PRIVATE PORTFOLIO, INC.

WRITTEN SUPERVISORY PROCEDURES(Following the FINRA Written Supervisory Procedures Review Checklist, May 2006, from http://www.finra.org )

COMPLIANCE MANUAL Rev. 9/9/2010

Private Portfolio of San Diego, Inc.7534 La Jolla Blvd.

La Jolla, Ca 92037-4720(858) 551-2071

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WRITTEN SUPERVISORY PROCEDURESCOMPLIANCE MANUAL

Attestation - Comprehension of WSP Manual! 11

ABOUT THIS MANUAL! 12Maintenance! 12Contents! 12

CORPORATE ORGANIZATION! 12General! 12Corporate Officers and Registered Personnel! 13Home Office! 13Office(s) of Supervisory Jurisdiction! 13

GENERAL ADMINISTRATIVE! 14Form Filing – Rule 1140! 14Form BD Amendments! 14Form U-4 / Form U-5 & Fingerprint Cards! 14Designation of Executive Representative! 14Designation of Principal Responsible for Supervision of Form Filings! 14

GENERAL BROKER/DEALER ACTIVITIES! 15Advertising and Sales Literature [Including e-mail and web sites]! 15Cold Callers/Telemarketing Scripts! 19Correspondence! 19Institutional Sales Literature & Correspondence! 20Customer Complaints! 20Social Media Websites and Electronic Forums! 20Material Event & Customer Complaint Reporting! 21Distribution of Procedures and Amendments! 21Gifts and Gratuities! 21Outside Business Activities! 21Periodic Review of Business and Supervisory System! 22Private Securities Transactions – “Selling Away” ! 22Regulation S-P of Gramm-Leach-Bliley Act! 26

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SEC Custody Rule! 27Speaking Engagements, Scripts, Chat Rooms! 27

RR ACTIVITIES! 27Rules You Should Know! 28Supervisors! 29Qualifications of Supervisory Personnel! 29All RRs Must Be Properly Registered! 29Investigation of Background and Qualifications! 30Records for RRs! 30RRs’ Supervisors! 30Annual RR Compliance Meeting! 30Heightened Supervisory /Hiring Procedures! 31Supervision of Statutorily Disqualified Persons! 31Screening For SD Persons Hired in Clerical or Ministerial Positions! 31Annual Written Attestation From RRs! 31Obligations of RRs With Accounts at Other Broker/Dealers! 32Parking of Securities Registrations! 32Sharing in Customer Accounts! 32Lending Between RRs and Customers! 32Use of Exception and Other Reports! 33Investment Advisor Activities! 33

BUSINESS CONDUCT OF REGISTERED REPRESENTATIVES! 34

SUPERVISION! 41Principals! 41Offices of Supervisory Jurisdiction! 41Designated Compliance Responsibility! 42Written Supervisory Procedures! 42Heightened Office Inspections! 45Supervision of Registered Representatives! 46

SUPERVISORY CONTROL SYSTEM! 47Limited Size and Resources Exception! 47Transmittals of Funds, Changes to Customer Account Information! 48Customer Accounts Supervision - Addresses! 49

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Customer Changes in Investment Objectives! 49Heightened Supervision for Producing Managers! 49

ANNUAL CERTIFICATION OF COMPLIANCE! 50

AND SUPERVISORY PROCESSES! 50Chief Compliance Officer! 50Rule 3013(a)! 50Certification of Compliance Processes! 50

FINANCIAL REPORTING/ BOOKS AND RECORDS! 51Maintenance of Books and Records! 51Books and Records Maintained in the Home Office! 52Written Supervisory Procedures (Compliance Manual)! 52FINRA Manual! 52Notices to Members! 52Customer New Account Form! 52Updating Customer Account Information! 53Personnel Files! 53Regulatory Complaint File! 54Prospectus/Offering Memorandum Files! 54Fidelity Bond! 54SIPC Logo! 54Net Capital Rule! 55Customer Protection Rule! 57Financial Reporting and Backup! 57Net Capital Computation! 58Focus I Report! 58Focus IIA Report! 58Filing of Annual Audit Report! 58Lost and Stolen Securities Registration! 58FINRA Fees and Assessments! 58SIPC Assessment! 58FINRA Annual Assessment! 59Margin Requirements/ Regulation T! 59Regulation T! 60

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Fees charged to Customers! 61Clearing Agreements! 61Clearing! 63Bank Secrecy Act! 63Business Continuity Planning! 64Taping Rule! 64

ANTI-MONEY LAUNDERING (AML) ! 641. Firm Policy! 642. AML Compliance Person Designation and Duties! 653. Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions! 664. Checking the Office of Foreign Assets Control Listings! 685. Customer Identification Program! 696. General Customer Due Diligence! 747. Correspondent Accounts for Foreign Shell Banks! 748. Due Diligence and Enhanced Due Diligence Requirements for Correspondent Accounts of Foreign Financial Institutions! 759. Due Diligence and Enhanced Due Diligence Requirements for Private Banking Accounts/Senior Foreign Political Figures! 7710. Compliance with FinCEN’s Issuance of Special Measures Against Foreign Jurisdictions, Financial Institutions or International Transactions of Primary Money Laundering Concern! 7911. Monitoring Accounts for Suspicious Activity! 8012. Suspicious Transactions and BSA Reporting! 8413. AML Recordkeeping! 8714. Clearing/Introducing Firm Relationships! 8915. Training Programs! 8916. Program to Independently Test AML Program! 9017. Monitoring Employee Conduct and Accounts! 9018. Confidential Reporting of AML Non-Compliance! 9119. Additional Risk Areas! 9120. Senior Manager Approval! 91

CONTINUING EDUCATION! 91Contact Person: Monitoring Compliance with Regulatory Element! 91

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Firm Element! 92

ALL SECURITIES-RELATED ACTIVITIES! 92Best Execution! 92Customer Funds & Securities Use! 93Designated Securities/Penny Stocks! 93Discretionary Accounts! 93Fair Pricing! 94Investor Education! 95Approval of Account Name or Designation Changes for Orders! 95New Account Review and Approval! 95Order Audit Trail System (OATS) Requirements! 96Opening Accounts and Transactions Involving Persons Associated with Other Broker/Dealers! 97Order Tickets/Confirmations! 97Parking of Securities! 98Periodic Customer Account Review! 98Prohibition Against Guarantees! 98Research Analysts! 98Restricted/Control Securities! 98Securities Transactions for Personal and Family-Related Accounts! 99Suitability! 99Third-Party Accounts! 100Trade Review! 100Transactions Involving FINRA and AMEX Employees! 101

MUNICIPAL SECURITIES! 102Municipal Securities Rule-making Board! 102Municipal Securities Principal! 102Rule Book! 102Financial Advisor Activities! 102Underwriting Official Statements! 102Underwriting Material Events! 102Underwriting transaction assessments payable to MSRB! 103Political Contributions! 103

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Financial Consultants/ Payment for solicitation of municipal securities business! 103Sales during underwriting period/ New issue syndicate practices! 103New Municipal securities issues; CUSIP Numbers and new issue requirements! 103Delivery of Investor Brochure Upon Receipt of Complaint/Customer Complaint Brochure! 103Customer Complaints! 104Transaction reporting requirements; Real-Time Reporting System [RTRS]! 104Use of Ownership Information obtained in Fiduciary or Agency Capacity! 104Policies and procedures to ensure timely annual filing of Schedule I.! 104Registered Representatives! 104Sales Practices! 104Uniform Practice Requirements! 105Prompt Notice! 106SEC Rule 15c2-12(c)! 106Books and Records – Municipal Transactions! 106

FIXED INCOME SECURITIES! 106TRACE Reporting! 106Repurchase/Reverse Repurchase Transactions! 106Bonds Borrowed and Loaned Transactions! 106Adjusted Trading! 106Municipal Securities! 106Government Securities! 107Mortgage Backed Securities! 107Collateralized Mortgage Obligations! 107

OPTIONS! 107Options Principal! 107Qualifications of Representatives! 107Allocation Procedures! 107Uncovered Short Option Contracts! 108Position and Exercise limits! 108Reporting Options Positions! 108Verification of Customer Background and Financial Information! 108Review/Approve New Accounts! 108

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Delivery of Disclosure Documents! 109Supervision! 109Discretionary Accounts! 109Branch Office Option Business! 110Maintenance of Records! 110Customer Grievances! 110Suitability! 110Options Communications With the Public! 111Margin/Options! 112Regulation T - Options! 112Special Statement For Uncovered Options Writers! 114

INVESTMENT COMPANY PRODUCTS AND VARIABLE CONTRACTS! 115Prospectus Delivery! 115Redemption Procedures (Dealers Only)! 115Verification of Customer Signatures! 115Signature Guarantee! 115Sales Charges! 115Reciprocal Activity! 116Sales Literature Review! 116Non-Cash Compensation! 116Mutual Funds & Unit Investment Trusts! 117Review of Customer Accounts! 117Bank Affiliated Broker/Dealer (BABD)! 120Variable Annuities! 120Underwriting Activities! 120Municipal Underwritings! 121Private Placements! 121Hedge Funds! 121Direct Participation Programs! 121

INSIDER TRADING! 121Purpose of Statement of Policy! 121The Basic Insider Trading Prohibition! 121Basic Concepts! 122

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Tender Offers! 124Procedures to Follow When Receiving Insider Information! 124Provisions for Investigating Suspect Trades! 124Updates On New or Revised Regulations! 125Attestation – Insider Trading! 126Investment Banking, Arbitrage, Research Firms! 127Chinese Wall Procedures! 127

TRADING/MARKET MAKING! 127Online Trading & Day-Trading! 127

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Ladies and Gentlemen:

The policies of Private Portfolio, Inc. (PPI) strictly adhere to sound investment principles, good business practices, and the highest ethical standards. They are intended to ensure compliance with the rules and regulations of the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), the Department of Corporations (DOC), and all other governing and/or regulatory authorities. This manual of Written Supervisory Procedures (WSPs) is intended as a guide both for Registered Representatives and for supervisors charged with enforcing these policies and procedures.

It is the desire of the officers of Private Portfolio, Inc. that company policies be conscientiously and effectively followed and enforced. Toward that end, this manual is available online to all authorized PPI associates in the secure internal section of the PPI website. Our WSPs are confidential, and are the property of Private Portfolio, Inc. These WSPs are the basis for current operations at Private Portfolio, Inc., and supersede any preceding procedural manual you may have received.

All representatives must read this WSP manual: you are responsible for its contents. Please acknowledge reading and understanding it by signing and returning to the home office the 3 Attestations included below (Comprehension, p. 10; Selling Away, p. 23; Insider Trading, p. 108). All new Registered Representatives must return these signed Attestations to the home office prior to conducting any securities investment business.

Periodically, PPI will issue memoranda updating this manual. Revisions will be included online for permanent reference. You will need to study all revisions carefully; again, you are responsible for all information included in them, and for acting in accordance with their content.

If at any time you have questions that cannot be answered fully by referring to this manual, please feel free to contact us at the home office.

Thank you for your cooperation.

Daniel Barba and Eduardo TovarPresident and Vice President, PPISeptember, 2010

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Attestation - Comprehension of WSP Manual

Print out, sign, and return with original signature to:

Eduardo Tovar

Private Portfolio, Inc.7534 La Jolla Blvd.La Jolla, California 92037-4720

I acknowledge that I have read and understood the Private Portfolio, Inc., Written SupervisoryProcedures manual. I attest that while registered with PPI, I will comply fully with the policies and procedures stated therein, including all subsequent additions of regulatory and/or compliance memoranda.

Name:_________________________________! RR#______________________(print)

x_____________________________________ __________________________Representative’s Signature ! ! ! ! Date:

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ABOUT THIS MANUALBecause the welfare of the public is directly involved, the securities industry is one of the most highly regulated industries in the United States. Standards required for proper selling of securities are spelled out in detail by various regulatory agencies. Failure to comply in strict accordance with the rules and regulations of the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Department of Corporations, State of California, can have serious consequences for you and for Private Portfolio, Inc.

PPI has adopted various policies designed to serve the interests of our clients and the investing public, and to ensure compliance with securities laws and regulations. No individual at PPI has authority to waive compliance with the provisions of any law or rule of the regulatory bodies.

MaintenanceIt is the policy of Private Portfolio, Inc. that all authorized persons have access to this manual. Amendments will be made to these WSPs at the behest of various regulatory agencies, and as technology, business, and other factors affect procedures. Eduardo Tovar will insert amendments into the online manual, located on the internal portion of the Private Portfolio website. He will also review and update these WSPs regularly, and will notify RRs when new information appears; RRs are responsible for reading, understanding, and keeping up to date with these WSPs.

ContentsThis manual follows the format of the FINRA Written Supervisory Procedures Review Checklist; relevant industry rules for each section follow section titles and/or subheadings. The manual specifies the regulations, policies, and procedures undertaken by PPI and its associates that are necessary for compliance with our industry’s regulatory agencies, and to fulfill the requirements of good business practice and client service.

The manual also contains three separate Attestations for the following: Comprehension of Written Supervisory Procedures; Insider Trading; Selling Away. All Registered Representatives are responsible for signing and returning these to Eduardo Tovar at the home office. These will be kept in your file as evidence that you are familiar with these WSPs, and with your responsibilities and prohibitions.

CORPORATE ORGANIZATIONGeneralPrivate Portfolio, Inc. is a securities broker/dealer that conducts general securities business through Pershing LLC, including options, on a fully disclosed basis.

Private Portfolio, Inc. is a California corporation with the following registrations:

• A broker/dealer registered with the Securities and Exchange Commission (SEC)

• A Registered Investment Advisor

• A member of the Financial Industry Regulatory Authority (FINRA)

• Certified as a broker/dealer by the State of California, Department of Corporations (DOC)

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• A member of the Securities Investor Protection Corporation (SIPC)

• Registered with the Securities Information Center (SIC) as an Indirect Inquirer

Corporate Officers and Registered Personnel Daniel Barba, PresidentHermann von Bertrab, Eduardo Tovar, Vice Presidents

Eduardo Tovar and Daniel Barba will register the business locations of all Registered Representatives on Form BR. The following is a current list of Private Portfolio’s Registered Representatives:

Daniel BarbaJohn BentonHermann von BertrabJuan DieguezRegina LebrijaDavid MarshallThomas MullenPaul MullerFrank PaianoLuis Mario RodriguezGuillermo RosalesJaime SchwartzMateo de Sola Eduardo Tovar

Home OfficeThe home office of Private Portfolio, Inc. is at 7534 La Jolla Boulevard, La Jolla, CA 92037-3552. The home office serves as central control for all broker/dealer activities. The home office includes the office of the president, financial control and accounting, operations, and other sections and departments necessary to the operation of the broker/dealer.

Office(s) of Supervisory JurisdictionRules 3010(a)(3),(4),(5); Rule 3010(b)(3)

Home Office:  7534 La Jolla Blvd., La Jolla CA 92037 ph: (858) 551-2072Designated principals at home office:  Eduardo Tovar and Daniel Barba.

Bond Trading Office:  437 Grant Street, Suite 632, Pittsburgh PA 15219 ph: (412) 232-3112Designated principals for Bond Trading Office:  David Marshall, Eduardo Tovar, Daniel Barba.

Each is an office of supervisory jurisdiction (OSJ).

The Bond Trading Office and all non-OSJ offices are supervised by the home office: Eduardo Tovar and Daniel Barba.

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GENERAL ADMINISTRATIVEForm Filing – Rule 1140Form BD AmendmentsNASD By-Laws Article IV, Sec 1

Information provided in the membership application and on Form BD must be kept current, and any changes must be updated within thirty (30) days of learning of facts that give rise to an amendment. All Form BD amendments must be filed electronically with FINRA, via Web CRD. Some circumstances that require filing an amended Form BD include changes in: applicant’s name; mailing or principal office addresses; proposed business activities; ownership or management personnel; status of criminal, regulatory, civil, or other events disclosed in Item 11 of Form BD. Form U-4 / Form U-5 & Fingerprint CardsNASD By-Laws Article V, Sections 2 and 3; NTM 03-65; SEC Rule 17f-2

After a successful interview, prospective Registered Representatives must complete and submit FINRA Applications (Form U-4) and fingerprint cards (for identification and appropriate processing), as well as registration with the State of California. PPI is required to make disclosures on all uniform registration forms in a timely manner. Therefore, it is very important that all Registered Representatives update their Form U-4 applications whenever there is a change in any of the information previously provided (e.g., change of residential or business address, new outside business activity, etc.) Amendments should be promptly sent to Eduardo Tovar, who will file them electronically with FINRA via Web CRD. NB: FINRA may impose a meaningful sanction against PPI and its associates for failure to submit amendments to Form U-4, Form U-5, and Form BD in a timely manner.

If applicants have been employed with another FINRA member firm, they must also submit their Form U-5 to Mr. Tovar. Whenever a Registered Representative of Private Portfolio, Inc. is terminated, regardless of the reason, PPI is required to submit a Form U-5 to FINRA within thirty (30) days of the termination date. Eduardo Tovar will make sure that all Registered Representatives who terminate or are terminated have received a copy of Form U-5. In addition, Private Portfolio, Inc. will require a copy of the most recent Form U-5 from any person seeking employment in a registered capacity.

Designation of Executive RepresentativeNASD By-Laws Article IV, Sec. 3, 1150

Private Portfolio, Inc. appoints and certifies to FINRA that Eduardo Tovar is our executive representative to vote and act for PPI in all FINRA affairs. Eduardo Tovar is vice president and a registered principal of PPI. He will maintain an e-mail account for communication with FINRA and will keep the firm contact information up to date.

Designation of Principal Responsible for Supervision of Form FilingsRule 1140

Eduardo Tovar is the designated principal responsible for form filings.

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GENERAL BROKER/DEALER ACTIVITIES Advertising and Sales Literature [Including e-mail and web sites]2210, 2220; IM 2210-1;NTM 93-73,93-85; 95-74, 96-50, 98-3, 98-107, 00-15, 00-21, 01-80, 02-39; MSRB Rule G-21, SEC Rule 17a3(a)(20)(Complete information regarding FINRA advertising regulation: http://www.finra.org/RulesRegulation/IssueCenter/Advertising/p011979 )

FINRAAdvertising Regulation Department9509 Key West AvenueRockville, MD 20850-3389

Definitions

Materials designated as Advertising are as follows:

• Newspapers, magazines, telephone listings, or other public media and periodicals.

• Radio, telephone, recordings, motion pictures, videotape displays, and television.

• Sales literature, research reports, marketing letters, performance reports and summaries; Sales literature includes not only advertising material but also all communications (whether oral or in writing) to prospective investors that relate to the offer and sale of securities: seminar presentation text and charts, tables, graphs, form letters, brochures, etc;

• Circulars, notices, reports, newsletters, signs/billboards.

• Reprints of any of the aforementioned or reprints of published articles.

Approval

All advertising must be approved, as evidenced by initials, by Eduardo Tovar prior to filing or use, and will be filed with FINRA within ten (10) days of first use or publication. In addition, PPI is aware that its advertising and sales literature is subject to routine spot-checks. Upon written request from the FINRA Advertising Department, PPI shall promptly submit requested material. PPI will not be required to submit material that has been previously submitted pursuant to the foregoing requirements, except for material related to direct participation programs.

In some cases, PPI is prohibited from using sales literature until it has been approved by the appropriate regulatory agency. Approval is to be received in writing following a review of the actual advertisement or promotional literature. This rule extends to any and all sales literature, newsletters, brochures, display ads, promotional articles, and other communications intended to further the activities of PPI and its representatives. The anti-fraud provisions of the federal securities laws and the state Blue Sky laws prohibit false, exaggerated, or misleading statements, or omissions of material facts in advertising or sales literature.

Any materials used for soliciting securities sales leads must conform in all respects to applicable rules and regulations. RRs may only use sales material furnished by PPI, or cleared by legal counsel for PPI. It is forbidden to use public press, trade publications, radio or television, mass mailings, or meetings open to the public to inform potential customers of a private offering.

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All Advertising and Sales literature pertaining to certain Option-related materials must also be filed with FINRA within ten (10) days prior to first use or publication. (For information specific to Options-related advertising, please see pp. 92-93.)

Service Charge

There is a service charge for every item of advertisement, sales literature, and other such material, whether printed, video or other form, filed with or submitted to FINRA. (The only exception is any item filed or submitted in response to a written request from FINRA’s Advertising Regulation Department for a spot-check.) Charges are as follows: for printed material reviewed, $100.00 for the first ten pages of material, plus $10.00 for each additional page reviewed; for video or audio media, $100.00 for the first ten minutes, plus $10.00 per additional minute of tape reviewed.

Expedited review of material submitted to the Advertising Regulation Department will carry a service charge of $500.00 for the first ten pages/minutes, plus $25.00 per page/minute in excess of ten pages/minutes. The Advertising Regulation Department may refuse requests for expedited review.

Registered Representatives and Advertising

Registered Representatives will use only advertising materials or sales literature (whether labeled “for broker/dealer use only” or not) that has been provided by PPI. The home office will maintain a file of usable, pre-approved advertising material and sales literature.

PPI’s letterhead may not be used for personal correspondence. You may not photocopy or otherwise reproduce Company letterhead for personal use for notes, memoranda, letters, or other documents. Materials approved for distribution will be available from the home office on request.

For seminar or sales presentations, you may use only charts or tables prepared by PPI and included in an Offering Memorandum or in authorization sales literature. Self-designed or homemade charts and tables are not permitted. You may not–under any circumstances–do any of the following unless specifically authorized to do so, in writing, by Eduardo Tovar:

• place advertisements in newspapers, magazines, or any other periodical;• print any material, business cards, letterhead, announcements, reprints of newspaper articles;• engage in any sales promotion, whether by radio, television, direct mail, online, or otherwise.

In addition, absolutely no alterations or deletions may be made in charts supplied by PPI: they must be used in their entirety, without modification. In using approved charts and tables, do not emphasize or draw attention to a particularly favorable section in contrast with another section, as such emphasis may be deemed misleading. Charts and tables approved for use regarding one offering may not be used for presentations for a different offering.

Seminar and Sales Presentations

SEMINAR OUTLINES/FORMAT WILL BE APPROVED BY FINRA–Financial Industry Regulatory Authority–PRIOR TO USE. For more complete information, see: http://www.finra.org/web/groups/educ_progs/documents/education_programs/p016822.pdf

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All sales presentations must follow:

• The principle of “Full Disclosure”;• All the rules set forth in the Securities and Exchange Commission’s Statement of Policy; • The Rules of Fair Practice of the Financial Industry Regulatory Authority; • The Securities Exchange Act of 1934; and • All applicable state securities laws

The requirements of these laws, rules, and regulations, insofar as they govern your sales activities, include the following:

New Registered Representatives - New Registered Representatives, including those who transfer from another broker/dealer, are not authorized to do business for PPI or to receive commissions from the sale of securities, until Private Portfolio, Inc. has confirmed, using FINRA’s Firm Gateway online, that Reps are indeed officially registered.

The Offering Memorandum - Unless you know that prospective clients are already in possession of same, you are required to deliver a currently effective Offering Memorandum at the time you solicit a sale for Mutual Funds. You may use supplementary literature that mentions the name of a specific security only if it has been preceded or accompanied by a current Offering Memorandum or Prospectus. Seminar presentations must be factually accurate and presented in an even-handed manner. Specific references should be made to Investor Suitability requirements, risks, fees, and compensation payable to the General Partners and their affiliates, and to the limited transferability of the investment in the offering. A sufficient quantity of Offering Memoranda and any supplements pertaining to the offering being presented must be available for distribution prior to the seminar.

You may not represent or imply that the stated investment objective of the offering will be met, although you may mention the objectives of the investment.

You must always point out or explain the inherent risks of any investment. You may not represent or imply that as a result of the purchase of a limited partnership interest an investor’s capital will increase, original capital will be preserved, protection against loss of purchasing power will occur, investments will be diversified, or opportunity will be provided for financial independence or profit.

You may not compare limited partnership interests with any other security, medium of investment, security index, or average without pointing out that:

• The particular security, index, average, and period were selected specifically for comparison;

• Any results disclosed should be considered in the light of PPI’s investment policy and objectives, the characteristics and quality of PPI’s investments, and the period selected;

• There are material differences or similarities between the subjects of the comparison;

• The comparison is designed to illustrate a particular situation;

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• Any other points that may be necessary to make a fair comparison.

Because self-designed or homemade comparisons can easily lead to inaccurate or misleading statements, PPI strongly recommends that care be taken to ensure that comparisons are factually accurate, fair, and in accordance with the above outline.

You may not represent or imply that limited partnership interests in the offering are similar to or are as safe as government bonds, insurance annuities, savings accounts, or life insurance, or that limited partnership interests have the fixed income, principal or any other features of a debt security.

You may not make predictions or projections about future performance or return on investment without clearly labeling such comments as estimates. All projections must be reasonably based and appropriately qualified. Discussions on past performance of programs should be restricted to tables in approved sales literature.

You may not mention the possibility of investing in a specific program until PPI has indicated that the offering is available for prospective investors.

Business Cards and Letterhead

Before it can be used, all such print material must be approved by Eduardo Tovar, with copies in the home office advertising file as a record and evidence of approval.

For Securities Business: Business cards, letterhead, and any other print material used by a Representative to give to a prospect, client, or other member of the public in connection with securities business, must clearly disclose that the Representative is acting as a Registered Representative of Private Portfolio, Inc. in the sale of Securities. It must also include: SIPC and FINRA identification, Company Name, home office address, and phone as below:

Private Portfolio, Inc.7534 La Jolla Blvd.

La Jolla, Ca 92037-4720(858) 551-2071

The RR’s local telephone number may be used, but not their local address, unless the location is a designated branch.

