you understand what fees and costs you are paying.

Affiliates

What affiliates of Secfi Securities provide financial services?

Secfi Securities is wholly owned by its Parent. The Parent has a controlling ownership interest in a number of additional affiliated entities. Below is a summary of these affiliates and their activities. For further information please contact us at info@Secfi.com. Alternatively, additional information regarding certain of the below affiliates that are investment advisers is available through www.Adviserinfo.sec.gov.

Secfi, Inc. provides one-time trust engagement and setup services to Shareholders in connection with the execution and facilitation of private securities contracts.

CoVenture-Secfi Management Limited is an exempted company incorporated in the Cayman Islands that serves as a discretionary investment adviser to a Fund. The sole purpose of the Fund is to acquire and invest in late-stage and growth-stage private technology companies through the use of securities contracts consistent with the Fund’s operating documentation.

Secfi Advisory Limited is an New York-based SEC-registered investment adviser. Secfi Advisory Limited provides discretionary and non-discretionary investment management services to Investors. Secfi Advisory Limited also provides financial planning and wealth management services to individuals, including Shareholders, who may be current or future customers of Secfi Securities.

Secfi Limited is an Amsterdam-based Cayman Islands limited company that serves as a non-discretionary investment adviser to certain pooled investment vehicles (each, a “Fund” and collectively, the “Funds”). Secfi Limited provides investment advice to the Funds on a non-discretionary basis solely with respect to the recommendation, negotiation and execution of securities contracts.

Conflicts of Interest

Secfi Securities, acting in an agency broker-dealer capacity, is committed to ensuring that both Secfi Securities and its financial professionals always act in the best interest of its retail customers and does not place its financial, or other interest ahead of its customers when making a recommendation. Conflicts are caused by a variety of arrangements, including but not limited to, when Secfi Securities affiliates play a role in a transaction.

What conflicts of interest exist for Secfi Securities and Secfi affiliates?

Secfi Securities brokers securities contracts between Shareholders and Investors that are advised by either Secfi Advisory Limited, Secfi Limited or CoVenture-Secfi Management Limited. Each of Secfi Advisory Limited, Secfi Limited and CoVenture Secfi Management Limited may receive advisory fees from each of the relevant Investors that they advise. In this capacity, Secfi Securities may receive an economic benefit from such investment advisory fees. This presents a conflict of interest for Secfi Securities with respect to such activities.

In addition, since a portion of the potential profits derived from our investment advisory affiliates will indirectly benefit Secfi Securities, there is an incentive to broker securities contracts between Shareholders and Investors and to promote private securities contract and loan transactions to Shareholders with greater frequency and for larger amounts than otherwise may be advisable.

In connection with the execution of a private securities contract between a Shareholder and an Investor, the Parent is also engaged in certain trust engagement and administration services. For certain private securities contract transactions, the Parent will charge Shareholders a one-time trust engagement and setup fee in connection with such services, which is remitted to the relevant trustee. In this capacity, Secfi Securities will receive an economic benefit from the trust administration services offered by the Parent to Shareholders. This presents a conflict of interest for Secfi Securities with respect to such activities.

As indicated above, given that Secfi Securities’ affiliates provide additional financial services and charge fees for such services, Secfi Securities is incented to promote these services.

How does Secfi Securities earn fees?

Secfi Securities earns fees (known as “commissions”) based on the size of a transaction it brokers on behalf of a Shareholder. Larger transactions typically result in greater commissions earned; however, ultimately the Shareholder selects the size of their transaction.

How might your conflicts of interest affect me?

The conflicts of interest outlined in our Customer Relationship Summary are expected to have minimal effect on Secfi Securities customers. The commission earned by us, and the fees earned by our affiliate, are necessary in order to provide our products and services to you. Separately, while our financial professionals may also act as representatives of some of our affiliates, they do not act as representatives of an affiliate in their interaction with you as related to a private securities contract or loan. Further, Secfi Securities is subject to extensive policies and procedures, as part of, and in addition to, applicable FINRA and SEC regulations and oversight.

How will you address the conflicts?

Providing customers with clear disclosure of conflicts of interest, as we have done here, is an important part of addressing those conflicts. Additionally, while some of our financial professionals may also be a representative of our affiliate, their work with that affiliate does not overlap in any way with their responsibilities to you as part of your relationship with us.

Is Secfi Securities subject to Best Execution Obligations?

As a broker-dealer, Secfi Securities is obligated to meet best execution obligations. It must conduct reasonable diligence to ensure the private securities contract and/or loan execution is as favorable as possible to buy and sell under the prevailing market conditions. Given the very limited liquidity for private securities contracts and loans of this nature, review of available venues is limited. That being said, private securities contracts and loans are only executed following negotiation between a Shareholder and an Investor and all securities contracts and loans are brokered by Secfi Securities on a non-discretionary basis.

How do your financial professionals make money?

Secfi Securities’ financial professionals receive a salary and have the possibility of earning a discretionary bonus based upon individual job performance and our overall performance. Secfi Securities’ financial professionals, while not directly compensated based upon the performance of our affiliates, given their equity in the Parent they may indirectly benefit from the services and revenues generated from such affiliate activity. This may create a conflict of interest.

Additional Information

If you would like the most current information about Secfi Securities or to request a copy of additional disclosures please see our website or contact us at clientops@secfi.com.

For additional information about securities investments generally you may visit the SEC’s website at https://investor.gov.