For Non-Securities Business – Many Representatives are licensed and conduct transactions in insurance, real estate, financial planning, etc., under other company names. Business cards and letterhead identifying the Representative’s status with another company may be used when conducting non-securities business. Thus, it may be appropriate for the Representative to have two sets of cards and stationery. When multiple business entities are named, the nature of the relationships, if any, between PPI and the named entities, and the products offered by each entity must be clear. When making reference to memberships (e.g., FINRA, SIPC, etc.), it must be clear which entity is the member of the referenced organization.

Financial Planning - Unless a Representative is registered as an Investment Advisor under the Investment Advisors Act of 1940, a reference to “Financial Planning” should not be used on the business card or the stationery letterhead.

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Non-PPI stationery and business cards must be approved in writing by Eduardo Tovar prior to use. All outside activities of a Registered Representative must be disclosed in writing and approved by Eduardo Tovar, per PPI policy (see below, under Outside Business Activities subhead).

Stationery and Business Cards must not include references to non-existent degrees or designations, and PPI prohibits the use of bona fide degrees or designations in a misleading manner when referring to individuals.

Dealing with the Press

Only Daniel Barba, Eduardo Tovar, David Marshall, or Hermann von Bertrab will have any communication with the press regarding any news concerning Private Portfolio, Inc. “The press” includes: television, newspapers, magazines, telephone listings, etc. Be aware that:

• News releases may not be issued by anyone other than Eduardo Tovar.

• All press inquiries concerning legal matters of any kind must be immediately referred, without comment, to Eduardo Tovar.

• No comments may be made, under any circumstances, about underwritings or offerings.

• Interviews on other topics may be conducted only with Principal and Compliance approval.

Cold Callers/Telemarketing Scripts2210, 2212; 3010(B)(2), 3110(G); NTM 95-54, 96-44, 97-1, 03-38, 04-15

N/A – PPI disallows Cold Calling and Telemarketing.

Correspondence3010(d); SEC Rule 17a-4(b)(4); NTM 98-11, 99-3, 01-80, 03-33; SEC Rule 17a(3)(20)

Faxes, Mail, E-mail, Instant Messaging, Text-Messaging

Eduardo Tovar and Daniel Barba are responsible for reviewing incoming and outgoing paper (non-electronic) and electronic correspondence between RRs and the public that relates to our securities business. Incoming paper business mail and faxes should all be addressed to the home office. If RRs receive such correspondence directly, they must forward it promptly to the home office for review and storage. Reviewers make sure that correspondence is related to our securities business, they properly identify and handle customer complaints, and they ensure that customer funds are handled in accordance with firm procedures. After review, the home office principal initials the file name and stores both incoming and outgoing mail and faxes electronically, thus creating and maintaining a current list of what is received and reviewed. Mail will be forwarded to appropriate RRs as needed.

1. A specific file format will be used for naming each piece of correspondence. This comprises the date, the reviewer’s initial, and an ID tag (account number, financial institution, etc.). Example: 20080220d 6jm0000.pdf (yyyymmddinitial IDtag.pdf).

2. Documents can be scanned directly into the Chronological folder, and are then named automatically using the scanner. Files saved manually should be given a file name that follows the same standardized format. All file types in general use are acceptable: pdf, txt, doc, gif and tif.

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3. A second copy of the document can be saved to a different folder by using the “save as” command, then entering a new file name. It may also be printed and added to the account file folder as hard copy.

E-mail –So that e-mail may be reviewed and stored, all members of Private Portfolio are required to use their assigned privateportfolio.com account for all business e-mail (but never for personal e-mail). Outgoing e-mails are reviewed at the home office and stored on Postini, on a DVD and in the e-mail storage folder on the server. Daniel Barba will review e-mail weekly by reading a sample twenty-five messages and doing word searches. Sampled messages and search results will be stored as evidence.

Instant Messaging/ Text-Messaging – PPI does not allow business correspondence to be carried out on instant messaging or by text message, since these are not reviewed and stored.

Institutional Sales Literature & CorrespondenceRule 2211; NTM 03-38

N/A – PPI does not have institutional investors.

Customer ComplaintsConduct Rules 3070 - Reporting Requirements; 3110, MSRB Rules G-18(a)(xii) and G-10

Here, “customer” includes any person other than a broker or dealer with whom PPI has engaged, or has sought to engage, in securities activities. As defined by FINRA, “A complaint shall be deemed to mean any written statement of a customer or any person acting on behalf of customer, alleging a grievance involving the activities of those persons under the control of [PPI] in connection with the solicitation or execution of any transaction or the disposition of securities or funds of that customer.”

Private Portfolio, Inc. will maintain all customer complaints, of any kind, as part of its books and records in the home office. A complaint record will include the name of the complainant, the date the complaint was received, the name(s) of any involved Registered Representatives, copies of correspondence sent to and received from the complainant, copies of transmittal correspondence to regulatory agencies, and records of any adjustments or actions taken by PPI. This file will be accessible for inspection.

Separate complaint files will be maintained for Options, for complaints from regulators, and for mutual funds. See also section under subheading “Customer Grievances”, Rule 2860(b)(17)(A).

Social Media Websites and Electronic ForumsPrivate Portfolio, Inc. does not allow its Brokers to participate in stock chat rooms, or any other type of real-time interactive communications with third parties.

Static content (such as profile or background information) will be allowed, with prior approval. Non Static, real-time, interactive communications using social networking sites (such as status updates) are considered participation in an interactive electronic forum and are not permitted by Private Portfolio, Inc.

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Material Event & Customer Complaint Reporting Rule 3070

Complaints from clients must be brought to the immediate attention of Eduardo Tovar. Mr. Tovar is designated as principal to respond to complaints, and will do so quickly and employ all appropriate support documents as necessary. Warning to RRs: Under no circumstances are Registered Representatives to attempt to settle errors or complaints with clients. Eduardo Tovar will be the only person with whom a complainant comes in contact to resolve problems.

If a complaint is in writing, the original will be filed alphabetically by client name in the Complaint File in the home office. In case of an oral complaint, the Registered Representative shall request that the customer send the complaint in writing to the home office so that PPI may respond. The Representative will make note of the conversation for the Complaint File, including name, address and telephone number of complainant, and will immediately submit a copy to Eduardo Tovar.

Mr. Tovar will report to FINRA statistical and summary information regarding customer complaints in such detail as FINRA shall specify by the 15th day of the month following the calendar quarter in which customer complaints are received by us. After the complaint is investigated and handled, a copy of the disposition of the matter is filed in the Complaint File. If a complainant alleges misconduct on the part of a Registered Representative, a copy of the complaint is filed in the Representative’s dossier after proper investigation and administration. If a complaint involves a mere misunderstanding or other problem that can be handled by PPI principals, a copy of the complaint and its disposition will be filed only in the Complaint File.

Distribution of Procedures and AmendmentsRule 3010(b)(4)

A copy of these Written Supervisory Procedures is maintained online on the internal portion of our website, and is available to all PPI personnel. PPI will amend these WSPs as appropriate within a reasonable time after changes occur in applicable securities laws and FINRA regulations, and as changes occur in technology, in our business, or in our supervisory system. We will notify RRs when amendments are made. RRs are responsible for knowing and abiding by the content of these WSPs.Gifts and GratuitiesRule 3060; MSRB Rule G-20

No Representative shall give or accept anything of value, including gratuities, in excess of $100 per individual per year to or from any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. A gift of any kind is considered a gratuity.

RRs will agree not to accept or receive, either directly or indirectly from any person, firm, corporation or association other than PPI, compensation of any nature as a bonus, commission, fee, gratuity or other consideration in connection with any securities transaction. (See also section under subheading “Non-Cash Compensation” Rules 2820, 2830; NTM 95-56, 95-75.)

Outside Business ActivitiesRule 3030; Section 4301-Article III, FINRA Rules of Fair Practice

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All Registered Representatives must sign an Independent Contractors Agreement with Private Portfolio, Inc. These agreements will be maintained in each RR’s personnel file.

Private Portfolio, Inc. understands and recognizes that an employee may have other business involvements that do not conflict with PPI’s securities business. RRs must submit in writing to Eduardo Tovar a full disclosure of any other connections and affiliations for his written authorization and approval. These written notices will be maintained in RRs’ personnel folders for inspection by all regulatory authorities. This provision does not apply to compensation from passive investments.

PPI uses an outside business activities (OBA) questionnaire for RRs, which helps to monitor such activities.

Periodic Review of Business and Supervisory SystemRule 3010(c)

At least annually, Eduardo Tovar will conduct a review of the businesses in which Private Portfolio engages. This review will help detect and prevent violations of, and achieve compliance with FINRA rules and other applicable securities laws and regulations. To expose and avoid irregularities or abuses, Eduardo Tovar, Daniel Barba, or a designated principal will review the activities of each office, including periodic examination of customer accounts. (For more complete information, please see the sections of this manual under the subheadings “Supervision” and “Supervisory Control”.)

Private Securities Transactions – “Selling Away”Rule 3040; NTM 85-54, 94-44-96-33; Sections 27 & 40, Article III, FINRA Rules of Fair Practice

Selling securities without processing the order through PPI and without PPI’s permission or knowledge is a violation of FINRA rules and company policy. Even products that you may not consider to be securities, such as leasing arrangements or promissory notes, may be securities under federal or state law. Check with the home office before engaging in any securities transactions you are not certain of.

Selling Away Prohibition

All Registered Representatives registered with Private Portfolio, Inc., should be aware of the prohibitions against “Selling Away”. Most simply stated, if our firm does not make a particular product or investment available, you are not authorized to make arrangements with another firm or product vendor so as to provide it to your clients.

This prohibition, as it is contained in NTM 85-54“ Interpretation of the NASD Board of Governors on Private Securities Transactions”, is as follows:

“It shall be deemed conduct inconsistent with just equitable principals of trade for any person associated with a member to engage in a private securities transaction outside the regular course or scope of his association or employment with a member, for himself, or with or for any person without prior written notification to the member with whom he is associated.” http://finra.complinet.com/finra/display/display_content.html?rbid=1189&element_id=1159004700

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A private securities transaction is defined as any securities transaction outside of the regular course or scope of an associated person’s employment with Private Portfolio, Inc.

Any person associated with PPI who participates in a private securities transaction must, prior to participating in the transaction, provide written notice to Eduardo Tovar. This notice must describe the transaction, the associated person’s role, and must state whether the associated person has received or may receive selling compensation.

Eduardo Tovar will respond to the notice in writing indicating whether Private Portfolio, Inc. approves or disapproves the proposed transaction. If PPI approves the transaction and the associated person received or may receive selling compensation, Eduardo Tovar will record the transaction in the broker/dealer’s books and records and must supervise the registered person’s participation in the transaction as if it were Private Portfolio, Inc.’s own.

Selling compensation is defined as any compensation paid directly or indirectly from whatever source in connection with, or as a result of, the purchase or sale of a security, including, though not limited to: commissions; finder’s fees; securities; or rights to acquire securities.

In the event an RR is found to be Selling Away without prior written approval, two things generally occur. First, the individual is terminated by PPI. Second, the individual becomes the subject of a formal disciplinary action by the District Business Conduct Committee. This has historically resulted in at least the imposition of sanctions, in the form of censure and fine. Private Portfolio, Inc. believes that the aforementioned and the attached memorandum will assist you in acquiring a better understanding of Selling Away.

FINRA is only looking for securities transactions that involve compensation. PPI will monitor Representatives using wrap fee or asset allocation programs, as well as Representatives selling any type of security through an outside firm.

[NB: Regulators pay extra attention to this area - it is paramount that you are familiar with these prohibitions and that you strictly abide by them. If you have any questions regarding this material, please contact the home office.]

A form acknowledging your receipt and understanding of this material appears below. Please promptly return a signed copy of this form to the home office, where it will be kept in your file. ! ! !

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Attestation – FINRA Memorandum: Selling Away Activities

Print out, sign, and return with original signature to:

Eduardo TovarPrivate Portfolio, Inc.7534 La Jolla Blvd.La Jolla, California 92037

I confirm my receipt of the above referenced material and I attest that I have familiarized myself with the prohibitions against Selling Away.

Name:_________________________________! RR#______________________(print)

x_____________________________________ __________________________Representative’s Signature ! ! ! ! Date:

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Regulation S-P of Gramm-Leach-Bliley ActRegulation S-P http://www.sec.gov/rules/final/34-42974.htm

Under the Gramm-Leach-Bliley Act, PPI must provide its customers with a notice of its privacy policies and practices, and must not disclose nonpublic personal information about a consumer to nonaffiliated third parties unless we provide certain information to the consumer and the consumer has not elected to opt out of the disclosure. The Act also requires appropriate standards to protect customer information.

Privacy Policy Notice to customer

Our Privacy Policy Notice to customer is contained in our Additional Terms Agreement, which is part of our New Account documentation. This serves as initial privacy policy notice to customers. Annual notice is provided when once a year this policy is included on customers’ statements, sent directly to them from our clearing agent, Pershing, LLC. Revisions are noted on monthly client statements from Pershing.

Protection of Customer Information

Member firms face increasing risks of security breaches that could result in the loss of confidential customer information.

To help safeguard customer information, PPI will test new technologies before incorporating them into existing systems; tests will include an assessment of internal surveillance, online access to client information (that is, who has access, how to limit access, how access is granted) and ongoing plans for handling account intrusions. This testing might include such things as: looking for internal security breaches; a survey of client confidentiality safeguards; a review of the online interface with customers to determine if there are any inefficiencies or gaps that can be strengthened to reduce the ability of intruders to access customer accounts and records. We will continue to review account activity daily, looking for “red flags” that may indicate suspicious activity. These tests will be evidenced by an annual report titled “Protection of Customer Information, Regulation S-P”, to be filed at the home office.

Steps Registered Representatives and Principals must take to maintain and secure data :

• Know and follow firm procedures

• Become familiar with PPI’s systems: NETX360, e-mail, and internal files

• Watch for red flags

• Secure electronic data: use secure computing practices, backup, laptop, WiFi connections and remote access

• Secure paper records: use locks and shredders as appropriate

• Abide by Pershing policies for data protection for NETX360

• Know who to notify in case of a breach: State data breach notification requirement, California Office of Privacy Protection - California Law on Notice of Security Breach. http://www.privacyprotection.ca.gov

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In addition, we must all remember to protect customer information stored on electronic devices such as hard drives, CDs, flash drives, laptops, and PDAs when such devices are discarded. Be aware: hard drives and other components must be completely erased or overwritten to eliminate any chance that customer information could be retrieved.

Vendor Management, Outsourcing NTM 05-48

Even though we may outsource an activity, we are still accountable for it.

Pershing, our clearing firm, is our major strategic partner as well as our primary service provider. Pershing is regulated as we are, and our Clearing Agreements relationship has been in use for many years. We work daily with Pershing personnel and systems, and we constantly monitor the accuracy and quality of work produced. Pershing has a third party test their procedures to help ensure quality.

In the future, if we outsource even more activities, we must be very careful about how we contract for them and about service levels agreements for services that are of critical importance to us. We are also aware that it is prohibited to outsource certain activities, and that others require registration and qualifications.

SEC Custody Ruleamends Rule 206(4)-2 of the Investment Advisors Act of 1940

We strongly assert that we fit the exception as advisors who are “operationally independent” of the related custodian.

Our firm is both broker/dealer and registered investment advisor; customer accounts are introduced to Pershing on a fully disclosed clearing basis. We are “operationally independent” of Pershing.

Account opening, address change, and asset movement all must be processed through Pershing and are subject to their rigorous internal controls. Pershing provides statements, and confirms directly to customers.

Speaking Engagements, Scripts, Chat RoomsRule 2210

If RRs plan to present to the public, whether in person, by telephone, or electronically, they must have their presentation material pre-approved by Eduardo Tovar. These are all considered advertising and sales materials by FINRA and the SEC.

RR ACTIVITIESEvery attempt has been made to have this manual touch on all of our procedures and requirements, and you should be familiar with the procedures and policies set forth here. Your own good judgment is nevertheless required in all your business activities.

As you will see below, PPI has a variety of supervisory procedures to oversee operations and compliance. BUT: The prime responsibility for following our policies and procedures rests with you,

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the Registered Representative. A conscientious and professional attitude on your part will ensure that we all follow the many rules, regulations, and the business ethics of the securities brokerage business.

Rules You Should KnowRules of Fair PracticeThe Statement of Policy of the Securities and Exchange Commission and the Rules of Fair Practice of the Financial Industry Regulatory Authority cover a wide range of practices in connection with the sale of securities to members of the general public.

Much of the FINRA Manual is directed to the activities of the broker/dealer. Certain sections are particularly pertinent to Registered Representatives and Registered Principals. Areas covered include what may and may not be said to clients, allowable types of appropriate sales literature and letters, books and records supervision, and definitions. Registered Representatives should be familiar with these sections. A knowledge of FINRA’s expectations and prohibitions will prevent many inadvertent errors and omissions. The complete FINRA Manual and Notices to Members are available online at www.finra.org.

The laws that govern the securities industry are summarized below. For complete text and more information, go to Laws & Regulations (SEC website).

Securities Act of 1933 (“ ‘33 Act”)Congress enacted the ‘33 Act to regulate the initial sale of securities. The Act requires disclosure of the material facts about securities being offered to the public. Disclosure is made through a registration statement filed with the SEC, and a prospectus given to the purchaser.

Securities Exchange Act of 1934 (“ ‘34 Act”)The ‘34 Act established the SEC as the Agency responsible for administration and enforcement of federal securities laws. It outlaws misrepresentation, manipulation, and other abusive practices in securities markets.

Maloney Act of 1938This Act amended the ‘34 Act to give associations of over-the-counter (OTC) securities dealers the power of self-regulation. The NASD (now FINRA) was established as the self-regulatory organization (SRO) of these broker/dealers.

Investment Advisors Act of 1940 (“Advisors Act”)The Advisors Act requires all investment advisors (persons who provide investment advice for a fee) to register with the SEC. It is designed to protect the public from fraud and misrepresentation.

Investment Company Act of 1940 (“ ‘40 Act”)The ‘40 Act requires registration and regulation of investment companies (including variable contract separate accounts, open-end mutual funds, and unit investment trusts) by the SEC. This Act protects potential investors by requiring a registration statement and prospectus to state the investment company’s specific investment objective and advise of all charges and fees related to the purchase or sale of shares.

Insider Trading and Securities Fraud Enforcement Act of 1988This Act amended both the ‘34 and Advisors Acts by adding specific provisions to detect and deter

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insider trading, and to impose stiffer sanctions upon violators. It also requires broker/dealers and registered investment advisors to establish, maintain, and enforce written policies and procedures on insider trading.

State “Blue Sky” LawsState laws that regulate sales and sellers of securities within their borders are commonly referred to as “Blue Sky” laws. These statutes govern registration of broker/dealers, Registered Representatives, Registered Investment Advisors, and securities offered for sale. Each state’s securities commission is responsible for the enforcement of state laws.

SupervisorsRule 3010(a)(2); 3010(b)(3); NTM 99-45

Daniel Barba – President; registered principal: General Securities 11/1/94; Financial Principal 11/1/94; Options Principal and Supervisor 11/1/94; supervision of Eduardo Tovar, and annual review; shares with Eduardo Tovar all supervisory and managerial duties for branch offices and OSJs

Eduardo Tovar – Vice President and Chief Compliance Officer 2/1/2005; registered principal 1/24/95; Mutual Funds 7/12/02; General Securities Principal 7/12/02; Designated Officer to Supervise Electronic Filing of Forms (Rule 1140) 8/15/07; Supervision of Daniel Barba and of Registered Representatives and Annual Reviews; shares with Daniel Barba all supervisory and managerial duties for branch offices and OSJs

Both supervisors work from Private Portfolio, Inc.’s home office, located at:7534 La Jolla Blvd., La Jolla CA 92037 ph: (858) 551-2071

(See also sections titled “Supervision” and “Supervisory Control System” in this manual.)

Qualifications of Supervisory PersonnelRule 3010(a)(6); NTM 99-45

Eduardo Tovar and Daniel Barba are responsible for all supervisory procedures. They are qualified by both experience and training to carry out supervisory responsibilities, and are appropriately registered. Because of PPI’s flat organizational structure and small size, they supervise and oversee the activities of each other and of all of PPI’s RRs and principals. They enforce the contents of these WSPs, and maintain and supervise every aspect of all books and records and securities transactions to ensure compliance.

All RRs Must Be Properly RegisteredFINRA By-Laws, Article III, Sec. 2; 1070; MSRB RUles G-2 & 3; 1021, 1022; IM-1022-1; IM-1022-2; 1030; 1040; 1100; 1110

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Before you can become a Registered Representative of Private Portfolio, Inc., you must take and pass examinations referred to as Series 7 (General Securities Representative) and Series 63 (Uniform Securities Agent State Law Examination). The following applies to the Series 63 examination:

• If the Representative was registered and approved in the State of California prior to May 22, 1989, the Series 63 exam is waived.

• If the Representative was approved within the State of California after May 23, 1989, they must have taken and passed the Series 63 by March 31, 1991.

• RRs licensed in other states and moved to California, refer to the date of approval in California to determine whether or not to take the Series 63.

PPI also has Foreign Associates, representatives who live abroad and do securities business with us. Foreign Associates go through the same background check and hiring process as Registered Representatives, but are not required to take the registration examinations listed above.

Investigation of Background and QualificationsRule 3010(a)(6); 3010(e); MSRB Rule G-7

Prior to employment and before certifying to FINRA that a candidate for Registered Representative is qualified, Eduardo Tovar will complete an investigation of the candidate’s good character, business repute, qualifications, and experience. This includes perusal of the candidate’s Form U-5, if any.

Records for RRsSEC Rule 17a-3(a)(12); NTM 01-80

Upon associating with PPI, Registered Representatives are required to complete FINRA Applications (Form U-4), fingerprint cards for identification and processing, and Form U-5 if applicable. RRs must become familiar with PPI’s current written supervisory procedures, and will complete and sign Attestation forms therein, and submit them to Eduardo Tovar, who will hold them and Form U-4 in RRs’ personnel files and file them with FINRA as appropriate.

RRs’ SupervisorsRule 3010(a)(5); NTM 99-45

All Registered Representatives are assigned to Eduardo Tovar – an authorized, experienced supervisor – for form filings, supervision, guidance, and continuing training. Eduardo Tovar and Daniel Barba in the home office will answer any questions about transactions, procedures, or rules. (For more complete information on PPI’s supervisory policies, please see sections in these WSPs titled “Supervision” and “Supervisory Control System” – FINRA Rules 3010, 3012, 3013.)

Annual RR Compliance Meeting3010(a)(7)

Eduardo Tovar, PPI’s Chief Compliance Officer, will meet annually, either in person, or by phone, with each Registered Representative and principal to discuss compliance pertaining to each RR’s and principal’s activities. These discussions may include, among other things, insider trading, sales

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practices, sales literature and advertising, disclosure requirements, procedures, private securities transactions (“selling away”), outside business activities, and other pertinent topics.

Eduardo Tovar will keep lists of attendees at all compliance meetings, group and individual. Each Registered Representative will also acknowledge the annual meeting in writing. If a Registered Representative is unable to attend a compliance meeting, Eduardo Tovar will conduct a separate session with this individual.

Heightened Supervisory /Hiring ProceduresNTM 97-19; 03-49

It is PPI policy not to hire any applicant with, among other things, a history of customer complaints, disciplinary problems, or arbitrations. Full and accurate disclosure on Form U-4 is essential. PPI considers the following as “best hiring practices”:

• discussing with applicants the nature of their prior customers and the types of securities sold while associated with prior employers;

• before hiring, obtaining from applicants explanations regarding any customer complaints and regulatory actions to determine the merit, to the extent practicable, of each;

• asking applicants about the existence of and nature of any pending proceedings, customer complaints, regulatory investigations, or arbitrations not listed in CRD; and

• involving compliance and legal staff, as appropriate, in the hiring process to review any customer complaints, disciplinary actions, or arbitrations before hiring a registered representative with such a history.

Private Portfolio, Inc. reserves the right to withdraw sponsorship of an applicant in the event that a Form MC-400 or a hearing is required by any regulator.

Supervision of Statutorily Disqualified PersonsFINRA By-Laws, Article III, Sec. 3 and 4; Form MC-400; Rule 3070; MSRB Rules G-4 and G-5

It is the policy of PPI not to employ or retain persons who are subject to disqualification from membership. If at any time it became necessary for PPI to retain a disqualified person, we would bear in mind that FINRA considers the following four factors to determine whether the supervision proposed for a disqualified person is adequate: 1) the nature of the underlying disqualification, 2) the disciplinary history of the sponsoring member and proposed supervisor of the disqualified person, 3) the nature of the proposed business activities for the disqualified person, and 4) the overall supervisory plan that the firm agrees to impose.Screening For SD Persons Hired in Clerical or Ministerial PositionsAt this time, PPI has no clerical or ministerial associates.

Annual Written Attestation From RRsOnce a year, you will receive an e-mail regarding:

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• opening a securities account

• private securities transactions (“selling away”)• outside business activities

You are required to respond promptly as directed so that the home office has an up-to-date record of your attestation.

Obligations of RRs With Accounts at Other Broker/DealersRule 3010(c), 3050(d); NTM 91-27, 97-25; MSRB Rule G-28

Eduardo Tovar will determine if a transaction involving purchase or sale of a security for the personal account of a person associated with Private Portfolio, Inc., will affect the interests of PPI. Pursuant to FINRA Rules of Fair Practice and PPI Policy, before opening an account or initiating a personal securities account with another member firm of FINRA, RRs must follow these procedures:

• Registered Representatives must notify the other member firm in writing of their association with Private Portfolio, Inc. and advise Eduardo Tovar of the existence of the account;

• The other member firm must notify Private Portfolio, Inc. in writing of the Registered Representative’s intention to open an account or to effect a transaction;

• Private Portfolio, Inc. requires that the other member firm furnish duplicate copies of all confirmations, transactions, and statements conducted through the other member firm. These documents are reviewed when received, then added to our chronological file, and a copy saved in the RR’s file.

• Registered Representatives must also inform PPI if their association is with a non-FINRA member, which would include a domestic or foreign investment advisor, bank, or other financial institution.

Parking of Securities RegistrationsFINRA By-Laws, Article III, Sec. 1; Rule 1031(a)

PPI will not make application to FINRA to register any person as an RR unless we intend to employ such person in PPI’s securities business. (That is, we will not hire someone merely to aid them in keeping their license viable; RRs need to be working actively in the securities business.)Sharing in Customer AccountsRule 2330(f); NTM 03-21

The sharing of profits or losses in an account with a customer is generally prohibited. Before contemplating entering into such an arrangement, RRs should read and become familiar with the provisions of Rule 2330. Rule 2330(f) requires that RRs obtain prior written authorization from PPI and that PPI and RRs obtain prior written authorization from the customer before sharing in a customer’s account.

Lending Between RRs and CustomersRule 2370; NTM 03-62; 04-14

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As an RR, you are prohibited from borrowing money from or lending money to a customer unless you have written permission from PPI’s home office, and the loan falls within one of the prescribed permissible types of lending arrangements set forth in the rule:

• the customer is in the business of lending money; • the customer and the registered person are both RRs of the same firm; • the lending arrangement is based on a personal relationship outside of the broker-customer

relationship; or • the lending arrangement is based on a business relationship outside of the broker-customer

relationship.

PPI exempts you from having to receive written permission if the lending arrangements are between you and an immediate family member, or between you and a customer that is a financial institution regularly engaged in the business of providing credit, financing, or loans (or other entity or person that regularly arranges or extends credit in the ordinary course of business), provided the loan has been made on commercial terms that the customer generally makes available to members of the general public similarly situated as to need, purpose, and creditworthiness.

You are limited to lending arrangements between yourself and your own customers, rather than with any customer of the firm.

Use of Exception and Other ReportsRule 3230(c); NTM 99-57

Pershing, LLC, our clearing agent, provides an annual list of all reports (exception and other types of reports) which it offers to PPI to assist us in supervising our activities, monitoring our customer accounts, and carrying out our functions and responsibilities under the clearing agreement. Using Pershing’s Report Center, part of NETX360, PPI may request such reports as needed to supervise and monitor our customer accounts.

Investment Advisor ActivitiesRule 3040; NTM 91-32, 94-44, 96-33

PPI is registered as an Investment Advisor and as a Broker/Dealer. This section deals with RRs who are also Registered Investment Advisors (RIAs).

RRs calling themselves a “financial planner” or making themselves known to the public as providing financial advice for compensation must be licensed and regulated as “Investment Advisors.”

To avoid any infraction of PPI policy, and to avoid violations of SEC and state regulations, registered personnel must obtain written consent from Eduardo Tovar before filing to become a Registered Investment Advisor (RIA).

Private Portfolio, Inc. requires all persons filing to become RIAs to submit, prior to filing, a copy of Form ADV. to Eduardo Tovar for his review and approval. Those who are already Investment Advisors must provide copies of Form ADV., including amendments and approvals from the SEC and States, to the attention of Eduardo Tovar at Private Portfolio, Inc.

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To avoid possible conflicts of interest, Registered Representatives who are also Registered Investment Advisors must practice the following:

• Investment Advisory clients must be given Part II of Form ADV. or information that includes a statement that investment advisory customers are not required to place securities transactions through Private Portfolio, Inc.

• Fees and concessions pertaining to transactions on stocks and bonds are not to exceed 5%.

• Files pertaining to investment advisory business must be maintained separately from Private Portfolio, Inc. broker/dealer files.

The National Business Conduct Committee has considered the applicability of Article III, Section 40 of the Rules of Fair Practice to the activities of individuals who are registered both as representatives of a FINRA member firm (in this case, PPI ) and with the SEC as a Registered Investment Advisor (”dually registered person” or “RR/RIA”), and who conduct their investment advisory activities “away from” their employer (PPI).

They determined that Section 40 applies to all investment advisory activities conducted by RR/RIAs that result in the purchase or sale of securities by the RR/RIA’s advisory clients, with the exception of their activities on behalf of PPI.

Receipt of compensation as a result of investment advisory activities constitutes the receipt of selling compensation as defined in Section 40.

NB to RIAs: please read thoroughly the sections of this manual that deal with discretionary accounts.

BUSINESS CONDUCT OF REGISTERED REPRESENTATIVESThe following section is general information for RRs about business practices and different types of accounts, things to avoid, prohibitions, etc. Eduardo Tovar and Daniel Barba at the home office will answer questions about any transaction, procedure, or rule. All representatives are provided with continuous guidance with respect to continuing education, compliance, proper selling standards, as well as information concerning procedures for processing orders and serving customers.

! ! ! ! ! •! •! •! •! •

Prospective Registered Representatives will be interviewed by Eduardo Tovar, Vice President and Chief Compliance Officer of Private Portfolio, Inc. In addition to other skills and experience, applicants must display the capacity to understand and to abide by the legal requirements and ethical concepts that will govern their relationships with clients. Under no circumstances may applicants sell any securities products until their registration is made effective by FINRA and the state(s) in which the applicants intend to do business, and they have been advised by PPI that their licensing/registration is effective.

Our Business Reputation

A prime directive to bear in mind at all times:Registered Representatives must provide fair, honest, and ethical service to their clients. That means that you are responsible for knowing the rules set forth here in these WSPs, and for “knowing your

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customers” and only recommending and/or selling investment products that are suitable for clients based on their assets, liabilities, tax position, income, risk tolerance, age, investment objectives, etc.

Because Private Portfolio, Inc.’s reputation is based on the behavior of its Registered Principals and Registered Representatives, we must all strictly adhere to principles of good business practice.

You will notify Eduardo Tovar promptly if you become the subject of:

• any investigation or proceeding by any governmental, securities, or insurance industry self-regulatory body;

• a refusal of registration, injunction, censure, suspension, expulsion, or other disciplinary action by any of the above-mentioned agencies;

• a major complaint by a customer of a FINRA member firm or securities broker/dealer;

• any litigation or arbitration alleging your violation of any agreement with or provision of the constitution, by-laws, or rules of regulations of any securities or insurance industry self-regulatory body;

• any bankruptcy or contempt proceeding, cease or desist order, injunction or civil judgment as party defendant;

• any arrest, summons, arraignment, indictment or conviction for a criminal offense (other than a minor traffic violation); or

• any material allegation that you have conducted yourself in a manner that may be inconsistent with just and equitable principles of trade, detrimental to the interest and welfare of PPI, or contrary to an established practice of PPI.

Eduardo Tovar will, upon notification, initiate a review and act accordingly (such as adding supporting documentation to personnel records, amending Form U-4, and–if applicable–instituting a Form U-5 filing, preparing and executing heightened supervision, etc.)

Withholding of CommissionsCommissions will be withheld on transactions involving the following:

• Violations of laws, regulations, or policies;

• Losses to PPI resulting from failure of customers to honor their obligations;

• Accounts for which necessary documents are missing and notice has been sent to the Registered Representative without results.

• Failure to complete Continuing Education requirements.

Eduardo Tovar will notify FINRA of any disciplinary action taken by PPI against any Representative that involves suspension, termination, the withholding of commissions, imposition of fines in excess of $2,500, or any other significant limitation of activities.

Keep Current with FINRA and SEC Regulations

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Some sections of the FINRA online manual are particularly relevant for Registered Representatives. We advise you become familiar with these as well as with this manual; this will help you avoid many mistakes and omissions. Your attention is particularly directed to the following online FINRA articles under the heading “Registered Representatives”: Entire DocumentThe complete FINRA Manual and Notice to Members are available online at www.finra.org. Rules that govern the securities industry are available at www.sec.gov . Please feel free to call the home office and ask us if you have questions about any of these rules and regulations.Correspondence from Regulatory Agencies

It is vitally important that any correspondence or telephone calls from the Financial Industry Regulatory Authority, the Securities and Exchange Commission, The Department of Corporations, or other regulatory agencies be referred immediately to Eduardo Tovar or Daniel Barba.

Eduardo Tovar or Daniel Barba, not individual Registered Representatives, will be the sole contact with such agencies; one of them will either speak directly with appropriate authorities, or prepare and forward responses to any inquiries or demands from these agencies.

Routine Customer Contacts

Eduardo Tovar may, from time to time, communicate directly with clients on a random basis. These contacts are made to confirm the following:

• The client has received all essential information;• A given transaction is suitable for the client;• The client is satisfied

Eduardo Tovar will make every effort to impress upon clients that these spot-checks are conducted as an additional service of PPI. Almost without exception, clients are pleased with PPI’s concern for them. Client confidence in PPI not only strengthens the agent/client relationship, but enhances the company’s image.

Registered Representatives should advise their clients at the time of sale that someone from the home office may communicate with them.

Prohibited & Fraudulent Practices:(This is not an exhaustive list of Don’ts, merely a sampling. See also specific prohibitions throughout, and the Insider Trading and Selling Away sections of this manual.)Examples of some prohibited and improper activities: ! !Churning/Twisting

Making recommendations to clients for transactions that are excessive in frequency or size or are otherwise not appropriate for the client’s financial condition or investment objectives.

Co-mingling

! Depositing clients’ checks or money into Rep’s personal bank account, regardless of the ! amount of money or length of time involved. Clients’ funds, whether in the form of checks,

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! money orders or cash, may never be deposited in Representatives’ personal bank accounts for ! any reason whatsoever.

Conflicts of InterestHolding or hiding securities in other than purchaser’s account, or in a fictitious account.

Owning shares of a thinly-traded stock in RR’s personal account, and recommending large purchases of those shares to clients.

Free-Riding and Withholding Withholding from their clients new issues of securities that immediately begin trading at a higher price than originally offered.

Front Running! The unethical practice of a broker trading an equity based on information from the analyst ! department before his or her clients have been given the information.

Guarantees to Customers ! Warranting or guaranteeing any customer against loss in connection with any securities ! transaction or in any securities account of the customer, or that any company or issuer will ! meet its promises or obligations.

Parking! A form of kiting shares that a brokerage commits by moving long positions in unrelated ! accounts to cover short positions that are improperly settled according to SEC regulations.

Rumors and Hot TipsInducing a client to buy or sell a security based on “hot tips” or rumors. Recommendations, analyses, and statements to clients must have a reasonable basis in fact. Withholding material information from a client could be considered fraud.

Selling to Breakpoints! The sale of investment company shares in dollar amounts just below the point at which the ! sales charge is reduced (breakpoint) on quantity transactions so as to share in the higher sales ! charges.Senior Designations and Credentials! Many investment professionals tell senior clients that they are specially accredited to advise ! on seniors’ financial issues; it is a violation of FINRA Rules 2110 and 2210, Rule 472, and ! anti-fraud provisions of the federal securities laws to convey an expertise in senior ! investments or retirement planning where such expertise does not exist. In general, RRs are ! always prohibited from making false, exaggerated, or misleading statements or claims in !all ! communications with the public.

Switching

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! In mutual funds, switching is the process of transferring an investment from one fund to ! another or selling out of a fund and purchasing another for the purpose of generating ! commissions.

Unauthorized Trading! Unless we have written permission on file, RRs may not place a trade entered by a client’s ! spouse or other family members.

Persons Prohibited From Participating in “Hot Issues”

FINRA Rules prohibit, in most cases, the persons listed below from participating in new issues that are considered “hot”. You must determine if any person who has a beneficial interest in the account is a restricted person under this interpretation. When completing the order ticket, you should note on the order ticket the name of the person from whom you received the assurance that the ultimate recipient was not restricted. ! • finders;

• any person acting in a fiduciary capacity when we are managing underwriter–such as attorney, accountants, financial consultants or members of immediate family;

• employees of any broker/dealer;

• senior officers of banks;

• senior officers of insurance companies;

• senior officers of investment advisory firms;

• personnel in a securities-related department of any corporation;

• any account related to all of the above where the individual has a beneficial interest.

Be aware that you may be restricted from participating in any bank conversion offerings. This includes distributions offered to depositors prior to the public offering.

Custodian Accounts

A simplified method for making gifts of securities to minors (children under the legal age of adulthood) is a transaction permitted under the Uniform Gifts to Minors Act. The security is registered in the name of the custodian for the minor. The custodian maintains the power of management, which includes the rights to sell the original gift stock, to reinvest the proceeds in stock or in other securities, to collect dividends, and to manage the account until the minor reaches the legal age in the state in which (s)he resides. The custodian may not delegate to anyone the duty to invest the custodial property.

Because of the importance and broad usage of the Uniform Gifts to Minors laws, we rely on Pershing for the most current information. Please contact the home office in the event your client wishes to open such an account, and we will work together to ensure that an appropriate set of guidelines are made available to you and your client.

Investment Club Accounts

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Take care before accepting Investment Club accounts. RRs must get approval from Eduardo Tovar before such an account is opened. Private Portfolio, Inc. will need copies of the Articles of Agreement and a vote or authorization indicating which officer or officers are authorized to buy and sell securities for the group.

Questions concerning additional margin or maintenance requirements should be discussed with Eduardo Tovar, who will consult with the clearing firm.

Referral Fees

Broker/dealers must adhere to specific rules governing payment of referral fees. PPI does not allow payment of fees to individuals or business entities for their referral of potential customers. FINRA allows such payments only to registered FINRA broker/dealers, and only if paid directly to the broker/dealer.

Exceptions - An exception to this rule would include compensation in connection with underwriting or merger-and-acquisition business. FINRA members will also be permitted to pay fixed fees for referrals on an occasional basis, provided the fee is minimal and neither the entitlement to, nor the amount of the fees are linked to the opening of an account, the execution of transactions, the volume of business, or are in any other way tied to the outcome of the referral. Registered Personnel are prohibited from paying referral fees under all other circumstances.

Clients’ Checks

Clients’ checks for purchase of general securities must be made payable to Pershing LLC or Client. Checks made out to any other entity or individual will be returned to the client for reissue, including checks mistakenly made payable to PPI.

Diminished Mental Capacity / Suspected Abuse of Senior Customers

If you suspect that one of your customers is experiencing diminished capacity or is being abused financially or otherwise by a family member, caregiver, or other third party, please notify Eduardo Tovar or Daniel Barba immediately. One of these two officers are your contacts for questions about senior issues; they may decide to restrict activity in the account, discuss the problem with noted emergency contacts given by the client, report abuse to an appropriate state agency, and/or take necessary action to comply with appropriate court orders. Reports of such suspicions and any action taken will be documented in the customer’s file.

Death of a Customer

Customers’ orders and instructions should all be canceled upon their death. Discuss questions and procedures with Eduardo Tovar at the home office; he will be in contact with clients’ heirs, legal counsel, and tax preparers if necessary. Pershing requires a death certificate before further action can be undertaken for accounts of the deceased.

Where You Can Sell

In most states, RRs must secure a state license (Series 63) in addition to their FINRA licenses. Registered Representatives are reminded that they may not make sales or sales solicitations in any

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state in which PPI is not licensed as a broker/dealer and in which the securities offered for sale have not been qualified for sale by that state (“Blue Sky” laws).

Solicitation is defined to include any written or verbal communications that may be construed as an offer to sell any security.

These States Only: All Representatives of Private Portfolio, Inc. may sell in the states in which PPI is registered. These are: Arizona, California, Florida, Georgia, Pennsylvania, Texas, and Washington. (Some RRs have clients with accounts in other states that allow two or three accounts under a de minimis exception.)

What You Can Sell

Approved Products - To assure that you meet regulatory and PPI requirements, you may not solicit or sell any new securities until you are advised by Eduardo Tovar that the security is available through this broker/dealer.

Short Sales of Securities - You may not make short sales of any security until it is reviewed by the clearing firm to determine if the security is available for loan and is marginable. This requirement also pertains to a short sale against the box. All securities borrowed are subject to a “buy-in” by the lender at any time.

Sale of Bearer Securities - Any bearer bonds or any securities registered in the name of a brokerage firm, properly endorsed, can only be sold for a customer upon presentation of valid proof of ownership. A delivery bill identifying the item to be sold, a confirmation notice, and a customer’s statement are all helpful in establishing proof of ownership. If anyone offers a bearer instrument for sale under suspicious circumstances, report it immediately to Eduardo Tovar.

Legal Items - Securities registered in any name other than an individual’s may be sold if the relevant papers are in Private Portfolio’s possession and have been approved as satisfactory.

Restrictions on Selling Proposed New Offerings - Registered Representatives may not solicit or accept an indication of interest for a proposed SEC registered issue until the Registration Statement has been filed with the SEC, and may not confirm any sale of, or accept payment for, such new issue until the Registration Statement has become effective and the issue has been released for offering. PPI will notify you when the offering has been released.

During the period between the time a Registration Statement has been filed and the release of the offering, Registered Representatives are authorized to send only the following written communications to customers:

The Preliminary Prospectus (“Red Herring”);A Preliminary Summary Prospectus, if available;A written communication identifying the issue and stating that we expect to be in the underwriting, but not including any additional description of the issuer.

To ascertain the states in which a new issue is “Blue Skied”, PPI will inform you when the trading restrictions for a particular offering become available. Registered Representatives are not permitted to

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solicit, buy, or sell orders in the specified securities in the open market until trading restrictions are lifted.

To assure that new offerings are placed effectively and suitably, Registered Representatives must know their customers. When customers sell securities prior to trading restrictions being lifted, sales credit may be subject to cancellation.

SUPERVISIONRule 3010; NTM 86-65, 88-84, 89-34, 92-18, 99-45, 04-71

Branch Office Activities – Rule 3010(a)(1)

We have in place a system to supervise the activities of registered representatives, principals, and officers, so that we may achieve compliance with securities laws and regulations, and with FINRA rules and regulations. These Written Supervisory Procedures are established and maintained as a guide for PPI associates, including those who supervise and enforce PPI’s policies and procedures.

PrincipalsRule 3010(a)(2)

The following are appropriately registered principals with authority to carry out PPI’s business transactions; supervisory responsibilities fall to Eduardo Tovar and Daniel Barba.

General Securities: Daniel Barba 11/1/94; Eduardo Tovar 1/24/95; Hermann von Bertrab 6/29/98; David Marshall 8/12/04 – General Securities PrincipalsFinancial Principal: Daniel Barba – Financial Principal, effective 11/1/94Mutual Funds: Eduardo Tovar – General Securities Principal, effective 7/12/02Options: Daniel Barba – Registered Options Principal, effective 11/1/94Supervision of Registered Representatives and Annual Reviews: Eduardo Tovar – General Securities Principal, effective 7/12/02Electronic Filing, Rule 1140: Eduardo Tovar 8/15/07

Offices of Supervisory JurisdictionRule 3010(a)(3)(A, B, C, D, E); 3010(a)(4, 5, 6)

Home Office:  7534 La Jolla Blvd., La Jolla CA 92037 ph: (858) 551-2071Designated principals at home office:  Eduardo Tovar, Vice President and CCO, and Daniel Barba, President.

In this office, the main office, the 2 registered representatives are also corporate officers and principals. They engage in retail sales and have contact with customers as well as with other RRs, regulators, personnel from our clearing firm, and members of the public.

Our business model is such that most of our RRs work from their homes or from single-person offices; all are supervised from the main office by Eduardo Tovar and Daniel Barba, both of whom

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are appropriately registered, and qualified by training and experience to carry out their responsibilities as supervisors. Most of PPI’s RRs are located in San Diego California, near the main office. There are some, however, who work in other states. Because it is the home office of the firm, the securities activities at this location are both diverse and complex.

Bond Trading Office:  437 Grant Street, Suite 632, Pittsburgh PA 15219 ph: (412) 232-3112Designated principals for Bond Trading Office:  David Marshall, Eduardo Tovar, Daniel Barba.

In this OSJ, the registered representative is an appropriately registered principal (David Marshall, General Securities Principal). He engages in retail sales, and has contact with customers and members of the public. He is supervised by Eduardo Tovar and Daniel Barba in the main office in San Diego, both of whom are appropriately registered, and qualified by training and experience to carry out their responsibilities as supervisors. The securities activities at this location are both diverse and complex.

Annual Compliance Meeting/Review with Representatives3010(a)(4, 5, 6, 7)

Eduardo Tovar, PPI’s Chief Compliance Officer, qualified by experience and training, will meet annually, either in person or by phone, with each Registered Representative and principal to discuss compliance pertaining to each RR’s and principal’s activities. Mr. Tovar keeps records of with whom and the date of these meetings. The agenda usually includes; a review of their CRD information, expiring W8-Ben, outside activies and other pertinent topics.

Designated Compliance ResponsibilityRule 3010(a)(2)(6, 7); NTM 98-38

Supervisory Organization: Officers, RRs

Daniel Barba – Eduardo Tovar

H. von Bertrab/ J. Dieguez/ P. Muller/ G. Rosales/ C. Tripp /J. Benton / M. de Sola / R. Lebrija /T. Mullen F. Paiano / LM Rodriguez / J. Schwartz / H. Blum / D. Marshall /M. Portal

Eduardo Tovar and Daniel Barba are responsible for all supervisory procedures. They are qualified by both experience and training to carry out these responsibilities. Because of PPI’s small size and flat organizational structure, they supervise and oversee the activities of each other and of all of PPI’s RRs and principals. They enforce the contents of these WSPs, and maintain and supervise every aspect of all books and records and securities transactions. As Chief Compliance Officer, Mr. Tovar is responsible for the financial and operational books and records: the general ledger, trial balance, income statements, balance sheets, net capital computation, monthly Focus I Reports, and quarterly Focus IIA Report, in addition to daily monitoring the activities of PPI’s Registered Representatives to ensure compliance.

Written Supervisory Procedures3010(2)(A, B, C, D, E, F, G, H, I, J, K, L)[N/A]; Rule 3010(b)(3, 4)

Daniel Barba and Eduardo Tovar have established–and they maintain and enforce–these WSPs, which are reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable Rules of FINRA.

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[Rule 3010(b)(2) (A, B, C, D, E, F, G, H, I, J, K, L) is not applicable to PPI since no one associated with Private Portfolio, Inc., has a disciplinary history or has been associated with any disciplined firms. We are aware, however, that we are required to abide by this portion of Rule 3010 if these circumstances should change.]

PPI’s WSPs set forth the supervisory system established by PPI, and includes the titles, registration status, dates for which such designation was made effective, and locations of our two supervisors (please see p. 26 and p. 38) and the responsibilities of each as these relate to the types of business engaged in, applicable securities laws and regulations, and FINRA Rules. We will preserve this record for not less than three years, the first two years in an easily accessible place.

A copy of these Written Supervisory Procedures is maintained online on the internal portion of our website, and is easily available to all PPI personnel. PPI will amend these WSPs as appropriate within a reasonable time after changes occur in applicable securities laws and FINRA regulations, and as changes occur in technology, in our business, or in our supervisory system. We will notify all of our RRs when amendments are made. RRs are responsible for familiarizing themselves with the content of these WSPs.

To help avoid violations, and to ensure compliance with applicable laws, regulations, and rules, Eduardo Tovar and Daniel Barba will conduct an annual review and general update of these Written Supervisory Procedures. Past versions of the PPI WSP manual are retained at the home office as evidence of revision and updates.

Internal Inspections

Rule 3010(c)(1)(A, B, C); 3010(c)(2)(A, B, C, D, E, F); 3010(c)(3)

At least annually, Eduardo Tovar will conduct a review of the businesses in which Private Portfolio engages. This review will help detect and prevent violations of, and achieve compliance with FINRA rules and other applicable securities laws and regulations. In his role as branch office supervisor, Eduardo Tovar regularly reviews the activities of each office, including:

• Safeguarding customer funds and securities;

• Maintenance of books and records;

• Supervising customer accounts serviced by producing managers;

• Transmitting funds between customer and registered representatives;

• Transmitting funds between customers and third parties;

• Validating customer address changes;

• Validating changes in customer account information

OSJ Inspection

In addition to the main office, Private Portfolio, Inc. has one other designated Office of Supervisory Jurisdiction, our Bond Trading Office located at:  437 Grant Street, Suite 632, Pittsburgh PA 15219 and manned by David Marshall (General Securities Principal).

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Our business model is such that all our offices are single-person and are supervised directly by Eduardo Tovar and Daniel Barba, home office principals and managers for all our offices, including this OSJ. PPI is limited in size and resources, and has only the two supervisors; we have no alternative but to comply in this manner. [Rule 3010(c)(3)]. Therefore, we will annually have a knowledgeable principal perform an inspection of this second office of supervisory jurisdiction.

Because supervision of this OSJ is carried out at the home office, in the written annual inspection report we will identify activities that this office does not perform itself. We acknowledge that supervisory policies and procedures would need to be in place before this office could engage in such activities.

Branch Office Inspections

Our business model is such that all our offices are single-person and are supervised directly by Eduardo Tovar and Daniel Barba, home office principals and managers for all our offices.

Each of these single-person branch offices will be inspected at least every three years. In establishing such schedule, we have considered the nature and complexity of the securities activities carried out at these locations, the volume of business done, and the frequency and number of contacts with customers. Private Portfolio will keep written records of review and inspection dates and findings. These written reports will be kept on file at the main office for a minimum of three years.

Because of our organizational structure and size, PPI assigns a principal who has the requisite knowledge to perform these inspections.

Private Portfolio, Inc. has centralized technology (computer networks and NETX360, Pershing’s online platform) to monitor trading and funds transfers, as well as e-mail. This allows principles in the home office to keep track of day-to-day practices, and helps us to comply with industry rules and regulations and to detect and prevent possible problems. We also use our systems to verify customer address changes, to review incoming and outgoing correspondence, to monitor transmittals of funds, and to document the suitability of our brokers’ securities recommendations. Because supervision of all of our offices is carried out at the home office, in written inspection reports we will identify activities that the branch offices do not perform. We acknowledge that supervisory policies and procedures would need to be in place before these offices could engage in these activities:

• Safeguarding of customer funds and securities: (our policy is that if checks or client funds are mistakenly sent directly to an RR, they must be sent, on the same day as received, to the home office. The home office must mail them, on the same day as received, to Pershing);

• Maintaining books and records (all are maintained and reviewed at the home office);• Supervision of customer accounts serviced by branch office managers (who are home office

principals);• Transmittal of funds between customers and registered representatives and between

customers and third parties; (it is the policy of Private Portfolio, Inc. to review fed fund wires as they are executed; when a third party wire is sent, the legal address of the person or company receiving the wire must be known and a full explanation given for the third party wire [e.g., credit card payment, escrow payment, etc.]). RRs are prohibited from accepting orders from a third party for a customer’s account without prior written authorization from the customer.

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• Changes to and validation of client information, including address and account information; (these are monitored daily through the main office and through Pershing reports and client statements).

Heightened Office InspectionsRule 3010(c)(3)

We are an independent contractor firm, and we rely on the Rule 3010(c) Limited Size and Resources Exception for office inspections: Our business model is such that all our offices are single-person and are supervised directly by Eduardo Tovar and Daniel Barba, home office principals and managers for all our offices. We will also note that we rely on this Exception in our branch examination forms. Because of our structure, customer account activity is reviewed daily in the home office, and accounts reviewed at least annually to detect and prevent irregularities and abuses and to assure that changes have been made and information kept up to date.

Because of Private Portfolio’s size and flat organizational structure, “heightened office inspections” could be difficult. If heightened office inspections were ever called for, the inspecting principal would inspect more frequently, come unannounced, and do a more extensive review to ensure that the practices and supervisory procedures of FINRA and of the firm are upheld.

Review of TransactionsRule 3010(d)(1)

Eduardo Tovar, a registered principal, reviews a daily trade blotter and keeps a log, initialed daily as evidence of this review, and stored at the home office. This daily trade blotter is a true reflection of trades, and includes each purchase and sale of securities conducted through Pershing.

Customer accounts are also examined periodically to check for and correct possible irregularities or mistakes. While reviewing monthly statements, Eduardo Tovar or Daniel Barba routinely look for such anomalies as apparent excessive activity, heavy concentration or abnormally large commitments in low-priced speculative securities, short-term trading in accounts that normally do not have such activity, switching or short-term transactions in mutual fund shares, sales of such shares just under the breakpoint, and habitual late payments for purchases. The inside covers of the CD boxes that the statements are stored in are dated and signed to evidence this review, and stored at the home office.

Review of CorrespondenceRule 3010(d)(1, 2, 3)

Faxes, Mail, E-mail, Instant Messaging, Text-Messaging

Eduardo Tovar and Daniel Barba are responsible for reviewing incoming and outgoing paper (non-electronic) and electronic correspondence between RRs and the public that relates to our securities business. Incoming business mail and faxes should all be addressed to the home office. If RRs receive correspondence directly, they must forward it promptly to the home office for review and storage. Reviewers make sure that correspondence is related to our securities business, they properly identify and handle customer complaints, and they ensure that customer funds and securities are being

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handled in accordance with firm procedures. After review, the home office principal initials and stores both incoming and outgoing mail and faxes in the Chronological Folder, thus creating and maintaining a current list of what is received and reviewed. Mail will be forwarded to appropriate RRs as needed.

A specific file format will be used for naming each piece of correspondence. This comprises the date, the reviewer’s initial, and an ID tag (account number, financial institution, etc.). Example: 20080220d 6jm0000.pdf (yyyymmddinitial IDtag.pdf).

Documents can be scanned directly into the Chronological folder, and are then named automatically using the scanner. Files saved manually should be given a file name that follows the same standardized format. All file types in general use are acceptable: pdf, txt, doc, gif and tif.

A second copy of the document can be saved to a different folder by using the “save as” command, then entering a new file name. It may also be printed and added to the account file folder as hard copy.

E-mail is considered correspondence. In order for it to be reviewed and stored, all members of Private Portfolio are required to use their assigned privateportfolio.com account for all business e-mail (but never for personal e-mail). E-mail is stored on Postini and on DVD at the home office and reviewed regularly by a principal. If the contents of an e-mail are unusual or in doubt, RRs should get approval and advice from a home office principal before the mail is sent out.

Daniel Barba will review e-mail weekly by reading a sample twenty-five messages and doing word searches. Sampled messages and search results will be stored as evidence. [MSRB Rule G-27 (d)]

IM/ Text-Messaging – PPI prohibits business correspondence to be carried out on instant messaging or by text message, since these are not being reviewed and stored.

Supervision of Registered RepresentativesQualifications InvestigatedRule 3010(e)

Prior to employment and before certifying to FINRA that a candidate for Registered Representative is qualified, Eduardo Tovar will complete an investigation of the candidate’s good character, business repute, qualifications, and experience.

If applicants have previously been registered with FINRA, PPI will request their Uniform Termination Notice of Securities Industry Registration (Form U-5), filed with FINRA by applicants’ most recent previous FINRA member employer, along with any pertinent amendments. Applicants must provide this form to PPI within two (2) business days of the request. Applicants will promptly provide amendments to their Form U-5 upon request. Eduardo Tovar will review the Form U-5 no later than sixty (60) days after filing the application for registration, or will show FINRA that he has made reasonable efforts to comply. He will take any action he deems appropriate after reviewing applicants’ Form U-5s.

Private Portfolio does not trade securities futures, nor does it have RRs that have been previously registered with a registered futures association (RFA) member. We are aware that we must abide by this portion of Rule 3010 if these circumstances should change.

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SUPERVISORY CONTROL SYSTEMRule 3012(a)(1); 3012(a)(2)(A), (i), (ii), (iii), (iv)

Eduardo Tovar and Daniel Barba, appropriately registered principals, are designated to establish, maintain, and enforce these written supervisory procedures and a system of control policies that test and verify that PPI’s supervisory procedures are reasonably designed with respect to its activities and those of our registered representatives, to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.

Eduardo Tovar will create additional or amend supervisory procedures where the need is identified by testing and verification. He will submit an annual report to Daniel Barba, PPI president, that details PPI’s system of supervisory controls, a summary of test results and significant identified exceptions, and any additional or amended supervisory procedures created in response to these test results.

Eduardo Tovar, a producing manager and one of our two supervisors, will daily review and supervise the customer account activity conducted by Daniel Barba, the other producing manager; Daniel Barba will review and supervise the customer account activity conducted by Eduardo Tovar. (These two perform all supervisory functions, including acting as branch office managers). A daily log of customer account activity is kept as evidence.

Limited Size and Resources ExceptionRule 3012(a)(2)(B), (i), (ii), (iii), (iv)

We understand the necessity of having in place procedures to determine who can conduct day-to-day supervisor reviews of PPI’s producing managers. The person who performs these supervisory reviews must be someone who is either senior to or otherwise independent of the producing manager. To be considered otherwise independent, the individual must meet the following criteria:

1. He does not report either directly or indirectly to the producing manager under review; 2. He is situated in a different office from the producing manager;3. He does not have supervisory responsibility over the activity being reviewed, including not

being directly compensated, based in whole or in part on revenues occurring for those activities;

4. He alternates his review responsibility with another qualified person every two years or less.

There are 2 producing managers at PPI:! Daniel Barba! ! Registered Rep # P02! Eduardo Tovar!! Registered Rep # P03

Because of PPI’s small size and flat organizational structure, these two producing managers are also the home office principals, managers of all branch offices and our other OSJ, and supervisors for all RRs, including each other.

Daniel Barba, president of Private Portfolio, is senior to Eduardo Tovar in that he does not report to Mr. Tovar, his compensation is not determined in whole or part by Mr. Tovar, and he has the authority

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to oversee, direct and correct the activities of Mr. Tovar and take all necessary remedial actions, including termination if and when necessary. However, he meets only criterion 1. in the list above.

Eduardo Tovar, vice president and CCO of Private Portfolio, Inc., is not senior to Mr. Barba. Mr. Tovar meets none of the above criteria for independence.

There is, therefore, no qualified person senior to or otherwise independent of the producing managers to conduct the reviews. PPI relies on the Limited Size and Resources Exception so that these principals, who are knowledgeable of our supervisory control procedures, may conduct the reviews themselves.

Our current procedures include a daily review of account activity, which includes our two producing managers monitoring each others’ revenue. Because of the firm’s structure and size, it is impractical to maintain a rolling, 12-month calculation of producing managers’ revenue to determine whether either crosses the 20% threshold. Both producing managers work closely and in concert to mitigate potential conflicts of interest. Our current supervisory system complies to the extent reasonably possible.

We have duly notified FINRA, and will continue to file an annual report with FINRA, stating that we rely on this Limited Size and Resources Exception.

Transmittals of Funds, Changes to Customer Account InformationRule 3012(a)(2)(B)(i)

Eduardo Tovar will annually verify that our procedures continue to reasonably review and monitor the following:

• all transmittals of funds (e.g., wires or checks, etc.) or securities from customers to third party accounts (i.e., a transmittal that would result in a change of beneficial ownership); from customer accounts to outside entities (e.g., banks, investment companies, etc.); from customer accounts to locations other than a customer's primary residence (e.g., post office box, “in care of” accounts, alternate address, etc.); and between customers and registered representatives;

• customer changes of address and the validation of such changes of address;

• customer changes of investment objectives and the validation of such changes of investment objectives.

It is the policy of Private Portfolio, Inc. to review fed fund wires as they are executed between customers and third party accounts; to locations other than customers’ primary residences; between customers and registered representatives; from customer accounts to outside entities.

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When a third party wire is sent, the legal address of the person or company receiving the wire must be known and a full explanation given for the third party wire (e.g., credit card payment, escrow payment, etc.).

Customer Accounts Supervision - AddressesRule 3012(a)(2)(B)(ii)

Principals at the home office supervise and note address changes and other changes in account information. The principals use systems provided by Pershing, LLC, and are aware of potential misuses indicated by the following: multiple address changes by a single customer; registered persons with a significant number of customers that have changed addresses; customer accounts for which account statements have been returned. We are also aware of the possibility of misuse of duplicate statements. This risk must be kept in mind when we conduct supervisory reviews of accounts for customers who request that duplicate account statements be sent to a third party. Careful records of such requests, the date, and addresses are kept on file. 

Either Eduardo Tovar or Daniel Barba download and review, daily, the Pershing Account Service Detail Audit Report (#PWD014D0). This review will be evidenced in the daily activity log. In addition to both previous address and new address, this report shows the account number, time, and user ID of the person who makes a change. To ensure that correct records are kept, only Daniel Barba, Eduardo Tovar and David Marshall can make address changes.

We have in place systems for sorting accounts by address. Using eAnalytics, we can download Account Profile files and sort them as needed in Excel. This helps us to look for unusual circumstances, such as multiple accounts with a common address, or registered persons with multiple customers who have non-home mailing addresses. 

Customer confirmation and notification of changes in address appear in Pershing’s monthly statements and/or advisory letters sent directly to clients.

Customer Changes in Investment ObjectivesRule 3012(a)(2)(B)(iii)

Either Eduardo Tovar or Daniel Barba download and review, daily, the Pershing Account Service Detail Audit Report (#PWD014D0). This review will be evidenced in the daily activity log. This report shows the account number, time, and user ID of the person who makes a change. To ensure that correct records are kept, no change will go into effect until it is approved by Daniel Barba and/or Eduardo Tovar. Clients’ stated investment objectives will change over time, and client files will be kept up-to-date, as well as their information on NETX360, so that records are current and monthly statements reflect the most recent information for each client.

Customer confirmation and notification of changes in investment objectives appear in Pershing’s monthly statements and/or advisory letters sent directly to clients.

Heightened Supervision for Producing ManagersRule 3012(a)(2)(C)

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There are 2 producing managers at PPI:! Daniel Barba! ! Registered Rep # P02! Eduardo Tovar!! Registered Rep # P03

Eduardo Tovar will supervise accounts managed by Daniel Barba. Daniel Barba will supervise accounts managed by Eduardo Tovar. PPI notified FINRA on 8/2/07 that it will rely on the Limited Size and Resources Exception for this lateral inspection system. This notification will be renewed annually.

Because of Private Portfolio’s small size and flat organizational structure (which means that our two producing managers supervise each other in the home office) “heightened supervision” is difficult. Care is taken that both producing managers are aware of and monitor each other closely so that the practices and supervisory procedures of FINRA and of the firm are upheld to the extent reasonably practicable. Even more care may be taken to document any suspected abuses. Heightened supervision would include more frequent reviews, or more extensive reviews of the day-to-day activities of the producing managers.

ANNUAL CERTIFICATION OF COMPLIANCEAND SUPERVISORY PROCESSESRule 3013

Chief Compliance OfficerRule 3013(a) Private Portfolio, Inc. designates Eduardo Tovar as its chief compliance officer (CCO), identified on Schedule A of Form BD. Certification of Compliance ProcessesRule 3013(b) and IM-3013

Because PPI does not have a board, a CEO, or an audit committee, Daniel Barba, PPI President, will execute an annual certification that we have in place processes to establish, maintain, review, test, and modify written compliance policies and written supervisory procedures, and that Mr. Barba has conducted one or more meetings with the CCO in the preceding 12 months to discuss such processes, Private Portfolio’s compliance efforts to date, and significant compliance problems and plans for emerging business areas.

Daniel Barba and Eduardo Tovar will annually prepare a report evidencing PPI processes, and have this report reviewed by any other employees or outside advisors deemed necessary.

Mr. Barba and Mr. Tovar will sign and file this report within forty-five (45) days of execution of the certification.

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FINANCIAL REPORTING/BOOKS AND RECORDSMaintenance of Books and RecordsSEC Rules 17a-3 and 17a-4; Rule 3110; NTM 01-80; 03-33; MSRB Rules G-8 and G-9

SEC rules require the establishment and retention of certain records and files. The following schedules apply. All books and records will be in an accessible location for twelve (12) months; readily accessible for three (3) years; and in storage for six (6) years.

The following is a retention schedule for some books and records:

Records – Years Retained

Bank Statements - 3Bills/Invoices - 3Transaction Blotter - 6Canceled Checks & Check Books - 3Commission Statements - 3Company Ledgers (assets, liabilities) - 6Correspondence Files (after account is terminated) - 3Customer Files (after account is terminated) - 6Personnel Records - Administrative Staff & RRs - 3Representatives (after termination) - 3Order Tickets - 3Trial Balance, Income Statement, Balance Sheet - 3Net Capital Computation & Audit Reports AI Computation - 3Focus IIA Report - 3Focus I Report - 3SIPC & FINRA Assessments - 3Corporate Records: Bylaws, Charters, Minute Books, Permanent Contracts & Agreements, Tax Returns - 3

Records To Be Preserved By Brokers & Dealers

As of 8/10/2007, FINRA has been properly notified that we are employing electronic storage media. We have contracted with Google Postini Services to archive all our e-mail online. The Google Postini Services will archive and provide search capabilities that help PPI comply with industry regulations and company policies. We will maintain e-mail in accordance with the 4 conditions of SEC Rule 17a-4(f)(2)(ii) as follows:

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1. Preserve the records exclusively in a non-rewriteable, non-erasable format;

2. Verify automatically the quality and accuracy of the storage media recording process;

3. Serialize the original and, if applicable, duplicate units of storage media and time and date for the required period of retention for information placed on such electronic storage media;

4. Have the capacity to readily download indexes and records preserved on the electronic storage media to any medium acceptable under this paragraph (f) as required by the Commission or the self-regulatory organizations of which PPI is a member.

PPI has in place an audit system providing for accountability regarding inputting of records required to be maintained and preserved pursuant to SEC. Sec. 240.17a-3 and 240.17a-4 to electronic storage media and inputting of any changes made to every original and duplicate record thus maintained and preserved.

Books and Records Maintained in the Home OfficeAll of PPI’s books and records are held at the home office.

Written Supervisory Procedures (Compliance Manual)A copy of this Written Supervisory Procedures Manual will be kept current and made available online for the use of all Registered Representatives and supervisory staff. Past copies of the manual are on file at the home office as evidence of updates and review.

FINRA ManualThe continually updated FINRA Manual is available online at www.finra.org for use by all Registered Representatives and PPI home office staff.

Notices to MembersPrivate Portfolio, Inc. will notify RRs of new FINRA Notices to Members for their review. Available at www.finra.org.

Customer New Account FormPrior to conducting business with Private Portfolio, Inc., each customer will complete a "Customer New Account Form" for each new account (as required by Articles III, Section I and SEC Rule 17a-3). Each of these forms will be signed by both customer and Representative, and reviewed and approved in writing by Daniel Barba or Eduardo Tovar.

Before approving an investment account (a partnership, corporation, entity, etc., not an individual or joint account) the home office must have on file a written document that designates the person(s) authorized to sign each agreement on behalf of the partnership, corporation, entity, etc., and specifically includes the types of securities in the account.

Data supplied when opening a new account must be sufficient for Eduardo Tovar to ascertain that the customer meets minimum financial requirements for the investment. The customer’s investment objectives are to be clearly documented, and must be compatible with stated investment standards.

A new account form must contain (but not be limited to) the following information:

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• Customer’s name, address, citizenship, date of birth (if not of legal age) and social security number or Federal I.D. number;

• Signatures of the Representative, Eduardo Tovar, and customer;

• Customer’s occupation;

• Marital and family status;

• Financial information: to include bank accounts, securities owned, insurance held and investment objectives;

• An arbitration clause.

Updating Customer Account InformationThe New Account form will be updated any time there are changes in the information contained in it. Customer accounts and trades are reviewed daily for suitability and to avoid suspicious activity, and are updated with changes of address or of investment objectives that appear on Pershing reports. Further, an annual review of customer accounts is made to update and review suitability and check that information is current.

Personnel FilesPrivate Portfolio, Inc. will maintain a personnel file for each registered person associated with PPI.

Each Registered Representative has signed an Independent Contractor agreement with Private Portfolio, Inc. These agreements are to be maintained in each individual personnel file.

Each Registered Representative’s personnel file shall contain (but not be limited to) the following:

• A copy of Form U-4 (application for registration with the Financial Industry Regulatory Authority and state[s]). Whenever any information contained on Form U-4 requires amending or updating (e.g., change of name or change of address) the applicant must complete and file an updated Form U-4 with FINRA. Only applicable pages of Form U-4 need be completed.

• Copies of any other licenses - as applicable.

• Copies of the RR’s stationery and business cards.

• The processed fingerprint card – which will in turn be replaced by the CRD Status Report reflecting clearance of the prints.

• Copies of signed Attestations for comprehension of these WSPs, Selling Away, and Insider Trading.

Non-Registered Personnel Files

In the event that Private Portfolio, Inc. hires non-registered personnel, we will maintain appropriate personnel files for them containing (but not be limited to) the following:

• An application of employment that shows at least three years’ history.

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• The processed fingerprint card, to be replaced by the CRD Status Report that shows clearance of the prints.

Regulatory Complaint FilePPI will keep a file and records of all written inquiries or complaints emanating from FINRA, SEC, or state regulators and pertaining to securities transactions.

Prospectus/Offering Memorandum FilesProspectus files are online and are delivered by e-mail to interested customers, or the customer is directed by the RR to the fund family’s website.

Fidelity BondPrivate Portfolio, Inc. maintains a Fidelity Bond in the amount of $25,000 as part of PPI’s books and records. Renewal of the annual premium is due thirty (30) days prior to the maturity date, November 1st. The bond contains a cancellation rider that provides for notification to FINRA if the bond is canceled or terminated.

PPI will ensure that the bond covers all of its associates who engage in securities business.

SIPC LogoThe home office displays the SIPC symbol in a prominent place.

Cash Receipt and Disbursement Blotter

A cash receipt and disbursement blotter is a chronological record of the receipt and disbursement of monies. If a customer were to mail funds to Private Portfolio, Inc., the monies would be logged in the cash receipt and disbursement blotter to reflect the date received and date forwarded. The monies would be forwarded on the same day as received.

Daily Transaction Blotter

This blotter is a true reflection of trades in each account, and includes each purchase and sale of securities conducted through Pershing. The blotter is delivered electronically from Pershing via NETX360. Eduardo Tovar will review all orders and trades daily using the NETX360 system, and will keep a checklist, initialed daily and stored, as evidence of this review.

Records for Mutual Funds

• Cash blotter – to reflect the concession income received from each Mutual Fund;

• A file for PPI with each Mutual Fund and/or Family of Funds containing each monthly or periodic statement and any other applicable notices – to be maintained in chronological order;

• Records of mutual fund purchases and sales. Sales people provide the home office with the subscription agreement issued by the mutual fund; this agreement is signed by the client, the RR, and a principal, and is then filed electronically, by client name, at the home office. Funds also issue confirmations, and quarterly reports that include account

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activity, earnings, dividends, interest, etc, and these will also be filed at the home office in customer files, in chronological order.

Records for Options

• Appropriate records for Options Principals• List of all Registered Representatives conducting a public Options business• Written Supervisory Procedures of PPI - including methods used to supervise Options

business• Option Allocation Assignment Procedure• Sample of how notification of Options Allocation Procedures are disclosed to customers• Customer complaint file/options• Copy of “Option Customer New Account” form (Pershing Client Option Agreement)

• PPI will have online addresses for option prospectuses for interested customers.

• File with memos regarding Registered Representative meetings.

• Pershing will mail statements to customers or provide them online–as desired–on a monthly (if there is activity) or a quarterly basis. Daniel Barba reviews statements, paying particular attention to options-related customer margin accounts.

• Ensure that customers who have options transactions have access to confirmations. Make certain the confirmations include information required by self-regulatory organizations.

• Maintain materials relating to the allocation of exercise assignment notices and retain them for at least three years.

• Copies of customer account statements from Pershing will be retained for six months.

Net Capital RuleSEC Rules 15c3-1; 17a-11; NTM 92-72; 93-30, 99-44

PPI will operate pursuant to SEC Rule 15c3-1(a)(2)(vi) and will maintain minimum net capital of not less than $100,000 – or, 6 2/3% of Aggregate Indebtedness.

The Securities and Exchange Commission (SEC) issued a No-Action Letter to clarify its position under SEC Rule 15c3-1 (Net Capital Rule) regarding the capital treatment of assets in the proprietary account of an introducing broker/dealer (PAIB) held by a clearing broker/dealer. The letter allows introducing broker/dealers to include PAIB assets as allowable assets in their net capital computations, provided the clearing broker/dealer adheres to the provisions, procedures, and interpretations set forth in the letter including the establishment of a separate reserve account for PAIB assets. Our clearing firm, Pershing LLC, has sent out a letter attesting that it adheres to these provisions, procedures, and interpretations.

As a broker/dealer that introduces accounts on a fully disclosed basis and wishes to maintain our minimum net capital requirement, PPI meets all of the following requirements: 

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• PPI maintains a written clearing agreement (signed by the clearing broker-dealer), which states that for purposes of the Securities Investor Protection Act (SIPA) and SEC Rules 15c3-3 and 15c3-1, customers are customers of the clearing firm and not the introducing firm;

• Pershing, the clearing firm, provides clients with a disclosure statement that makes plain the clearing agent/introducing firm relationship and division of duties and responsibilities;

• Pershing issues all account statements directly to customers;

• Account statements disclose that all customer funds and/or securities are located at the clearing broker-dealer; and

• Account statements provide a contact person or department at the clearing firm who can address customers’ inquiries regarding their accounts.  

Private Portfolio, Inc. does not handle checks from Mutual Fund companies. PPI introduces clients to a fund and the fund deals directly with customers from there. PPI does not receive monies for benefit of customers.

Error Procedures for Handling Customer FundsReceived by Wholly Disclosed Firms

All customer checks are to be made payable to our clearing firm, Pershing, and all checks are to be forwarded by customers directly to Pershing, either by mail or an overnight delivery service. If for some reason a check mistakenly comes into the hands of an RR, it should be sent immediately to the home office, where Eduardo Tovar will handle it by logging it and keeping a copy in an electronic check blotter for documentation, and forwarding it immediately to Pershing by mail or delivery service.

If PPI receives a check made payable to Private Portfolio, Inc., the home office will return it immediately to the customer, along with a letter of explanation requesting re-issuance to the Mutual Fund, or clearing firm, or other.

Handling Customer Funds

Customer funds, whether in the form of check, money order, or cash, may never be deposited in a Representative’s personal bank account, even for the purpose of enabling the salesperson to draw his own check to cover payment made by a customer. Customer certificates or Direct Registration Systems evidencing ownership may never be deposited in a Representative’s personal bank safe deposit box for any purpose. Such co-mingling of a customer’s funds with those of a Representative, for no matter how long a time, is a violation of the rules governing our business, as well as a violation of firm policy.

Handling Customer Securities

Direct Registration Statements are quickly making stock certificates obsolete. On rare occasions, a customer may have a physical stock certificate. We will make a copy of it for our files at the home office, then ship the certificate by a trackable overnight method to Pershing, our clearing firm, to be held safely for the customer.

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Customer certificates evidencing ownership may never be deposited in a Representative’s personal bank safe deposit box for any purpose. Such co-mingling of a customer’s funds with those of a Representative, for no matter how long a time, is a violation of the rules governing our business, as well as a violation of firm policy.

Customer Protection RuleSEC Rule 15c3-3; Rule 3140

PPI does not do business in securities futures products.

Reserve ComputationsNTM 99-44

As an introducing broker/dealer, PPI includes PAIB assets as allowable assets in our net capital computations. The Securities and Exchange Commission No-Action Letter regarding the capital treatment of assets in the proprietary account of an introducing broker/dealer (PAIB) held by a clearing broker/dealer allows us to do so since Pershing, LLC, our clearing broker/dealer, has issued a letter attesting that it adheres to the provisions, procedures, and interpretations set forth in the letter, including the establishment of a separate reserve account for PAIB assets in accordance with the SEC Customer Protection Rule.

Quarterly Box CountSEC Rule 17a-13

PPI is not subject to this rule since we do not engage in this business.

Safekeeping and Segregation of SecuritiesSEC Rules 17a-5, 17a-11; FINRA By-Laws, Schedule A; Rules 3110, 2330; SEC Rules 8c-1, 15c2-1, 15c3-3, and 17a-13

PPI does not hold securities carried for the account of any customer; this is a service provided by our clearing firm, Pershing LLC. A securities received/delivered blotter is a chronological record of receipt and delivery of securities to the clearing firm. This Pershing system is called PCAS.

If, at some future time, we were to provide this service, we would abide by the following: A broker/dealer relying on the (k)(2)(ii) exemption from SEC Rule 15c3-3 may write checks for its customers, drawn on a bank account of its clearing firm if:

1. The bank account is in the name of the clearing firm;

2. There is a written agreement between the carrying firm and the introducing broker/dealer stating that the introducing firm may draw upon the account only as agent;  

3. The customer’s account is debited in the amount of the check when the check is issued and the outstanding checks payable to the customers of the correspondents are included in the clearing firm’s 15c3-3 Reserve Formula credit balances.

Financial Reporting and BackupSEC Rules 17-a-5; 17a-11; FINRA By-Laws, Schedule A; Rule 3110

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Net Capital ComputationAccording to SEC Rule 15c3-1(a)(1)(i), PPI shall not permit its aggregate indebtedness to all other persons to exceed 1500 percent of its net capital. PPI will operate pursuant to SEC Rule 15c3-1(a)(2)(vi) and will maintain minimum net capital of not less than $100,000 or 6 2/3% of Aggregate Indebtedness. In accordance with SEC Rule 17a-11, PPI must maintain one hundred twenty percent (120%) of its minimum net capital requirement; however, PPI agrees to notify the District 2 office should net capital be less than $100,000 above those requirements.

Private Portfolio, Inc. is a Dealer and shall maintain net capital of not less than $100,000 [paragraph (2)(iii) of Reg. 240.15c3-1].

This net capital level will allow us, as dealer, to effect more than ten transactions in any calendar year for our own investment account [paragraph (2)(iii)(b) of Reg. 240.15c3-1].

We maintain a General Ledger, trial balance, income statement, balance sheet, and net capital computation with all supporting documentation, on a monthly basis.

Focus I ReportThe Focus I Report is filed monthly with FINRA via Electronic Focus Filing.

Focus IIA ReportThe Focus IIA Report will be maintained on a quarterly basis and filed via Electronic Focus Filing with FINRA in both its Maryland and local offices.

PPI will also maintain a separate book and record file for the computer-generated Electronic Focus Filing report to verify that the Focus Reports were transmitted over the internet.

Filing of Annual Audit ReportPrivate Portfolio, Inc. will file an annual audited financial statement with the Securities and Exchange Commission, Financial Industry Regulatory Authority, and all applicable states within sixty (60) days of PPI’s year end, or as specified by the State. PPI’s year end is December 31st.

Lost and Stolen Securities RegistrationPrivate Portfolio, Inc. has filed applicable forms with the Securities Information Center (SIC) so that PPI may participate in the Lost and Stolen Securities Program as an Indirect Inquirer. Private Portfolio, Inc. has also entered into an agreement with Pershing, which will act as their registered Direct Inquirer and be directly responsible for any Lost and Stolen Monies and/or Securities.

FINRA Fees and AssessmentsFINRA By-Laws, Schedule A; MSRB Rules A-13 and A-14 as applicable

SIPC AssessmentPrivate Portfolio, Inc. will file appropriate forms and fees as required with our SIPC Collection Agent, FINRA.

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An SIPC-6 Form will be filed for the first six-month period of our calendar year, and thereafter. SIPC-6 is due no later than thirty (30) days after calendar year-end, together with payment of the assessment.

An annual SIPC-7 Form will be filed for the period ending December 31st, and annually thereafter. SIPC-7 is due no later than 60 days after end of period, together with payment of the assessment balance.

SIPC Supplemental Report

The annual audit of Private Portfolio, Inc., shall include an opinion from the independent public accountant, and the status of the membership of Private Portfolio, Inc. with the SIPC. This report shall also include a separate supplemental report, the SIPC annual general assessment reconciliation, or exclusion from membership–as applicable.

FINRA Annual AssessmentA FINRA preliminary Renewal Statement is made available on the FINRA Firm Gateway in mid-November, and serves as the Annual Assessment. Payment is made on receipt of this notice and the Renewal Statement is filed.

Margin Requirements/ Regulation TRule 2520; Federal Reserve Board Regulation T

Private Portfolio, Inc. is responsible for complying with the margin requirements for Pershing. Currently, Private Portfolio, Inc. requires a 50% deposit of the current market value of securities after the initial margin requirement of $2,000. It is important to remember that such margin requirements are an addition to, not a replacement or modification of, requirements imposed by Regulation T. Pershing has set its “house” rules at 35%, which is 10% more strict than those of Regulation T.

Margin Agreement

For each new margin account established, both the customer and Registered Representative must prepare and sign a Margin Agreement. Eduardo Tovar must review and approve all new accounts prior to executing any trades for said account.

Initial Margin or Minimum Account Equity

The American Stock Exchange (AMEX), New York Stock Exchange (NYSE), and other exchanges have similar rules that prescribe that the initial deposit in a margin account must be either cash equal to the cost of the security purchased, or cash or marginable securities sufficient to reflect an equity in the account of at least $2,000.

Margin Accounts

Before any margin trades can be executed, Eduardo Tovar must have a signed copy of the customer’s Margin Agreement and Loan Consent. Some facts about Margin Accounts:

• Securities for use in maintaining margin shall be in street name. No margin will be allowed for securities registered in a customer’s name.

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• All securities used for margin purposes must meet the criteria set by the clearing firm. A decline in price below the set level makes the stock ineligible. RRs must advise your customers of this requirement at the time accounts are opened. (This requirement may be altered from time to time in view of market conditions. Refer to current Margin Agreement for more information.)

• As for all accounts for an employee of any bank, trust company, or financial organization engaged in the business of dealing in securities, margin accounts must not be opened without the written consent of the employer.

• Credit will not be extended to a customer on unlisted or over-the-counter securities unless said securities appear on the marginal list published by the Federal Reserve Board.

• Every effort must be made to ensure payment by the settlement date to eliminate the need to request an extension. Regulation T extension may be applied for in case of non-payment with a valid reason. An extension may also be applied for in case of non-delivery of securities.

• Regulation T forbids a Registered Representative from arranging credit on terms better than Private Portfolio, Inc. can give the customer.

• For all corporations opening accounts, obtain copies of the By-Laws and resolutions that establish the authority of the officer to act on behalf of the corporation. A corporation wishing to open a margin account must have specific rights under its charter or By-Laws, and Private Portfolio, Inc. must have a copy of such document before any margin trade is executed.

Supervision of Margin Accounts

To ensure that margin accounts are properly maintained, Private Portfolio, Inc. has enacted the following practices:

• Ascertain that all purchases of options effected by customers have been paid in full.

• Make certain that minimum equity requirements established for margin transactions have been met, and that all initial Regulation T margin requirements are observed.

• Determine that appropriate margin maintenance requirements for uncovered short option positions, option straddle positions, short options covered by exchangeable or convertible securities, and conventional option positions are met.

• Determine that for purposes of covering short option positions or satisfying margin requests and/or exercise notices, we refuse securities that are restricted, unregistered, or in any other manner not salable under the provisions of the 1933 Act.

Regulation TRegulation T of the Federal Reserve Board governs, among other items, the amount of credit (if any) that may be initially extended by a broker or dealer at the time a customer enters into any securities transaction. Regulation T also governs the release of proceeds of securities sold, if any, which must be retained in a customer’s account, as well as substitution privileges in such accounts.

Private Portfolio, Inc. is responsible for complying with the margin requirements for Pershing. Currently, Private Portfolio, Inc. requires a 50% deposit of the current market value of securities after the initial margin requirement of $2,000. It is important to remember that such margin requirements

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are an addition to, not a replacement or modification of, requirements imposed by Regulation T. Pershing has set its “house” rules at 35%, which is 10% more strict than those of Regulation T.

The requirements of Regulation T, including interpretations thereof, are complex and are subject to change from time to time. Registered Representatives should consult Eduardo Tovar to inform themselves regarding current requirements of Regulation T.

ALL MARGIN ACCOUNTS WILL BE CARRIED ON A FULLY-DISCLOSED BASIS WITH PERSHING.

FINRA/Regulation T

Requirements by FINRA under Regulation T of the Federal Reserve Board are as follows: If payment is not received by the seventh (7th) business day, a legitimate “extension of time” must be requested by the Representative no later than 2:00 p.m. Central Standard Time on the seventh (7th) day. Extensions will be made only for cases of extreme hardship.

Combined Regulation T/SEC Rule 15c3-3 – Extension Request Form

FINRA has created a combined form for use in submitting extension requests pursuant to Regulation T and SEC Rule 15c3-3.

An SEC 15c3-3 extension will be filed when securities are not received from the client 10 days from settlement date.

A Regulation T extension is filed on the seventh (7th) day after trade date for monies not received from client.

Note: The extension form requires information including the RR’s Central Registration Depository (CRD) number, as well as the customer’s Social Security or Tax Identification number.

Questions regarding this notice may be directed to Eduardo Tovar.

Fees charged to CustomersRule 2430

N/A – Private Portfolio, Inc. does not offer fee-based accounts.

Clearing AgreementsRule 3230; NTM 99-57

Private Portfolio, Inc. has a Fully Disclosed Clearing Agreement with Pershing, LLC (member FINRA, NYSE, SIPC). Pershing holds our customer accounts, and executes and clears our trades. We are connected to their workstation platform, NETX360, for account management and trading. Most of our bonds trades are made away from Pershing, and some mutual funds are held and traded at the fund families.

Pershing, our clearing firm, is our primary service provider. Pershing is regulated as we are, and we rely on them to comply in strict accordance to applicable regulations. We work daily with Pershing

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personnel and systems, and we constantly monitor the accuracy and quality of work produced. Pershing has a third party test their procedures to help ensure quality.

Clearing Agent Services

All clearing agreements entered into by PPI and Pershing, LLC, specify the respective functions and responsibilities of each party to the agreement and specify the responsibility of each party with respect to each of the following matters:

• opening, approving and monitoring customer accounts;

• extension of credit;

• maintenance of books and records;

• receipt and delivery of funds and securities;

• safeguarding of funds and securities;

• confirmations and statements;

• acceptance of orders and execution of transactions;

• whether customers are customers of the clearing member; and

• a disclosure statement that makes plain to customers the introducing firm/ clearing agent relationship and division of responsibilities;

Order Entry and Execution

Both order entry and execution are performed on Pershing’s online platform, NETX360, in their order entry system.

Order Flow Disclosure

Private Portfolio does not receive compensation for directing order flow. On clients’ March statements, Pershing makes their (and our) disclosure for payment for order flow.

Disclosure Statement

PPI customer accounts are all opened on a fully disclosed basis. On opening an account, each client receives from Pershing a written Disclosure Statement that explains the existence of the clearing agreement and the nature of the relationship and division of responsibilities between PPI and Pershing.

This Disclosure Statement reveals that PPI, as introducing member, maintains its proprietary and customer accounts and the proprietary and customer accounts of any member for which it is acting as an intermediary in obtaining clearing services from Pershing in such a manner as to enable Pershing

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and FINRA to identify data belonging to the proprietary and customer accounts of each member. This Disclosure Statement also contains general explanations of some of Pershing’s services and procedures.

Confirmations

A confirmation will be mailed by Pershing to the customer and copies will be available to Private Portfolio, Inc. Information on confirmations should include the following:

• The capacity in which PPI is acting.• Disclosure if the transaction is of a dual agency nature.• Disclosure of any additional remuneration received in connection with customer transactions.• Appropriate yield and call information on transactions in debt securities.

PPI will maintain all records as required and in compliance with SEC Rules 17a-3 and 4 and pursuant to SEC Rule 17a3(8). Copies of confirmations are available on NETX360 for all securities transactions, including verification of receipt of cash and other items for the accounts of customers. In addition, as in SEC Rule 10b-10(a), the source and amount of any other remuneration received or to be received in connection with the transaction will be disclosed, as applicable.

Clearing Agent Special Services

To obtain immediate information concerning all Pershing customer accounts, Private Portfolio, Inc. will utilize Pershing’s online platform, NETX360.

ClearingTo confirm that Pershing is functioning correctly on behalf of PPI’s customers, Eduardo Tovar will take the following steps:

• Confirm that uniform comparisons are sent, in accordance with the Uniform Practice Code, Section 9.

• Ensure that Pershing is sending Private Portfolio customers monthly and quarterly statements with activity as well as credit balances.

• Determine that copies of “as of,” canceled, uncompared, and corrected comparisons are maintained in accordance with SEC Rule 17a-4.

• Review the number of “Don’t Know (DK),” “as of”, and uncompared trades in relation to PPI’s overall volume of business.

• Ensure that Pershing confirmations contain required disclosures.

Bank Secrecy ActSEC Rule 17a-8; NTMs 89-12; 97-13

• Reporting Suspicious Transactions

PPI relies on our clearing firm, Pershing LLC, to screen for suspicious transactions. We are also aware that the Department of the Treasury recently established a toll-free number, 800-BSA-CTRS,

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as a hotline for reporting suspicious currency transactions. We will use the hotline to refer information on transactions that appear to be arranged in such a way as to evade the requirements of the Bank Secrecy Act (the Act) to report cash transactions of $10,000 or more. We will also be alert to suspicious non-cash transactions (i.e., multiple cashier's checks, money orders, traveler’s checks, and bank checks in amounts below $10,000) and wire transfers that may involve illegal activities, such as money laundering. Such transactions could be violations of the Money Laundering Control Act of 1986 (MLCA) and should be reported to the Customs hotline, 800-BE-ALERT.

In addition, we respond to FinCEN reports, as evidenced by online confirmation on the FinCEN website and saved in blotters electronically at the home office.

Record-Keeping for Funds Transfers

Private Portfolio, Inc. has centralized technology (computer networks and NETX360, Pershing’s online platform) to monitor trading and funds transfers. As part of our Anti-Money Laundering program, our firm will create and maintain SAR-SFs, CTRs, CMIRs, FBARs, and relevant documentation on customer identity and verification and funds transmittals (see below, AML program). We will maintain SAR-SFs and their accompanying documentation for at least five years. We will keep other documents according to existing BSA (and other) record-keeping requirements, including certain SEC rules that require six-year retention.

Business Continuity Planning Rules 3510, 3500, 3520; MSRB Rule G-40 http://www.finra.org/RulesRegulation/IssueCenter/BusinessContinuityPlanning/p006464

PPI has created and maintains a business continuity plan, following the Small Introducing Firm Business Continuity Planning Template provided by FINRA. We conduct an annual review of this plan, and update it accordingly. The plan is filed at the home office and appears on our website.

Taping RuleRule 3010(b)(2)

Rule 3010(b)(2) (A, B, C, D, E, F, G, H, I, J, K, L) is not applicable to PPI since no one associated with Private Portfolio, Inc., has a disciplinary history or has been associated with any disciplined firms. We are aware, however, that we are required to abide by this portion of Rule 3010 if these circumstances should change.

ANTI-MONEY LAUNDERING (AML)Updated Small Firm Template, January 1, 2010

1. Firm PolicyIt is the policy of Private Portfolio, Inc to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations.

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Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the "placement" stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler's checks, or deposited into accounts at financial institutions. At the "layering" stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the "integration" stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses.

Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.

Our AML policies, procedures and internal controls are designed to ensure compliance with all applicable BSA regulations and FINRA rules and will be reviewed and updated on a regular basis to ensure appropriate policies, procedures and internal controls are in place to account for both changes in regulations and changes in our business.

Rules: 31 C.F.R. § 103.120(c); FINRA Rule 3310.

2. AML Compliance Person Designation and Duties The firm has designated Eduardo Tovar as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the firm’s AML program. Eduardo Tovar has a working knowledge of the BSA and its implementing regulations and is qualified by experience, knowledge and training. The duties of the AML Compliance Person will include monitoring the firm’s compliance with AML obligations, overseeing communication and training for employees, and; review NASD Rules 1021 and 1031 for any applicable registration requirements. The AML Compliance Person will also ensure that the firm keeps and maintains all of the required AML records and will ensure that Suspicious Activity Reports (SAR-SFs) are filed when warranted in consultation with Daniel Barba to the Financial Crimes Enforcement Network (FinCEN) when appropriate. The AML Compliance Person is vested with full responsibility and authority to enforce the firm’s AML program.

Private Portfolio, Inc has provided FINRA with contact information for the AML Compliance Person, including: (1) name; (2) title; (3) mailing address; (4) email address; (5) telephone number; and (6) facsimile number through the FINRA Contact System (FCS). The firm will promptly notify FINRA of any change in this information through FCS and will review, and if necessary update, this information within 17 business days after the end of each calendar year. The annual review of FCS information will be conducted by Daniel Barba and will be completed with all necessary updates being provided no later than 17 business days following the end of each calendar year. In addition, if

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there is any change to the information, Daniel Barba will update the information promptly, but in any event not later than 30 days following the change.

Rules: 31 C.F.R. § 103.120; FINRA Rule 3310, NASD Rule 1160. Resources: NTM 06-07; NTM 02-78. Firms can submit their AML Compliance Person information through FINRA's FCS Web page.

3. Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions a. FinCEN Requests Under USA PATRIOT Act Section 314(a)We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning accounts and transactions (a 314(a) Request) by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity or organization named in the 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure Web site. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. We will designate through the FINRA Contact System (FCS) one or more persons to be the point of contact (POC) for 314(a) Requests and will promptly update the POC information following any change in such information. (See also Section 2 above regarding updating of contact information for the AML Compliance Person.) Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, [Name] will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), [Name] will structure our search accordingly.

If Eduardo Tovar searches our records and does not find a matching account or transaction, then Eduardo Tovar will not reply to the 314(a) Request. We will maintain documentation that we have performed the required search by printing a search self-verification document from FinCEN’s 314 (a) Secure Information Sharing System confirming that our firm has searched the 314(a) subject information against our records and maintaining a log showing the date of the request, the number of accounts searched, the name of the individual conducting the search and a notation of whether or not a match was found.

We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. Eduardo Tovar will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of customers’ nonpublic information.

We will direct any questions we have about the 314(a) Request to the requesting federal law enforcement agency as designated in the request.

Unless otherwise stated in the 314(a) Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the customer identification and verification requirements.

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Rule: 31 C.F.R. § 103.100. Resources: FinCEN press release (2/6/03); FinCEN press release (2/12/03); NASD Member Alert (2/14/03); FinCEN's 314(a) Fact Sheet (11/18/08). FinCEN also provides financial institutions with General Instructions and Frequently Asked Questions relating to 314(a) requests through the 314(a) Secured Information Sharing System or by contacting FinCEN at (800) 949-2732.! b. National Security LettersNational Security Letters (NSLs) are written investigative demands that may be issued by the local Federal Bureau of Investigation and other federal government authorities conducting counterintelligence and counterterrorism investigations to obtain, among other things, financial records of broker-dealers. NSLs are highly confidential. No broker-dealer, officer, employee or agent of the broker-dealer can disclose to any person that a government authority or the FBI has sought or obtained access to records. Firms that receive NSLs must have policies and procedures in place for processing and maintaining the confidentiality of NSLs. If you file a Suspicious Activity Report (SAR-SF) after receiving a NSL, the SAR-SF should not contain any reference to the receipt or existence of the NSL.

Resource: FinCEN SAR Activity Review, Trends, Tips & Issues, Issue 8 (National Security Letters and Suspicious Activity Reporting) (4/2005).

c.! Grand Jury SubpoenasPrivate Portfolio, Inc understands that the receipt of a grand jury subpoena concerning a customer does not in itself require that we file a Suspicious Activity Report (SAR-SF). When we receive a grand jury subpoena, we will conduct a risk assessment of the customer subject to the subpoena as well as review the customer’s account activity. If we uncover suspicious activity during our risk assessment and review, we will elevate that customer’s risk assessment and file a SAR-SF in accordance with the SAR-SF filing requirements. We understand that none of our officers, employees or agents may directly or indirectly disclose to the person who is the subject of the subpoena its existence, its contents or the information we used to respond to it. To maintain the confidentiality of any grand jury subpoena we receive, we will process and maintain the subpoena by date in our home office. If we file a SAR-SF after receiving a grand jury subpoena, the SAR-SF will not contain any reference to the receipt or existence of the subpoena. The SAR-SF will only contain detailed information about the facts and circumstances of the detected suspicious activity.

Resources: FinCEN SAR Activity Review, Trends, Tips & Issues, Issue 10 (Grand Jury Subpoenas and Suspicious Activity Reporting) (5/2006).

d. Voluntary Information Sharing With Other Financial Institutions Under USA PATRIOT Act Section 314(b)

Private Portfolio, Inc will share information with other financial institutions regarding individuals, entities, organizations and countries for purposes of identifying and, where appropriate, reporting activities that we suspect may involve possible terrorist activity or money laundering. Eduardo Tovar will ensure that the firm files with FinCEN an initial notice before any sharing occurs and annual notices thereafter. We will use the notice form found at FinCEN’s Web site. Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will

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make available. We understand that this requirement applies even to financial institutions with which we are not affiliated, and that we will obtain the requisite notices from affiliates and follow all required procedures.

We will employ strict procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, for example, by segregating it from the firm’s other books and records.

We also will employ procedures to ensure that any information received from another financial institution shall not be used for any purpose other than:• identifying and, where appropriate, reporting on money laundering or terrorist activities;• determining whether to establish or maintain an account, or to engage in a transaction; or • assisting the financial institution in complying with performing such activities.

Rule: 31 C.F.R. § 103.110. Resources: FinCEN Financial Institution Notification Form; FIN-2009-G002: Guidance on the Scope of Permissible Information Sharing Covered by Section 314(b) Safe Harbor of the USA PATRIOT Act (06/16/2009).

e.! Joint Filing of SARs by Broker-Dealers and Other Financial InstitutionsPrivate Portfolio, Inc will file joint SARs when requested and one of our clients is involved. We will also share information about a particular suspicious transaction with any broker-dealer, as appropriate, involved in that particular transaction for purposes of determining whether we will file jointly a SAR-SF.

We will share information about particular suspicious transactions with our clearing broker for purposes of determining whether we and our clearing broker will file jointly a SAR-SF. In cases in which we file a joint SAR-SF for a transaction that has been handled both by us and by the clearing broker, we may share with the clearing broker a copy of the filed SAR-SF.

If we determine it is appropriate to jointly file a SAR-SF, we understand that we cannot disclose that we have filed a SAR-SF to any financial institution except the financial institution that is filing jointly. If we determine it is not appropriate to file jointly (e.g., because the SAR-SF concerns the other broker-dealer or one of its employees), we understand that we cannot disclose that we have filed a SAR-SF to any other financial institution or insurance company.

Rules: 31 C.F.R. §103.19; 31 C.F.R. § 103.38; 31 C.F.R. § 103.110.

f. Sharing SAR-SFs With Parent CompaniesNot applicable we are not a subsidiary of a foreign or domestic parent entities.

4. Checking the Office of Foreign Assets Control ListingsBefore opening an account, and on an ongoing basis, our clearing firm Pershing LLC will check to ensure that a customer does not appear on the SDN list or is not engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC. (See the OFAC Web site for the SDN list and listings of current sanctions and embargoes). Because the SDN list and listings of economic sanctions and embargoes are updated frequently, we will consult them on a regular basis and subscribe to receive any available updates when they occur. With respect to the

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SDN list, we may also access that list through various software programs to ensure speed and accuracy. See also FINRA’s OFAC Search Tool that screens names against the SDN list Pershing LLC will also review existing accounts against the SDN list and listings of current sanctions and embargoes when they are updated and he will document the review.

If we determine that a customer is on the SDN list or is engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC, we will reject the transaction and/or block the customer's assets and file a blocked assets and/or rejected transaction form with OFAC within 10 days. We will also call the OFAC Hotline at (800) 540-6322 immediately.

Pershing LLC will review customer accounts, transactions involving customers (including activity that passes through the firm such as wires) and the review of customer transactions that involve physical security certificates or application-based investments (e.g., mutual funds).

Resources: SEC AML Source Tool, Item 12; OFAC Lists Web page (including links to the SDN List and lists of sanctioned countries); FINRA’s OFAC Search Tool. You can also subscribe to receive updates on the OFAC Subscription Web page. See also the following OFAC forms: Blocked Properties Reporting Form; Voluntary Form for Reporting Blocked Transactions; Voluntary Form for Reporting Rejected Transactions; OFAC Guidance Regarding Foreign Assets Control Regulations for the Securities Industry.

5. Customer Identification ProgramRule: 31 C.F.R. §103.122(a)(1)(i)(ii) and 103.122(a)(4)(i)(ii).Resources: SEC Staff Q&A Regarding the Broker-Dealer Customer Identification Program Rule (October 1, 2003); NTM 03-34; FIN-2006-G007: Frequently Asked Question: Customer Identification Program Responsibilities under the Agency Lending Disclosure Initiative (April 25, 2006).

Resources: FIN-2008-G002: Customer Identification Program Rule No-Action Position Respecting Broker-Dealers Operating Under Fully Disclosed Clearing Agreements According to Certain Functional Allocations (March 4, 2008) and FIN-2008-R008 (Bank Secrecy Act Obligations of a U.S. Clearing Broker-Dealer Establishing a Fully Disclosed Clearing Relationship with a Foreign Financial Institution) (June 3, 2008).

In addition to the information we must collect under FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade), NASD Rules 2310 (Recommendations to Customers - Suitability) and 3110 (Books and Records) and Securities Exchange Act of 1934 (Exchange Act) Rules 17a-3(a)(9) (Beneficial Ownership regarding Cash and Margin Accounts) and 17a-3(a)(17) (Customer Accounts), we have established, documented and maintained a written Customer Identification Program (CIP). We will collect certain minimum customer identification information from each customer who opens an account; utilize risk-based measures to verify the identity of each customer who opens an account; record customer identification information and the verification methods and results; provide the required adequate CIP notice to customers that we will seek identification information to verify their identities; and compare customer identification information with government-provided lists of suspected terrorists, once such lists have been issued by the government. See Section 5.g. (Notice to Customers) for additional information.

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When we open and account for and entity will collect information to determine whether the entity opening an account would be excluded as a “customer,” pursuant to the exceptions outlined in 31 CFR 103.122(a)(4)(ii) (e.g., documentation of a company’s listing information, licensing or registration of a financial institution in the U.S, and status or verification of the authenticity of a government agency or department).

Rule: 31 C.F.R. §103.122.Resources: SEC Staff Q&A Regarding the Broker-Dealer Customer Identification Program Rule (October 1, 2003); NTM 03-34.

a.! Required Customer InformationPrior to opening an account, Eduardo Tovar or Daniel Barba will collect the following information for all accounts, if applicable, for any person, entity or organization that is opening a new account and whose name is on the account:

(1) the name; (2) date of birth (for an individual); (3) an address, which will be a residential or business street address (for an individual), an Army

Post Office (APO) or Fleet Post Office (FPO) box number, or residential or business street address of next of kin or another contact individual (for an individual who does not have a residential or business street address), or a principal place of business, local office, or other physical location (for a person other than an individual); and

(4) an identification number, which will be a taxpayer identification number (for U.S. persons), or one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or other similar safeguard (for non-U.S. persons).

In the event that a customer has applied for, but has not received, a taxpayer identification number, we will ask for a copy of the application to confirm that the application was filed before the customer opens the account and to obtain the taxpayer identification number within a reasonable period of time after the account is opened.

When opening an account for a foreign business or enterprise that does not have an identification number, we will request alternative government-issued documentation certifying the existence of the business or enterprise.

Rule: 31 C.F.R. §103.122(b)(2)(i)(A) & § 103.122(b)(2)(i)(B).

b. Customers Who Refuse to Provide Information If a potential or existing customer either refuses to provide the information described above when requested, or appears to have intentionally provided misleading information, our firm will not open a new account and, after considering the risks involved, consider closing any existing account. In either case, our AML Compliance Person will be notified so that we can determine whether we should report the situation to FinCEN on a SAR-SF.

c. Verifying Information Based on the risk, and to the extent reasonable and practicable, we will ensure that we have a reasonable belief that we know the true identity of our customers by using risk-based procedures to

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verify and document the accuracy of the information we get about our customers. Eduardo Tovar will analyze the information we obtain to determine whether the information is sufficient to form a reasonable belief that we know the true identity of the customer (e.g., whether the information is logical or contains inconsistencies).

We will verify customer identity through documentary means, non-documentary means or both. We will use documents to verify customer identity when appropriate documents are available. In light of the increased instances of identity fraud, we will supplement the use of documentary evidence by using the non-documentary means described below whenever necessary. We may also use non-documentary means, if we are still uncertain about whether we know the true identity of the customer. In verifying the information, we will consider whether the identifying information that we receive, such as the customer’s name, street address, zip code, telephone number (if provided), date of birth and Social Security number, allow us to determine that we have a reasonable belief that we know the true identity of the customer (e.g., whether the information is logical or contains inconsistencies).

Appropriate documents for verifying the identity of customers include the following:

• For an individual, an unexpired government-issued identification evidencing nationality or residence and bearing a photograph or similar safeguard, such as a driver’s license or passport; and

• For a person other than an individual, documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement or a trust instrument.

We understand that we are not required to take steps to determine whether the document that the customer has provided to us for identity verification has been validly issued and that we may rely on a government-issued identification as verification of a customer’s identity. If, however, we note that the document shows some obvious form of fraud, we must consider that factor in determining whether we can form a reasonable belief that we know the customer’s true identity.

We will use the following non-documentary methods of verifying identity:

• Independently verifying the customer’s identity through the comparison of information provided by the customer with information obtained from a consumer reporting agency, public database or other source.

• Checking references with other financial institutions; or • Obtaining a financial statement.• Spot-checking customer contact information (e.g., calling given phone numbers).

We will use non-documentary methods of verification when: (1) the customer is unable to present an unexpired government-issued identification document

with a photograph or other similar safeguard; (2) the firm is unfamiliar with the documents the customer presents for identification verification; (3) the customer and firm do not have face-to-face contact; and (4) there are other circumstances that increase the risk that the firm will be unable to verify the

true identity of the customer through documentary means.

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We will verify the information within a reasonable time before or after the account is opened. Depending on the nature of the account and requested transactions, we may refuse to complete a transaction before we have verified the information, or in some instances when we need more time, we may, pending verification, restrict the types of transactions or dollar amount of transactions. If we find suspicious information that indicates possible money laundering, terrorist financing activity, or other suspicious activity, we will, after internal consultation with the firm's AML Compliance Person, file a SAR-SF in accordance with applicable laws and regulations.

We recognize that the risk that we may not know the customer’s true identity may be heightened for certain types of accounts, such as an account opened in the name of a corporation, partnership or trust that is created or conducts substantial business in a jurisdiction that has been designated by the U.S. as a primary money laundering jurisdiction, a terrorist concern, or has been designated as a non-cooperative country or territory. We will identify customers that pose a heightened risk of not being properly identified. We will also take the following additional measures that may be used to obtain information about the identity of the individuals associated with the customer when standard documentary methods prove to be insufficient: we always need to know who the officers, partners are and they need to provide appropriate government identification.

Rule: 31 C.F.R. §103.122(b).

d.! Lack of VerificationDescribe your procedures for responding to circumstances in which the firm cannot form a reasonable belief that it knows the true identity of a customer.

When we cannot form a reasonable belief that we know the true identity of a customer, we will do the following: (1) not open an account; (2) impose terms under which a customer may conduct transactions while we attempt to verify the customer’s identity; (3) close an account after attempts to verify customer’s identity fail; and (4) determine whether it is necessary to file a SAR-SF in accordance with applicable laws and regulations.

Rule: 31 C.F.R. §103.122(b)(2)(iii).

e.! RecordkeepingWe will document our verification, including all identifying information provided by a customer, the methods used and results of verification, and the resolution of any discrepancies identified in the verification process. We will keep records containing a description of any document that we relied on to verify a customer’s identity, noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date. With respect to non-documentary verification, we will retain documents that describe the methods and the results of any measures we took to verify the identity of a customer. We will also keep records containing a description of the resolution of each substantive discrepancy discovered when verifying the identifying information obtained. We will retain records of all identification information for five years after the account has been closed; we will retain records made about verification of the customer's identity for five years after the record is made.

Rule: 31 C.F.R. §103.122(b)(3).

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f. Comparison with Government-Provided Lists of TerroristsAt such time as we receive notice that a federal government agency has issued a list of known or suspected terrorists and identified the list as a list for CIP purposes, we will, within a reasonable period of time after an account is opened (or earlier, if required by another federal law or regulation or federal directive issued in connection with an applicable list), determine whether a customer appears on any such list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by Treasury in consultation with the federal functional regulators. We will follow all federal directives issued in connection with such lists.

We will continue to comply separately with OFAC rules prohibiting transactions with certain foreign countries or their nationals.

Rule: 31 C.F.R. §103.122(b)(4).Resources: NTM 02-21, page 6, n.24; 31 C.F.R. § 103.122.

g. Notice to CustomersFINRA has produced a Customer Identification Program Notice to assist firms in fulfilling this notification requirement. Please refer to FINRA’s AML Web page for further details.We will provide notice to customers that the firm is requesting information from them to verify their identities, as required by federal law.

Important Information About Procedures for Opening a New AccountTo 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.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

Rule: 31 C.F.R. §103.122(b)(5).

h. Reliance on Another Financial Institution for Identity VerificationWe may, under the following circumstances, rely on the performance by another financial institution (including an affiliate) of some or all of the elements of our CIP with respect to any customer that is opening an account or has established an account or similar business relationship with the other financial institution to provide or engage in services, dealings or other financial transactions:

• when such reliance is reasonable under the circumstances;• when the other financial institution is subject to a rule implementing the anti-money

laundering compliance program requirements of 31 U.S.C. § 5318(h), and is regulated by a federal functional regulator; and

• when the other financial institution has entered into a contract with our firm requiring it to certify annually to us that it has implemented its anti-money laundering program and that it will perform (or its agent will perform) specified requirements of the customer identification program.

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Rule: 31 C.F.R. § 103.122(b)(6).Resources: No-Action Letters to the Securities Industry and Financial Markets Association (SIFMA) (formerly known as the Securities Industry Association (SIA)) (February 12, 2004; February 10, 2005; July 11, 2006; and January 10, 2008). (The letters provide staff guidance regarding the extent to which a broker-dealer may rely on an investment adviser to conduct the required elements of the CIP rule, prior to such adviser being subject to an AML rule.)

6. General Customer Due DiligenceIt is important to our AML and SAR-SF reporting program that we obtain sufficient information about each customer to allow us to evaluate the risk presented by that customer and to detect and report suspicious activity. When we open an account for a customer, the due diligence we perform may be in addition to customer information obtained for purposes of our CIP.

For each account meeting the following criteria we will take steps to obtain sufficient customer information to comply with our suspicious activity reporting requirements. Such information should include:

• the customer’s business;• the customer’s anticipated account activity (both volume and type); • the source of the customer’s funds.• The customers age.

For accounts that we have deemed to be higher risk, we will obtain the following information:

• the purpose of the account;• the source of funds and wealth;• the beneficial owners of the accounts;• the customer’s (or beneficial owner’s) occupation or type of business;• financial statements;• banking references;• domicile (where the customer’s business is organized);• description of customer’s primary trade area and whether international transactions are

expected to be routine;• description of the business operations and anticipated volume of trading;• explanations for any changes in account activity.

We will also ensure that the customer information remains accurate by all information is appropriately filled out on the new account form.

7. Correspondent Accounts for Foreign Shell Banks a. Detecting and Closing Correspondent Accounts of Foreign Shell Banks It is the policy of Private Portfolio, Inc. not to open foreign correspondent accounts of unregulated foreign shell banks. Daniel Barba and Eduardo Tovar will review all new accounts. If we detect an account corresponds to an unregulated foreign shell bank; the account will not be opened.

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Rules: 31 C.F.R. §§103.175, 103.177.

! b.! CertificationsWe will require our foreign bank account holders to identify the owners of the foreign bank if it is not publicly traded, the name and street address of a person who resides in the United States and is authorized and has agreed to act as agent for acceptance of legal process, and an assurance that the foreign bank is not a shell bank nor is it facilitating activity of a shell bank. In lieu of this information the foreign bank may submit the Certification Regarding Correspondent Accounts For Foreign Banks provided in the BSA regulations. We will re-certify when we believe that the information is no longer accurate or at least once every three years.

Rules: 31 C.F.R. §§ 103.175, 103.177.Resources: 31 C.F.R., Pt. 103, Subpt. I, App. A (Certification Regarding Correspondent Accounts for Foreign Banks); FIN-2006-G003: Frequently Asked Questions: Foreign Bank Recertifications under 31 C.F.R. § 103.77 (February 3, 2006).

c. Recordkeeping for Correspondent Accounts for Foreign BanksWe will keep records identifying the owners of foreign banks with U.S. correspondent accounts and the name and address of the U.S. agent for service of legal process for those banks.

Rules: 31 C.F.R. §§ 103.175, 103.177.

d. Summons or Subpoena of Foreign Bank Records; Termination of Correspondent Relationships with Foreign Bank

When we receive a written request from a federal law enforcement officer for information identifying the non-publicly traded owners of any foreign bank for which we maintain a correspondent account in the United States and/or the name and address of a person residing in the United States who is an agent to accept service of legal process for a foreign bank’s correspondent account, we will provide that information to the requesting officer not later than seven days after receipt of the request. We will close, within 10 days, any correspondent account for a foreign bank that we learn from FinCEN or the Department of Justice has failed to comply with a summons or subpoena issued by the Secretary of the Treasury or the Attorney General of the United States or has failed to contest such a summons or subpoena. We will scrutinize any correspondent account activity during that 10-day period to ensure that any suspicious activity is appropriately reported and to ensure that no new positions are established in these correspondent accounts.

Rule: 31 C.F.R. § 103.185.

8. Due Diligence and Enhanced Due Diligence Requirements for Correspondent Accounts of Foreign Financial Institutions a. Due Diligence for Correspondent Accounts of Foreign Financial InstitutionsFinCEN Guidance on Application of Correspondent Account Rules to the Presentation of Negotiable Instruments Received by a Covered Financial Institution for Payment (1/30/08).

We will conduct an inquiry to determine whether a foreign financial institution has a correspondent account established, maintained, administered or managed by the firm.

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If we have correspondent accounts for foreign financial institutions, we will assess the money laundering risk posed, based on a consideration of relevant risk factors. We can apply all or a subset of these risk factors depending on the nature of the foreign financial institutions and the relative money laundering risk posed by such institutions.

The relevant risk factors can include:

• the nature of the foreign financial institution’s business and the markets it serves;• the type, purpose and anticipated activity of such correspondent account;• the nature and duration of the firm’s relationship with the foreign financial institution

and its affiliates;• the anti-money laundering and supervisory regime of the jurisdiction that issued the

foreign financial institution’s charter or license and, to the extent reasonably available, the jurisdiction in which any company that is an owner of the foreign financial institution is incorporated or chartered; and

• information known or reasonably available to the covered financial institution about the foreign financial institution’s anti-money laundering record.

In addition, our due diligence program will consider additional factors that have not been enumerated above when assessing foreign financial institutions that pose a higher risk of money laundering.

We have reviewed our accounts and we do not have, nor do we intend to open or maintain, correspondent accounts for foreign financial institution. Eduardo Tovar or Daniel Barba as principals of Private Portfolio, Inc. will review each new account and sign off on the new application while verifying it is not a correspondent account for a foreign-financial institution.

Rules: 31 C.F.R. §§ 103.175, 103.176.Resources: FIN-2006-G009 Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to the Securities and Futures Industries (May 10, 2006).

b.! Enhanced Due DiligenceWe will assess any correspondent accounts for foreign financial institutions to determine whether they are correspondent accounts that have been established, maintained, administered or managed for any foreign bank that operates under:

(1) an offshore banking license; (2) a banking license issued by a foreign country that has been designated as non-cooperative with

international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the U.S. representative to the group or organization concurs; or

(3) a banking license issued by a foreign country that has been designated by the Secretary of the Treasury as warranting special measures due to money laundering concerns.

If we determine that we have any correspondent accounts for these specified foreign banks, we will perform enhanced due diligence on these correspondent accounts. The enhanced due diligence that we will perform for each correspondent account will include, at a minimum, procedures to take reasonable steps to:

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(1)! conduct enhanced scrutiny of the correspondent account to guard against money laundering and to identify and report any suspicious transactions. Such scrutiny will not only reflect the risk assessment that is described in Section 8.a. above, but will also include procedures to, as appropriate:(i)! obtain (e.g., using a questionnaire) and consider information related to the

foreign bank’s AML program to assess the extent to which the foreign bank’s correspondent account may expose us to any risk of money laundering;

(ii)! monitor transactions to, from or through the correspondent account in a manner reasonably designed to detect money laundering and suspicious activity (this monitoring may be conducted manually or electronically and may be done on an individual account basis or by product activity); and

(iii)! obtain information from the foreign bank about the identity of any person with authority to direct transactions through any correspondent account that is a payable-through account (a correspondent account maintained for a foreign bank through which the foreign bank permits its customer to engage, either directly or through a subaccount, in banking activities) and the sources and beneficial owners of funds or other assets in the payable-through account.

(2)! determine whether the foreign bank maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the correspondent account under review and, if so, to take reasonable steps to obtain information to assess and mitigate the money laundering risks associated with such accounts, including, as appropriate, the identity of those other foreign banks; and

(3)! if the foreign bank’s shares are not publicly traded, determine the identity of each owner and the nature and extent of each owner’s ownership interest. We understand that for purposes of determining a private foreign bank’s ownership, an “owner” is any person who directly or indirectly owns, controls or has the power to vote 10 percent or more of any class of securities of a foreign bank. We also understand that members of the same family shall be considered to be one person.

Rules: 31 C.F.R. §§ 103.175, 103.176.

c.! Special Procedures When Due Diligence or Enhanced Due Diligence Cannot Be Performed

In the event there are circumstances in which we cannot perform appropriate due diligence with respect to a correspondent account, we will determine, at a minimum, whether to refuse to open the account, suspend transaction activity, file a SAR-SF, close the correspondent account and/or take other appropriate action.

Rules: 31 C.F.R. §§ 103.175, 103.176.

9. Due Diligence and Enhanced Due Diligence Requirements for Private Banking Accounts/Senior Foreign Political Figures Our firm currently does not maintain or open foreign banking accounts.

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We will review our accounts to determine whether we offer any private banking accounts and we will conduct due diligence on such accounts. This due diligence will include, at least, (1) ascertaining the identity of all nominal holders and holders of any beneficial ownership interest in the account (including information on those holders' lines of business and sources of wealth); (2) ascertaining the source of funds deposited into the account; (3) ascertaining whether any such holder may be a senior foreign political figure; and (4) detecting and reporting, in accordance with applicable laws and regulations, any known or suspected money laundering, or use of the proceeds of foreign corruption.

We will review public information, including information available in Internet databases, to determine whether any private banking account holders are senior foreign political figures. If we discover information indicating that a particular private banking account holder may be a senior foreign political figure, and upon taking additional reasonable steps to confirm this information, we determine that the individual is, in fact, a senior foreign political figure, we will conduct additional enhanced due diligence to detect and report transactions that may involve money laundering or the proceeds of foreign corruption.

In so doing, we will consider the risks that the funds in the account may be the proceeds of foreign corruption by determining the purpose and use of the private banking account, location of the account holder(s), source of funds in the account, type of transactions conducted through the account and jurisdictions involved in such transactions. The degree of scrutiny we will apply will depend on various risk factors, including, but not limited to, whether the jurisdiction the senior foreign political figure is from is one in which current or former political figures have been implicated in corruption and the length of time that a former political figure was in office. Our enhanced due diligence might include, depending on the risk factors, probing the account holder's employment history, scrutinizing the account holder's source(s) of funds, and monitoring transactions to the extent necessary to detect and report proceeds of foreign corruption, and reviewing monies coming from government, government controlled or government enterprise accounts (beyond salary amounts).

If we do not find information indicating that a private banking account holder is a senior foreign political figure, and the account holder states that he or she is not a senior foreign political figure, then we may make an assessment if a higher risk for money laundering, nevertheless, exists independent of the classification. If a higher risk is apparent, we will consider additional due diligence measures such as

In either case, if due diligence (or the required enhanced due diligence, if the account holder is a senior foreign political figure) cannot be performed adequately, we will, after consultation with the firm's AML Compliance Person and, as appropriate, not open the account, suspend the transaction activity, file a SAR-SF or close the account.

We do not open or maintain private banking accounts.

Rules: 31 C.F.R. §§ 103.175, 103.178.Resource: Guidance on Enhanced Scrutiny for Transactions that May Involve the Proceeds of Foreign Official Corruption.

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10. Compliance with FinCEN’s Issuance of Special Measures Against Foreign Jurisdictions, Financial Institutions or International Transactions of Primary Money Laundering ConcernSee Section 311 – Special Measures.

We do not maintain any accounts (including correspondent accounts) with any foreign jurisdiction or financial institution. However, if FinCEN issues a final rule imposing a special measure against one or more foreign jurisdictions or financial institutions, classes of international transactions or types of accounts deeming them to be of primary money laundering concern, we understand that we must read FinCEN’s final rule and follow any prescriptions or prohibitions contained in that rule.

If FinCEN issues a final rule imposing a special measure against one or more foreign jurisdictions or financial institutions, classes of international transactions or types of accounts deeming them to be of primary money laundering concern, we understand that we must read FinCEN’s final rule and follow any prescriptions or prohibitions contained in that rule. For example, if the final rule deems a certain bank and its subsidiaries (Specified Bank) to be of primary money laundering concerns, a special measure may be a prohibition from opening or maintaining a correspondent account in the United States for, or on behalf of, the Specified Banks. In that case, we will take the following steps:

(1)! We will review our account records, including correspondent account records, to ensure that our accountholders and correspondent accountholders maintain no accounts directly for, or on behalf of, the Specified Banks; and

(2)! We will apply due diligence procedures to our correspondent accounts that are reasonably designed to guard against indirect use of those accounts by the Specified Banks. Such due diligence may include:

•! Notification to Correspondent Accountholders

We will notify our correspondent accountholders that the account may not be used to provide the Specified Banks with access to us.

We will transmit the notice to our correspondent accounts, and we shall retain documentation of such notice.

•! Identification of Indirect Use

We will take reasonable steps in order to identify any indirect use of our correspondent accounts by the Specified Banks. We will determine if such indirect use is occurring from transactional records that we maintain in the normal course of business. We will take a risk-based approach when deciding what, if any, additional due diligence measures we should adopt to guard against the indirect use of correspondent accounts by the Specified Banks, based on risk factors such as the type of services offered by, and geographic locations of, their correspondents.

We understand that we have an ongoing obligation to take reasonable steps to identify all correspondent account services our correspondent accountholders may directly or indirectly provide to the Specified Banks.

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Rules: 31 C.F.R. §§ 103.186, 103.187, 103.188, 103.192, 103.193.Resources: Section 311 – Special Measures (for information on all special measures issued by FinCEN); NTM 07-17; NTM 06-41.

11. Monitoring Accounts for Suspicious ActivityWe will monitor account activity for unusual size, volume, pattern or type of transactions, taking into account risk factors and red flags that are appropriate to our business. (Red flags are identified in Section 11.b. below.) Monitoring will be conducted through the following methods: Through NETX360, the online system our clearing firm provides, we will monitor for unusual size, volume, or type of transaction. The AML Compliance Person or his or her designee will be responsible for this monitoring, will review any activity that our monitoring system detects, will determine whether any additional steps are required, will document when and how this monitoring is carried out, and will report suspicious activities to the appropriate authorities.

We will conduct the following reviews of activity that our monitoring system detects: Through NETX360, the online system our clearing firm provides, we will monitor for unusual size, volume, pattern, or type of transactions. We will document our monitoring and reviews as follows: See page 71 WSP’s. The AML Compliance Person or his or her designee will conduct an appropriate investigation and review relevant information from internal or third-party sources before a SAR-SF is filed. Relevant information can include, but not be limited to, the following:

• Customers exhibiting unusual concern about PPI’s compliance with government reporting requirements and PPI’s AML policies (particularly concerning identity, type of business, and assets), or reluctance or refusal to reveal any information concerning business activities, or furnishing unusual or suspicious identification or business documents.• Customer wishes to engage in transactions that lack business sense or apparent investment strategy, or are inconsistent with stated business or investment strategy.• Information provided by the customer that identifies a legitimate source for funds is false, misleading, or substantially incorrect.• Upon request, customer refuses to identify, or fails to indicate, any legitimate source for funds and other assets.• Customer (or a person publicly associated with the customer) has a questionable background or is the subject of news reports indicating possible criminal, civil, or regulatory violations.• Customer exhibits a lack of concern regarding risks, commissions, or other transaction costs.• Customer appears to be acting as an agent for an undisclosed principal, but declines or is reluctant, without legitimate commercial reasons, to provide information, or is otherwise evasive regarding that person or entity.• The customer has difficulty describing the nature of their business, or lacks general knowledge of same.• Customer attempts to make frequent or large deposits of currency, insists on dealing only in cash, or asks for exemptions from PPI’s policies relating to the deposit of cash.• Customer engages in transactions involving cash or cash equivalents or other monetaryinstruments that appear to be structured to avoid the $10,000 government reportingrequirements, especially if the cash or monetary instruments are in an amount just belowreporting or recording thresholds.• For no apparent reason, the customer has multiple accounts under a single name or multiple names,

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with a large number of inter-account or third-party fed funds transmittals.• The customer is from, or has accounts in, a country or territory identified as non-cooperative by the Financial Action Task Force on Money Laundering (FATF).• Customer’s account has unexplained or sudden extensive wire activity, especially in accounts that had little or no previous activity.• The customer’s account shows numerous currency or cashiers check transactions that aggregate to significant sums.• Customer’s account has a large number of funds transmittals to unrelated third partiesinconsistent with the customer’s legitimate business purpose.• Customer’s account has funds transmittals that have no apparent business purpose to or from a country identified as a money laundering risk or a bank secrecy haven.• Customer’s account indicates large or frequent funds transmittals, immediately withdrawn by check or debit card without any apparent business purpose.• The customer makes a funds deposit followed by an immediate request that the money be wired out or transferred to a third party, or to another firm, without any apparent business purpose.• The customer makes a funds deposit to purchase a long-term investment, followed shortly thereafter by a request to liquidate the position and transfer the proceeds out of the account.• Customer engages in excessive journal entries between unrelated accounts without any apparent business purpose.• Customer requests that a transaction be processed to avoid PPI’s normal documentationrequirements.• The customer, for no apparent reason, or in conjunction with other red flags, engages intransactions involving certain types of securities (such as penny stocks, Regulation S stocks, and bearer bonds) that, although legitimate, have been used in connection with fraudulent schemes and money laundering activity. (Such transactions may warrant further due diligence to ensure the legitimacy of the customer’s activity.)• The customer’s account shows an unexplained high level of account activity with very low levels of securities transactions.• Customer maintains multiple accounts, or maintains accounts in the names of family members or corporate entities, for no apparent purpose.• Customer’s account has inflows of funds or other assets well beyond the known income or resources of the customer.

Rules: 31 C.F.R. §103.19; FINRA Rule 3310(a).Resource: Final Rule Release: 67 Fed. Reg. 44048 (July 1, 2002) (“it is intended that broker-dealers, and indeed every type of financial institution to which the suspicious transaction reporting rules of 31 CFR part 103 apply, will evaluate customer activity and relationships for money laundering risks, and design a suspicious transaction monitoring program that is appropriate for the particular broker-dealer in light of such risks”).

a. Emergency Notification to Law Enforcement by Telephone In situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, we will immediately call an appropriate law enforcement authority. If a customer or company appears on OFAC’s SDN list, we will call the OFAC Hotline at (800) 540-6322. Other contact numbers we will use are: FinCEN’s Financial Institutions Hotline (866) 556-3974) (especially to report transactions relating to terrorist activity), local U.S. Attorney’s office (619) 557-5610, local FBI office (858) 499-7991and local SEC office (323) 965-3998 (to voluntarily report such violations to the SEC in addition to contacting the appropriate law

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enforcement authority). If we notify the appropriate law enforcement authority of any such activity, we must still file a timely SAR-SF.

Although we are not required to, in cases where we have filed a SAR-SF that may require immediate attention by the SEC, we may contact the SEC via the SEC SAR Alert Message Line at (202) 551-SARS (7277) to alert the SEC about the filing. We understand that calling the SEC SAR Alert Message Line does not alleviate our obligations to file a SAR-SF or notify an appropriate law enforcement authority. We will first call the OFAC Hotline at 1-800-540-6322. Other contact numbers we will use are:Financial Institutions Hotline (1-866-556-3974)Local U.S. Attorneys Office (619) 557-5610Local FBI Office (858) 565-1255Local SEC Office (323) 965-3998Other Resources: SDN List -- http://www.treasury.gov/ofac/downloads/t11sdn.pdf

Rule: 31 C.F.R. § 103.19.Resources: FinCEN’s Web site; OFAC Web page; NTM 02-21; NTM 02-47.

b. Red FlagsRed flags that signal possible money laundering or terrorist financing include, but are not limited to:

Customers – Insufficient or Suspicious Information

•! Provides unusual or suspicious identification documents that cannot be readily verified.•! Reluctant to provide complete information about nature and purpose of business, prior

banking relationships, anticipated account activity, officers and directors or business location.•! Refuses to identify a legitimate source for funds or information is false, misleading or

substantially incorrect.•! Background is questionable or differs from expectations based on business activities.•! Customer with no discernible reason for using the firm’s service.

Efforts to Avoid Reporting and Recordkeeping

•! Reluctant to provide information needed to file reports or fails to proceed with transaction.•! Tries to persuade an employee not to file required reports or not to maintain required records.•! “Structures” deposits, withdrawals or purchase of monetary instruments below a certain

amount to avoid reporting or recordkeeping requirements.•! Unusual concern with the firm’s compliance with government reporting requirements and

firm’s AML policies.

Certain Funds Transfer Activities

•! Wire transfers to/from financial secrecy havens or high-risk geographic location without an apparent business reason.

•! Many small, incoming wire transfers or deposits made using checks and money orders. Almost immediately withdrawn or wired out in manner inconsistent with customer’s business or history. May indicate a Ponzi scheme.

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•! Wire activity that is unexplained, repetitive, unusually large or shows unusual patterns or with no apparent business purpose.

Certain Deposits or Dispositions of Physical Certificates

• ! Physical certificate is titled differently than the account.• ! Physical certificate does not bear a restrictive legend, but based on history of the stock and/or

volume of shares trading, it should have such a legend.• ! Customer’s explanation of how he or she acquired the certificate does not make sense or

changes.• ! Customer deposits the certificate with a request to journal the shares to multiple accounts, or

to sell or otherwise transfer ownership of the shares.

Certain Securities Transactions

• ! Customer engages in prearranged or other non-competitive trading, including wash or cross trades of illiquid securities.

• ! Two or more accounts trade an illiquid stock suddenly and simultaneously.• ! Customer journals securities between unrelated accounts for no apparent business reason.• ! Customer has opened multiple accounts with the same beneficial owners or controlling

parties for no apparent business reason.•.! Customer transactions include a pattern of receiving stock in physical form or the incoming

transfer of shares, selling the position and wiring out proceeds.• ! Customer’s trading patterns suggest that he or she may have inside information.

Transactions Involving Penny Stock Companies

• ! Company has no business, no revenues and no product. • ! Company has experienced frequent or continuous changes in its business structure. • ! Officers or insiders of the issuer are associated with multiple penny stock issuers.• ! Company undergoes frequent material changes in business strategy or its line of business.• ! Officers or insiders of the issuer have a history of securities violations.• ! Company has not made disclosures in SEC or other regulatory filings. • ! Company has been the subject of a prior trading suspension.

Transactions Involving Insurance Products

• ! Cancels an insurance contract and directs funds to a third party.• ! Structures withdrawals of funds following deposits of insurance annuity checks signaling an

effort to avoid BSA reporting requirements.• ! Rapidly withdraws funds shortly after a deposit of a large insurance check when the purpose

of the fund withdrawal cannot be determined.• ! Cancels annuity products within the free look period which, although could be legitimate,

may signal a method of laundering funds if accompanied with other suspicious indicia.• ! Opens and closes accounts with one insurance company then reopens a new account shortly

thereafter with the same insurance company, each time with new ownership information. • ! Purchases an insurance product with no concern for investment objective or performance.

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• ! Purchases an insurance product with unknown or unverifiable sources of funds, such as cash, official checks or sequentially numbered money orders.

Activity Inconsistent With Business

• ! Transactions patterns show a sudden change inconsistent with normal activities.• ! Unusual transfers of funds or journal entries among accounts without any apparent business

purpose.• ! Maintains multiple accounts, or maintains accounts in the names of family members or

corporate entities with no apparent business or other purpose.• ! Appears to be acting as an agent for an undisclosed principal, but is reluctant to provide

information.

Other Suspicious Customer Activity

•! Unexplained high level of account activity with very low levels of securities transactions.• ! Funds deposits for purchase of a long-term investment followed shortly by a request to

liquidate the position and transfer the proceeds out of the account.• ! Law enforcement subpoenas. • ! Large numbers of securities transactions across a number of jurisdictions.• ! Buying and selling securities with no purpose or in unusual circumstances (e.g., churning at

customer’s request).

• ! Payment by third-party check or money transfer without an apparent connection to the customer.

•! Payments to third-party without apparent connection to customer.• ! No concern regarding the cost of transactions or fees (i.e., surrender fees, higher than

necessary commissions, etc.).

c. Responding to Red Flags and Suspicious ActivityWhen an employee of the firm detects any red flag, or other activity that may be suspicious, he or she will notify. When members of PPI detect any red flag, they will investigate further under the direction of Eduardo Tovar. This may include gathering additional information internally or from third-party sources, contacting the government, freezing the account, or filing a Form SAR-SF.Under the direction of the AML Compliance Person, the firm will determine whether or not and how to further investigate the matter.

12. Suspicious Transactions and BSA Reporting Rule: 31 C.F.R. §103.19.

a. Filing a SAR-SFWe will file SAR-SFs with FinCEN for any transactions (including deposits and transfers) conducted or attempted by, at or through our firm involving $5,000 or more of funds or assets (either individually or in the aggregate) where we know, suspect or have reason to suspect:

(1) the transaction involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or

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evade federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation;

(2) the transaction is designed, whether through structuring or otherwise, to evade any requirements of the BSA regulations;

(3) the transaction has no business or apparent lawful purpose or is not the sort in which the customer would normally be expected to engage, and after examining the background, possible purpose of the transaction and other facts, we know of no reasonable explanation for the transaction; or

(4) the transaction involves the use of the firm to facilitate criminal activity.

We will also file a SAR-SF and notify the appropriate law enforcement authority in situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes. In addition, although we are not required to, we may contact that SEC in cases where a SAR-SF we have filed may require immediate attention by the SEC. See Section 11 for contact numbers. We also understand that, even if we notify a regulator of a violation, unless it is specifically covered by one of the exceptions in the SAR rule, we must file a SAR-SF reporting the violation.

We may file a voluntary SAR-SF for any suspicious transaction that we believe is relevant to the possible violation of any law or regulation but that is not required to be reported by us under the SAR rule. It is our policy that all SAR-SFs will be reported regularly to the Board of Directors and appropriate senior management, with a clear reminder of the need to maintain the confidentiality of the SAR-SF.

We will report suspicious transactions by completing a SAR-SF, and we will collect and maintain supporting documentation as required by the BSA regulations. We will file a SAR-SF no later than 30 calendar days after the date of the initial detection of the facts that constitute a basis for filing a SAR-SF. If no suspect is identified on the date of initial detection, we may delay filing the SAR-SF for an additional 30 calendar days pending identification of a suspect, but in no case will the reporting be delayed more than 60 calendar days after the date of initial detection. The phrase “initial detection” does not mean the moment a transaction is highlighted for review. The 30-day (or 60-day) period begins when an appropriate review is conducted and a determination is made that the transaction under review is “suspicious” within the meaning of the SAR requirements. A review must be initiated promptly upon identification of unusual activity that warrants investigation.

We will retain copies of any SAR-SF filed and the original or business record equivalent of any supporting documentation for five years from the date of filing the SAR-SF. We will identify and maintain supporting documentation and make such information available to FinCEN, any other appropriate law enforcement agencies, federal or state securities regulators or SROs upon request.

We will not notify any person involved in the transaction that the transaction has been reported, except as permitted by the BSA regulations. We understand that anyone who is subpoenaed or required to disclose a SAR-SF or the information contained in the SAR-SF will, except where disclosure is requested by FinCEN, the SEC, or another appropriate law enforcement or regulatory agency, or an SRO registered with the SEC, decline to produce the SAR-SF or to provide any information that would disclose that a SAR-SF was prepared or filed. We will notify FinCEN of any such request and our response.

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Rules: 31 C.F.R. §103.19, FINRA Rule 3310(a).Resources: FinCEN’s Web site contains additional information, including information on the BSA E-Filing System, the SAR-SF Form (fill-in version), and the biannual SAR Activity Reviews and SAR Bulletins, which discuss trends in suspicious reporting and give helpful tips. SAR Activity Review, Issue 10 (May 2006) (documentation of decision not to file a SAR; grand jury subpoenas and suspicious activity reporting, and commencement of 30-day time period to file a SAR); FinCEN SAR Narrative Guidance Package (11/2003), FinCEN Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting (10/10/2007);NTM 02-21; NTM 02-47.

b. Currency Transaction Reports Our Firm Prohibits the receipt of currency.

Rules: 31 C.F.R.§§103.11, 103.22.Resource: BSA E-Filing System.

c. Currency and Monetary Instrument Transportation Reports Our firm prohibits both the receipt of currency or other monetary instruments that have been transported, mailed or shipped to us from outside of the United States, and the physical transportation, mailing or shipment of currency or other monetary instruments by any means other than through the postal service or by common carrier. We will file a CMIR with the Commissioner of Customs if we discover that we have received or caused or attempted to receive from outside of the U.S. currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time (on one calendar day or, if for the purposes of evading reporting requirements, on one or more days). We will also file a CMIR if we discover that we have physically transported, mailed or shipped or caused or attempted to physically transport, mail or ship by any means other than through the postal service or by common carrier currency or other monetary instruments of more than $10,000 at one time (on one calendar day or, if for the purpose of evading the reporting requirements, on one or more days). We will use the CMIR Form provided on FinCEN’s Web site.

Rules: 31 C.F.R. §§103.11, 103.23.

d. Foreign Bank and Financial Accounts ReportsWe will file a FBAR with the IRS for any financial accounts of more than $10,000 that we hold, or for which we have signature or other authority over, in a foreign country. We will use the FBAR Form provided on the IRS’s Web site.

Rule: 31 C.F.R. §103.24.Resource: FBAR Form.

e.! Monetary Instrument Purchases

We do not issue bank checks or drafts, cashier’s checks, money orders or traveler’s checks.

Rule: 31 C.F.R. § 103.29. See also 31 C.F.R. 103.22(b).

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Resources: 52 Fed. Reg. 52250 (October 17, 1994) (Final Rule Amendments to BSA Regulations Relating to Identification Required to Purchase Bank Checks and Drafts, Cashier’s Checks, Money Orders, and Traveler’s Checks).

f. Funds Transmittals of $3,000 or More Under the Travel RuleWhen we are the transmittor’s financial institution in funds of $3,000 or more, we will retain either the original or a copy (e.g., microfilm, electronic record) of the transmittal order. We will also record on the transmittal order the following information: (1) the name and address of the transmittor; (2) if the payment is ordered from an account, the account number; (3) the amount of the transmittal order; (4) the execution date of the transmittal order; and (5) the identity of the recipient’s financial institution. In addition, we will include on the transmittal order as many of the following items of information as are received with the transmittal order: (1) the name and address of the recipient; (2) the account number of the recipient; (3) any other specific identifier of the recipient; and (4) any form relating to the transmittal of funds that is completed or signed by the person placing the transmittal order.

We will also verify the identity of the person placing the transmittal order (if we are the transmitting firm), provided the transmittal order is placed in person and the transmittor is not an established customer of the firm (i.e., a customer of the firm who has not previously maintained an account with us or for whom we have not obtained and maintained a file with the customer's name, address, taxpayer identification number, or, if none, alien identification number or passport number and country of issuance). If a transmittor or recipient is conducting business in person, we will obtain: (1) the person’s name and address; (2) the type of identification reviewed and the number of the identification document (e.g., driver’s license); and (3) the person’s taxpayer identification number (e.g., Social Security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record the lack thereof. If a transmittor or recipient is not conducting business in person, we shall obtain the person’s name, address, and a copy or record of the method of payment (e.g., check or credit card transaction). In the case of transmittors only, we shall also obtain the transmittor’s taxpayer identification number (e.g., Social Security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. In the case of recipients only, we shall obtain the name and address of the person to which the transmittal was sent.

Rule: 31 C.F.R. §103.33(f) and (g).

13. AML Recordkeeping a. Responsibility for Required AML Records and SAR-SF Filing Our AML Compliance Person and his or her designee will be responsible for ensuring that AML records are maintained properly and that SAR-SFs are filed as required.

In addition, as part of our AML program, our firm will create and maintain SAR-SFs, CTRs, CMIRs, FBARs, and relevant documentation on customer identity and verification (See Section 5 above) and funds transmittals. We will maintain SAR-SFs and their accompanying documentation for at least five years. We will keep other documents according to existing BSA and other recordkeeping requirements, including certain SEC rules that require six-year retention periods (e.g., Exchange Act Rule 17a-4(a) requiring firms to preserve for a period of not less than six years, all records required to be retained by Exchange Act Rule 17a-3(a)(1)-(3), (a)(5), and (a)(21)-(22) and Exchange Act Rule

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17a-4(e)(5) requiring firms to retain for six years account record information required pursuant to Exchange Act Rule 17a-3(a)(17)).

Rules: 31 C.F.R. § 103.38, Exchange Act Rule 17a-8 (requiring registered broker-dealers subject to the Currency and Foreign Transactions Reporting Act of 1970 to comply with the BSA regulations regarding reporting, recordkeeping and record retention requirements), FINRA Rule 3310.

b. SAR-SF Maintenance and ConfidentialityWe will hold SAR-SFs and any supporting documentation confidential. We will not inform anyone outside of FinCEN, the SEC, an SRO registered with the SEC or other appropriate law enforcement or regulatory agency about a SAR-SF. We will refuse any subpoena requests for SAR-SFs or for information that would disclose that a SAR-SF has been prepared or filed and immediately notify FinCEN of any such subpoena requests that we receive. See Section 11 for contact numbers. We will segregate SAR-SF filings and copies of supporting documentation from other firm books and records to avoid disclosing SAR-SF filings. Our AML Compliance Person will handle all subpoenas or other requests for SAR-Sfs. We may share information with another financial institution about suspicious transactions in order to determine whether we will jointly file a SAR according to the provisions of Section 3.d. In cases in which we file a joint SAR for a transaction that has been handled both by us and another financial institution, both financial institutions will maintain a copy of the filed SAR.

Rules: 31 C.F.R. §103.19(e); 67 Fed. Reg. 44048, 44054 (July 1, 2002).Resources: NTM 02-47.

c. Additional RecordsWe shall retain either the original or a microfilm or other copy or reproduction of each of the following:

• A record of each extension of credit in an amount in excess of $10,000, except an extension of credit secured by an interest in real property. The record shall contain the name and address of the person to whom the extension of credit is made, the amount thereof, the nature or purpose thereof and the date thereof;

• A record of each advice, request or instruction received or given regarding any transaction resulting (or intended to result and later canceled if such a record is normally made) in the transfer of currency or other monetary instruments, funds, checks, investment securities or credit, of more than $10,000 to or from any person, account or place outside the U.S.;

• A record of each advice, request or instruction given to another financial institution (which includes broker-dealers) or other person located within or without the U.S., regarding a transaction intended to result in the transfer of funds, or of currency, other monetary instruments, checks, investment securities or credit, of more than $10,000 to a person, account or place outside the U.S.;

• Each document granting signature or trading authority over each customer's account;

• Each record described in Exchange Act Rule 17a-3(a): (1) (blotters), (2) (ledgers for assets and liabilities, income, and expense and capital accounts), (3) (ledgers for cash and margin accounts),

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(4) (securities log), (5) (ledgers for securities in transfer, dividends and interest received, and securities borrowed and loaned), (6) (order tickets), (7) (purchase and sale tickets), (8) (confirms), and (9) (identity of owners of cash and margin accounts);

• A record of each remittance or transfer of funds, or of currency, checks, other monetary instruments, investment securities or credit, of more than $10,000 to a person, account or place, outside the U.S.; and

• A record of each receipt of currency, other monetary instruments, checks or investment securities and of each transfer of funds or credit, of more than $10,000 received on any one occasion directly and not through a domestic financial institution, from any person, account or place outside the U.S.

Rules: 31 C.F.R. §§ 103.33, 103.35(b).

14. Clearing/Introducing Firm RelationshipsWe will work closely with Pershing LLC to detect money laundering. We will exchange information, records, data and exception reports as necessary to comply [with our contractual obligations and] with AML laws. Both our firm and our clearing firm have filed (and kept updated) the necessary annual certifications for such information sharing, which can be found on FinCEN’s Web site. As a general matter, we will obtain and use the following exception reports offered by our clearing firm in order to monitor customer activity: Account Services Detail Audit Report & Incoming/Outgoing Wires, Checks and ACH Report which will reviewed daily and evidenced by a stamp on each report as reviewed and we will provide our clearing firm with proper customer identification and due diligence information as required to successfully monitor customer transactions. We have discussed how each firm will apportion customer and transaction functions and how we will share information and set forth our understanding in a written document. We understand that the apportionment of functions will not relieve either of us from our independent obligation to comply with AML laws, except as specifically allowed under the BSA and its implementing regulations.

Rules: 31 CFR 103.110; FINRA Rule 3310, NASD Rule 3230.Resources: FIN-2006-G003: Frequently Asked Questions: Foreign Bank Recertifications under 31 C.F.R. § 103.77 (February 3, 2006).

15. Training ProgramsWe will develop ongoing employee training under the leadership of the AML Compliance Person and senior management. Our training will occur on at least an annual basis. It will be based on our firm’s size, its customer base, and its resources and be updated as necessary to reflect any new developments in the law.

Our training will include, at a minimum: (1) how to identify red flags and signs of money laundering that arise during the course of the employees’ duties; (2) what to do once the risk is identified (including how, when and to whom to escalate unusual customer activity or other red flags for analysis and, where appropriate, the filing of SAR-SFs); (3) what employees' roles are in the firm's compliance efforts and how to perform them; (4) the firm's record retention policy; and (5) the disciplinary consequences (including civil and criminal penalties) for non-compliance with the BSA.

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We will develop training in our firm, or contract for it. Delivery of the training may include educational pamphlets, videos, intranet systems, in-person lectures and explanatory memos. Currently our training program is: FINRA webcast on Anti Money Laundering. We will maintain records to show the persons trained, the dates of training and the subject matter of their training.

We will review our operations to see if certain employees, such as those in compliance, margin and corporate security, require specialized additional training. Our written procedures will be updated to reflect any such changes.

Rule: FINRA Rule 3310.Resources: See NTM 02-21, FinCEN SAR Narrative Guidance Package (11/2003), FinCEN Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting (10/10/2007).

16. Program to Independently Test AML Program

a. StaffingEduardo Tovar is PPI’s AML officer. However, to avoid conflicts that could arise from tests being conducted by the person who reports to the person whose activities are being monitored, testing of PPI’s AML program will be performed by Daniel Barba. Because of PPI’s size and flat organizational structure, and because Barba and Tovar are the only senior management with no supervisory staff above them, there is a lack of personnel that qualify as independent under rule 3011(c), and there are limited financial resources to hire in outside independent testers. PPI therefore exercises the Limited Size and Resources Exception, and will do its testing internally.

Evaluation and ReportingAfter completing testing, Daniel Barba will file a report of the findings. We will address each resulting recommendation.

Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.Resource: NTM 06-07.

b.! Evaluation and Reporting

After we have completed the independent testing, staff will report its findings to senior management. We will promptly address each of the resulting recommendations and keep a record of how each noted deficiency was resolved.

Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.

17. Monitoring Employee Conduct and AccountsWe will subject employee accounts to the same AML procedures as customer accounts, under the supervision of the AML Compliance Person. We will also review the AML performance of supervisors, as part of their annual performance review. The AML Compliance Person’s accounts will be reviewed by Eduardo Tovar or Daniel Barba.

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Rules: 31 C.F.R. §§ 103.19, 103.120; FINRA Rule 3310.

18. Confidential Reporting of AML Non-ComplianceEmployees will promptly report any potential violations of the firm’s AML compliance program to the AML Compliance Person, unless the violations implicate the AML Compliance Person, in which case the employee shall report to Daniel Barba. Such reports will be confidential, and the employee will suffer no retaliation for making them.

Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.

19. Additional Risk AreasThe firm has reviewed all areas of its business to identify potential money laundering risks that may not be covered in the procedures described above; we found none.

20. Senior Manager ApprovalI have approved this AML program as reasonably designed to achieve and monitor our firm’s ongoing compliance with the requirements of the Bank Secrecy Act and the implementing regulations under it.

Daniel BarbaPresident and PrincipalMay, 2010

Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.

CONTINUING EDUCATIONRule 1120; NTM 97-35, 98-59, 02-77; 04-22; MSRB Rule G-3

FINRA Rule 1120 prescribes requirements regarding the continuing education of certain RRs subsequent to their initial qualification and registration. The requirements consist of a Regulatory Element and a Firm Element, as set forth below.

Contact Person:Monitoring Compliance with Regulatory ElementEduardo Tovar at the home office will conduct continuing education with and for RRs. Mr. Tovar is our designated contact person and executive representative with FINRA. He will promptly notify RRs if they are required by regulatory agencies to complete computer-based training programs, and will track their progress to ensure they sit for and complete this training. Eduardo Tovar ensures that designated RRs are in compliance, or their registration becomes inactive.

Mr. Tovar will administer our continuing education programs in accordance with our annual evaluation and written plan, and will maintain records that document the content of the programs and completion of the programs by RRs.

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Firm ElementPersons Subject to the Firm ElementThe requirements apply to any RR who has direct contact with customers in the conduct of PPI’s securities sales, trading, and investment banking activities, and to RRs’ immediate supervisors. “Customer” shall mean any natural person and any organization, other than another broker or dealer, executing securities transactions with, or through, or receiving investment banking services.

Standards for the Firm ElementPPI must maintain a continuing and current education program for its RRs to enhance their securities knowledge, skill, and professionalism. At a minimum, PPI will at least annually evaluate and prioritize its training needs and develop a written needs analysis, and a written training plan. Our plan will take into consideration PPI’s size, organizational structure, and scope of business activities, as well as regulatory developments and the performance of RRs in the Regulatory Element. If our analysis shows a need for supervisory training for persons with supervisory responsibilities, such training must be included in our training plan.

Minimum Standards for Training Programs – Programs used to implement our training plan must be appropriate for our business and, at a minimum, must cover the following matters concerning securities products, services, and strategies we offer:

• General investment features and associated risk factors;

• Suitability and sales practice considerations;

• Applicable regulatory requirements. Administration of Continuing Education Program – We will administer our continuing education programs in accordance with our annual evaluation and written plan, and will maintain records that document the content of the programs and completion of the programs by RRs.

Participation in the Firm ElementRRs included in our plan must take all appropriate and reasonable steps to participate in continuing education programs as required by us.Specific Training RequirementsWe may be required by FINRA, individually or as part of a larger group, to provide specific training to our RRs in such areas that FINRA deems appropriate. Such a requirement may stipulate the class of RRs for which it is applicable, the time period in which the requirement must be satisfied, and, where appropriate, the actual training content.

ALL SECURITIES-RELATED ACTIVITIESBest ExecutionRule 2320; NTM 97-57, 00-42, 01-22; MSRB Rules G-17 and G-18

In any transaction for or with a customer, PPI uses reasonable diligence to ascertain the best market for a security, and to buy or sell in such market so that the price to the customer is as favorable as possible. It is our obligation to conduct regular and rigorous reviews of our systems and procedures to

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ensure that they are designed to obtain for our customers’ orders the most favorable terms reasonably available under the circumstances. Factors to consider include:

• volatility • relative liquidity• pressure on communications • size and type of transaction

“Facts and circumstances” are a necessary component in analyzing best execution: technological developments and changes to market structure must be considered when assessing reasonable diligence and best execution in general. We will therefore periodically examine and, if needed, modify our practices in light of market and technology changes.

The regular and rigorous examination of procedures requirement substitutes for having to analyze certain order routing decisions on an order-by-order basis; such analysis is impracticable. As an introducing broker/dealer, we route orders to our clearing agent, Pershing, for execution on an automated, non-discretionary basis; we nonetheless have an obligation to ensure that our customer orders are executed in a manner consistent with the duty of best execution.

We rely on Pershing to conduct regular and rigorous review of its execution quality, and the statistical results and rationale of their review are fully disclosed to us as the introducing firm. Pershing’s “Execution Quality Scorecard” is e-mailed quarterly. Eduardo Tovar is responsible for conducting our review of systems and procedures; he reviews Pershing’s best execution report and includes evidence of this review in an electronic blotter file stored at the home office. This review is done to ensure that their review is thorough, and considers the execution quality of a broad range of market centers, including those in the execution of options orders.

Customer Funds & Securities UseRule 2330; MSRB Rule G-25

No associate of PPI shall make improper use of a customer's securities or funds.

In the conduct of its business, PPI shall adhere to the provisions of SEC Rule 15c3-3 with respect to obtaining possession and control of securities, and the maintenance of appropriate cash reserves.

RRs may not lend, either to themselves or to others, securities carried for the account of any customer that are eligible to be pledged or loaned unless the RR has first obtained from the customer a written authorization permitting the lending of such securities.

Designated Securities/Penny StocksSEC Rules 15(g)-(9); NTM 92-38, 93-81, 96-6, 97-6

A “penny stock” generally sells for less than $5 a share. Penny stocks are highly speculative and risky, and notoriously hard to track and predict. PPI discourages its RRs from recommending or trading penny stocks.

Discretionary AccountsRules 2510, 3110(c)(3); MSRB Rule G-19

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Discretionary accounts are those in which clients grant Registered Representatives authorization to purchase or sell securities on their behalf. PPI’s policy generally discourages discretionary accounts; exceptions may be made in certain limited circumstances. Certain accounts of Registered Investment Advisors (RIAs) are such an exception. For allowed discretionary accounts, in addition to acquiring and documenting required new account information and obtaining new account approval, PPI will:

• obtain the signature of each person authorized to exercise discretion in the account;• record the date such discretion is granted; and • in connection with exempted securities, record the age or approximate age of the customer.

Fair PricingRule 2440; IM-2440; MSRB Rules G-18 and G-30; NTM 92-16, 93-81, 96-6, 97-6

A customer shall not be charged more than a fair commission or service charge, taking into consideration all relevant circumstances. To provide direction in this area, FINRA adopted its 5% Policy. This policy applies to all transactions for which Private Portfolio, Inc. acts as agent and charges its customers a commission. The 5% policy therefore clearly applies to commissions charged in agency transactions, and is not limited to markups in principal transactions. Regardless of product or type of transaction, all customers shall receive fair prices and are not to be charged unfair or unreasonable commissions.

Disclosure does not justify a commission or markup that is unfair or excessive in view of all or other relevant circumstances. Other relevant factors include the price of the security and the amount of money involved in the transaction. We will pay particular attention to commission charges on agency transactions that involve low-priced securities, including consideration of minimum commission charges.

Markups/Markdowns – Rule 3010(b)(1)

Article III, Section 4 of the Rules of Fair Practices requires PPI to purchase from or sell to a customer at a “fair” price when trading from its own account, taking into consideration all relevant factors. Although the percentage of markup or markdown from the prevailing market price is a significant factor in determining the fairness of pricing, that percentage must be viewed in light of the:

• Type of security involved• Availability of the security in the market• Market price of the security • Amount of money involved in the transaction• Disclosure• Pattern of markups or markdowns• Nature of our business

Since 1943, FINRA has adopted a “5%” policy that serves as a guideline, not as a rule, and states that markups and markdowns should generally not exceed five percent of the prevailing market price for securities. Markups or markdowns exceeding five percent are considered excessive and in violation of Article III unless there is proof of unique circumstances that render the markup or markdown charged

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to be “fair”. In such a case, PPI must be prepared to justify its reasons for the higher markup or markdown with adequate documentation.

Eduardo Tovar or Daniel Barba will assure compliance by reviewing the daily trade blotter for inappropriate markups/markdowns at the end of each day–and initialing as proof of review.

Please Note: the 5% Policy applies equally to commissions on agency trades and markups or markdowns on principal transactions. Agency commission charges are to be fair and reasonable (they should not exceed 5% of total transaction amount, unless PPI can document factors that justify a higher amount) and must comply with Article III Section 4 of the FINRA Rules of Fair Practice. FINRA is an aggressive enforcer in ensuring fair dealing with customers.

Investor EducationRule 2280 [proposed FINRA Rule 2267]; NTM 08-26

Under the proposed rule, PPI (which is an introducing firm that is party to a clearing agreement with a firm member that complies with the rule) is not subject to the requirement to provide customers with the following information in writing annually:

• the “Public Disclosure Program” hotline number;

• the FINRA Regulation Web site address; and

• a statement regarding the availability of an investor brochure that includes information describing the “Public Disclosure Program”[aka “BrokerCheck”].

Approval of Account Name or Designation Changes for OrdersRule 3110(d)

Before any customer order is executed, there must be placed upon the memorandum for each transaction, the name or designation of the account (or accounts) for which the order is to be executed. No change in account name(s) (including related accounts) or designation(s) (including error accounts) will be made unless the change has been authorized by Eduardo Tovar. Prior to giving his approval of the account designation change, Mr. Tovar must be personally informed of the essential facts relative thereto, and indicate his approval of such change in writing on the order or other similar record. The essential facts relied upon by Mr. Tovar must be documented in writing and preserved in an easily accessible place for at least three years.

New Account Review and ApprovalRule 2310(a)&(b), 3110(c); 3050; SEC Rule 17a-3; MSRB Rule G-8

No account will be opened until it has been approved by Eduardo Tovar or Daniel Barba. Before the approval process begins, RRs should personally inform Eduardo Tovar of essential facts about the customer, and the nature of the proposed account; Eduardo Tovar will indicate approval in writing on the new account form.

Opening New Accounts

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Rule 3110, SEC Rules 17a-3, 17a-4

Registered Representatives must know their customers. RRs must learn the essential facts relative to every securities or option account opened and serviced by them. This information must be collected from the customer for whom the account is being opened. Your responsibility is ongoing, and begins with preparation of new account or option forms. Any subsequent change in the usual pattern of a client’s trades should be brought to the attention of Eduardo Tovar.

The new account form and additional terms agreement have been updated to help us meet the new Books and Records requirements. Some points to remember:

• When opening foreign accounts, we need to know the beneficial owner of the account, including proof of citizenship;

• Registered persons are required to obtain the following customer information: tax status (if US citizens), net worth, income, whether customer is employed by a FINRA member firm;

• If various accounts use the same P.O. Box number or foreign address, a principal must ensure that clients receive correspondence;

• When there is a customer account change of address, our clearing firm mails notification to the old address.

Any change in clients’ information must be noted on New Customer Account Forms. RRs need to be aware of changes, and make sure the home office is also made aware so that files may be updated promptly. Be aware also of changes in client employment: look out for possible sales of restricted or controlled stock, and determine if clients’ employment subjects them to prior written consent rules and FINRA Rules of Free-Riding and Withholding.

When completing new account or options forms, RRs should note clients’ stated investment objectives and be aware that, in the event of client litigation or investigation by a regulatory agency, the quality of transactions in the account will be evaluated in light of clients’ given investment objectives and known financial resources. Clients have very different objectives, based on their financial status, market sophistication, age, income, and number of dependents. Be sure you–and your clients–are clear on what their stated objectives are, and that they are kept up to date on these forms.

Registered Representatives must not assume that the income and assets of a client’s spouse are fully available to the client for purposes of the account. The assumption may be incorrect and lead to inappropriate recommendations. A client’s spouse may have no interest in the account and no financial obligation for any losses that might occur.

Accounts must not be opened for customers in any name other than their own.

Order Audit Trail System (OATS) RequirementsRule 6953

Order audit trail reporting requirements govern what is known as the Order Audit Trail System. Under these rules, PPI is required to have a means for electronically capturing and reporting to OATS specific data elements related to the handling and execution of orders, including recording all times of these events in hours, minutes, and seconds, and to synchronize our business clocks.

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Clock Synchronization: All PPI brokers must use computers that automatically synchronize with the NIST.gov internet time server so that they have the precise time, synchronized with the home office.

Review of OATS Website: PPI uses Pershing, our clearing firm, as our OATS reporting agent. However, we remain ultimately responsible for all supervisory activities, and therefore must periodically review and assess the effectiveness of our reporting agent’s activities.

Review of OATS Data: PPI principals assigned to perform OATS supervision are Eduardo Tovar and Daniel Barba, both principals and qualified and with the authority to supervise. As required, both supervising principals do have valid User IDs and passwords to access our data on the OATS Web Interface, and to review logs and notes. As recommended, such review will be done on a weekly basis. These reviews will be evidenced by entering the data viewed into a log file named OATS_log, and saved. If any action is needed, it will also be entered in this log.Opening Accounts and Transactions Involving Persons Associated with Other Broker/DealersRule 3050

Eduardo Tovar will determine if a transaction involving purchase or sale of a security for the personal account of a person associated with Private Portfolio, Inc., will affect the interests of PPI. Before opening an account or initiating a personal securities account with another member firm of FINRA, RRs must follow these procedures:

• Registered Representatives must notify the other member firm in writing of their association with Private Portfolio, Inc. and advise Eduardo Tovar of the existence of the account;

• The other member firm must notify Private Portfolio, Inc. in writing of the Registered Representative’s intention to open an account or to effect a transaction;

• Private Portfolio, Inc. requires that the other member firm furnish duplicate copies of all confirmations, transactions, and statements conducted through the other member firm. These documents are reviewed when received, then added to our chronological file, and a copy saved in the RR’s file.

• Registered Representatives must also inform PPI if their association is with a non-FINRA member, which would include a domestic or foreign investment advisor, bank, or other financial institution.

Order Tickets/ConfirmationsRules 2320, 2830; IM 2230; NTM 95-2, 98-3, 01-80; SEC Rules 10b-10, 17a-3; MSRB Rule G-15

Order tickets - Eduardo Tovar conducts a daily trade blotter review to monitor trading and order status and all other account activity. This blotter shows all trade details, such as time of execution, price, source and amount of any other remuneration received or to be received in connection with the transaction, etc. Evidence of this review is kept on an activity log review, initialed and filed at the home office.

Confirmations - Pershing mails confirmations directly to customers. Copies of confirmations are available for all securities transactions for the accounts of customers on NETX360, where they are

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available to PPI. (Some clients who use the online service elect not to receive hard copies on confirmations and, sometimes on statements.) Information on confirmations includes the following:

• The capacity in which PPI is acting.• Disclosure if the transaction is of a dual agency nature.• Disclosure of any additional remuneration received in connection with customer

transactions.• Appropriate yield and call information on transactions in debt securities.

In addition to requirements for disclosure on written confirmations of transactions, if the transaction involves the purchase of shares of an investment company that imposes a deferred sales charge on redemption, such written confirmation shall also include the following legend: “On selling your shares, you may pay a sales charge. For the charge and other fees, see the prospectus.” The legend shall appear on the confirmation in at least 8-point type.

Parking of SecuritiesRule 2110; SEC Rules 10b-5, 15c3-1

Parking securities and maintaining fictitious accounts– that is, holding or hiding securities in someone else’s or a fictitious account– is misleading, and is strictly prohibited.

Periodic Customer Account ReviewRule 3010(c); MSRB Rule G-27(c)

Customer accounts will be examined periodically to check for and correct possible irregularities or abuses. While reviewing monthly statements, Eduardo Tovar or Daniel Barba routinely look for such things as apparent excessive activity, heavy concentration or abnormally large commitments in low-priced speculative securities, short-term trading in accounts that normally do not have such activity, switching or short-term transactions in mutual fund shares, sales of such shares just under the breakpoint (either in single transactions or in a series of transactions over a short period of time), and habitual late payments for purchases. The inside covers of the CD boxes the statements are stored in are dated and signed to evidence this review.

Prohibition Against GuaranteesRule 2330(e); NTM 03-2; MSRB Rule G-25(b)

RRs are prohibited against warranting or guaranteeing any customer against loss in connection with any securities transaction or in any securities account of the customer, or that any company or issuer will meet its promises or obligations.

Research AnalystsRule 1050, 2711; NTM 03-4, 04-184

At this time, Private Portfolio, Inc. has no research analysts.

Restricted/Control SecuritiesSEC Rule 144

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Restricted Securities are issued privately by the company, without the benefit of a registration statement. Under Rule 144, before restricted securities can be sold, they are subject to a holding period.

Control stock is stock held by a person who directly or indirectly controls the management of the issuing company. The right of the owner or a pledge to sell control stock is limited by provisions in the Securities and Exchange Acts.

Transacting this type of business is a long process. PPI’s RR must ask the issuing company for the appropriate paperwork that is required to lift the restriction. The home office submits this paperwork to our clearing agent, Pershing. Pershing goes through the process that lifts restrictions so shares or bonds are sellable after the holding period (which varies from security to security). There are many differences and interpretations, but in general, RRs should closely consider the security at hand, the individual circumstances surrounding that security, the holder of that security, and suitability for the client. RRs who wish to get involved with Restricted and Control securities need to get information and advice from the home office before doing so. Securities Transactions for Personal and Family-Related AccountsRule 2110; IM 2110-1

In dealing with transactions for personal and family-related accounts, RRs and principals of PPI will abide by rule 210, which states:

“A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.” SuitabilityRules 2110, 2310, 3110(a); 2720(k); 2810(b)(2); 2844; 2860(b)(19); NTM 96-86; MSRB Rule G-19

FINRA Rules of Fair Practice require that all securities recommended to clients to purchase or to sell must be suitable, given clients’ financial circumstances, needs, investment objectives, age, and other security holdings.

Suitability (investment objectives and risk tolerance) is determined by taking into account all information clients furnish, reasonable inquiry, and consideration of any information otherwise available to the Registered Representative regarding clients’ incomes, assets (including life insurance), family responsibilities, health, age, education, experience in investments, and investment objectives. Eduardo Tovar and the Registered Representative are both responsible for suitability of investments, and must sign as evidence of approval.

It is especially important, therefore, that all New Account Application information be filled out completely and kept up to date so that we obtain a clear overview of each client’s financial position and wants. All New Account Applications will be reviewed by Daniel Barba and/or Eduardo Tovar to make sure all necessary information appears, but it is RRs’ responsibility to fill out the forms and make sure all required fields and signatures are obtained, and that clients’ information is current.

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RRs must never rely on customers’ net worth alone to determine whether a particular product is suitable. Note, especially, that suitability profiles change. Older investors will have different needs than they once did, and RRs will need to be aware of proper asset allocation, liquidity demand, and longevity needs, and will need to watch out for changing needs. RRs are prohibited from recommending transactions that are not based on clients’ stated investment objectives and risk tolerance.

Products vary widely in risk. Some products are deemed generally unsuitable (for instance, RRs are always prohibited from ever recommending so-called “penny stocks” for any of their clients). Call the home office for advice about product availability, characteristics, and for whom they may be suitable.

Supervision of Suitability

Eduardo Tovar and Daniel Barba are responsible for supervising compliance with suitability requirements. They will review new accounts to assure that given information about customers’ financial status, tax status, and risk exposure is complete and checked by the customer, and appears to reasonably concur with stated investment objectives. Any changes made to clients’ investment objectives and risk exposure statements will be printed on clients’ statements so they can see or correct changes made.

Compliance with suitability requirements will be monitored by a daily review of trades by Eduardo Tovar or Daniel Barba. Part of the review will include a simultaneous comparison of what the customer is purchasing and what the customer’s stated investment objectives and risk tolerance are, to check for appropriateness. Reviewers will evidence this supervision by initialing the daily trade log.

In addition, either Daniel Barba or Eduardo Tovar will undertake an annual review to verify that clients’ positions truly reflect the risk exposure and investment objectives clients noted on their New Account Forms. We will compare clients’ holdings on Pershing’s NETX360 with clients’ expressed risk exposure and investment objectives. As record of such analysis, reviewers will sign and attach a document stating that the review was done, by whom, and date of completion.

Third-Party AccountsSEC Rule 17a-4(b)(6)

Eduardo Tovar must approve and keep copies of all powers of attorney and other evidence of the granting of any discretionary authority given in respect of any account in appropriate customers’ files in the home office.

Trade Review SEC Rules 10b-5 FIPS System, 15c 1-7; Rules 2110, 2120, 2310, 3010; IM 2110-1; NTM 04-30; MSRB Rule G-27(c)

Eduardo Tovar, a registered principal, reviews a daily trade blotter and keeps a log, initialed daily as evidence of this review, and stored at the home office. This daily trade blotter is a true reflection of trades, and includes each purchase and sale of securities conducted through Pershing.

Customer accounts are examined periodically to check for and correct possible irregularities or mistakes. Eduardo Tovar or Daniel Barba routinely look for such anomalies as apparent excessive activity, heavy concentration or abnormally large commitments in low-priced speculative securities,

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short-term trading in accounts that normally do not have such activity, switching or short-term transactions in mutual fund shares, sales of such shares just under the breakpoint, and habitual late payments for purchases.

Registered Representatives are reminded to act at all times in accordance with sound investment principles, good business practices, the highest ethical standards, and compliance with the rules and regulations of all governing and/or regulatory authorities. Some prohibited and unethical practices that you are further warned against: Churning - RRs are prohibited from making recommendations to clients for transactions that are excessive in frequency or size or are otherwise not appropriate for the client’s financial condition or investment objectives (called “churning”).

Unauthorized Trading - Unless we have written permission on file, Private Portfolio, Inc. will not allow a Registered Representative to place a trade entered by a client’s spouse or other family members.

Unacceptable Accounts/Accounts with Limitations:

Minors - In most states, an individual now has to be eighteen (18) to enter into a binding contract. If Registered Representatives accept orders from customers under eighteen years of age, the customers may repudiate such transactions, at will, during their minority or within a reasonable time after reaching their majority. It is against the policy of Private Portfolio, Inc. to open an account in the name of a minor alone.

Incompetents - Persons legally adjudged to be insane, or otherwise mentally incompetent, have no legal capacity to contract. Such an account may only be opened through a duly-appointed person, and created under an appropriate court order, a copy of which must be obtained for review and approval by principals at the home office.

Fiduciaries - Private Portfolio, Inc. will not open an account for fiduciaries (administrators, executors, trustees, guardians, etc.) unless they obtain a copy of the document that creates the fiduciary’s relationship. Such documents will be strictly interpreted, and unless they contain specific permission, such accounts will not be permitted to trade on margin. In addition, option trading is not permitted unless the instrument contains a provision that specifically allows such activity.

Transactions Involving FINRA and AMEX EmployeesRule 3090

Accounts of Employees of the Exchange, Member Organizations (or certain financial organizations) We can only open accounts for employees of other member organizations, banks, trust companies, insurance companies, or other firms in the securities business, if we are in receipt of written consent from the customer’s employer.

As a FINRA member, if PPI were ever to carry brokerage accounts for FINRA, NASDAQ, or American Stock Exchange employees, we would need to promptly implement employees’ instructions calling for duplicate statements to be provided to FINRA. FINRA Rule 3090(a) provides that “when a member has actual notice that an Association or American Stock Exchange employee

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has a financial interest in, or controls trading in, an account, the member shall promptly obtain and implement an instruction from the employee directing that duplicate account statements be provided by the member to FINRA.” If this situation were ever to occur, PPI will comply.

MUNICIPAL SECURITIESMunicipal Securities Rule-making BoardAn annual fee will be paid to the Board by Private Portfolio, Inc. with respect to each fiscal year-end of the Board in which the firm conducts a municipal securities business. The firm will receive an invoice each year in the month of September, and will pay its annual fee no later than October 31st of each year.

Municipal Securities PrincipalDaniel Barba is the qualified Municipal Securities Principal, and will review the following:

• Each municipal security transaction (to be initialed as evidence of approval);

• Customer complaints involving municipal securities;

• All correspondence regarding municipal securities;

• All customer accounts to detect irregularities and abuses.

Rule BookMSRB Rule G-29The firm will maintain a copy of the updated MSRB Rule Book, available at: MSRB 2010 Rule Book. The most up-to-date version of MSRB's rules is posted at: http://www.msrb.org.

Financial Advisor ActivitiesMSRB Rule G-23Not applicable. (The purpose and intent of this rule is to establish ethical standards and disclosure requirements for brokers, dealers, and municipal securities dealers who act as financial advisors to issuers of municipal securities.) Private Portfolio does not engage in this type of business.

Underwriting Official Statements MSRB Rule G-36Not applicable. (Each broker, dealer or municipal securities dealer that acts as an underwriter in a primary offering of municipal securities subject to Securities Exchange Act rule 15c2-12 shall deliver the official statements, and advance refunding documents to the Board or its designee.) Private Portfolio does not engage in this type of business.

Underwriting Material EventsSEC Rule 15c2-12(c)Not applicable. (The firm is responsible under SEC and MSRB rules with respect to municipal securities. Securities Exchange Act (SEA) Rule 15c2-12(b)(5) requires an underwriter to make a reasonable determination that the municipal issuer or obligated person has undertaken in writing to provide the MSRB continuing disclosure information, including annual financial information and

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information about events with respect to the issuer’s securities as stated in paragraphs (b)(5)(i)(C) and (D) and paragraph (d)(2)(ii)(B), commonly known as “material events notifications.”) Private Portfolio does not engage in this type of business.

Underwriting transaction assessments payable to MSRBMSRB Rule A-13Not applicable. Private Portfolio does not engage in this type of business.

Political ContributionsMSRB Rules G-37 and G-38; NTM 96-54, 99-14Members are required to submit one of, Form G-37, G-37x and G-38t to the MSRB if any one of the following occurred during the reporting period: • reportable political contributions to issuer officials or payments to political parties were made; • the dealer engaged in municipal securities business; • the dealer used consultants to obtain or retain municipal securities business;• contribution to bond ballot campaigns.

The firm will maintain a file with a list of political contributions. Each year Daniel Barba will request this information from Registered Representatives and employees.

Financial Consultants/ Payment for solicitation of municipal securities businessMSRB Rule G-38Not applicable. Subject to section (c) of this rule, no broker, dealer or municipal securities dealer may provide or agree to provide, directly or indirectly, payment to any person who is not an affiliated person of the broker, dealer or municipal securities dealer for a solicitation of municipal securities business on behalf of such broker, dealer or municipal securities dealer. Private Portfolio does not engage in this type of business.

Sales during underwriting period/ New issue syndicate practicesMSRB Rule G-11Not applicable. Private Portfolio does not engage in this type of business.

New Municipal securities issues; CUSIP Numbers and new issue requirementsMSRB Rule G-34Not applicable. Private Portfolio does not engage in this type of business.

Delivery of Investor Brochure Upon Receipt of Complaint/Customer Complaint BrochureMSRB Rule G-10Each broker, dealer and municipal securities dealer shall deliver a copy of the investor brochure to a customer promptly upon receipt of a complaint by the customer.

http://www.msrb.org/msrb1/pdfs/MSRBInvestorBrochure.pdf

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Customer Complaints3110, MSRB Rules G-18(a)(xii), G-10 and G-27(c)Private Portfolio, Inc. maintains a Municipal Securities customer complaint file as part of its books and records. It is the firm's policy to respond quickly to written customer complaints and to maintain copies of such complaints along with the written response, including all appropriate support documents as necessary.

Transaction reporting requirements; Real-Time Reporting System [RTRS]MSRB Rule G-14, NTM 03-13To meet the reporting requirements (MSRB Rule G-14), all municipal securities transactions are to be entered promptly on Pershing’s fixed income order entry system.

Use of Ownership Information obtained in Fiduciary or Agency CapacityMSRB Rule G-24No broker, dealer, or municipal securities dealer having access to confidential, non-public information that concerns ownership of municipal securities and that was obtained by such broker, dealer, or municipal securities dealer (or by a bank or other person of which the broker, dealer, or municipal securities dealer is a department or division) in the course of acting in a fiduciary or agency capacity for an issuer of municipal securities or for another broker, dealer, or municipal securities dealer, (including but not limited to: acting as a paying agent, transfer agent, registrar, or indenture trustee for an issuer or as clearing agent, safekeeping agent, or correspondent of another broker, dealer, or municipal securities dealer) shall use such information for the purpose of soliciting purchases, sales, or exchanges of municipal securities, or otherwise shall make use of such information for financial gain except with the consent of such issuer or such broker, dealer, or municipal securities dealer or the person on whose behalf the information was given.

Policies and procedures to ensure timely annual filing of Schedule I.Government Securities Act Amendments of 1993, Sections 102-107, SEC Rules 10b-5, 17a-3; NTM 95- 48, 96-66see Financial Reporting and Backup, this manual.

Registered RepresentativesMSRB Rule G-2 &3

All Registered Representatives involved in the execution of municipal securities transactions will be properly qualified in accordance with Rule G-2 & 3 of the MSRB Rule Book. These RRs must first have passed the Series 7 and/or the Series 52 tests.

It will be the Registered Representatives’ responsibility to insure that municipal bond transactions they are recommending are in accordance with the client's objectives, financial background, and ability to handle the transaction.

Sales PracticesMSRB Rule G-21, G-8, G-17 & G-32

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It is the policy of the firm to:

• Establish guidelines to make certain that principal transactions with customers are made at fair and reasonable prices.

• Adopt commission rates and service charges in amounts that are fair and reasonable. • Ensure that the best execution is obtained for agency transactions. • Promptly review the following: opening of each municipal securities account; each transaction in

municipal securities; handling of customer complaints; correspondence pertaining to the solicitation or execution of transactions in municipals securities.

• Examine all customer accounts regularly and frequently to detect irregularities and abuses.

Daniel Barba will insure that advertising is filed in accordance with Article II, Section 35 of the FINRA Rules of Fair Practice. Mr. Barba will maintain a file of all advertisements and sales literature concerning municipal securities, and he will approve them in writing prior to use.---------------------MSRB Rule G-17 requires firms to disclose, at or before the sale of municipal securities to a customer, all material facts about the transaction, including a complete description of the security and information obtained from established industry sources. These obligations apply even when a dealer is acting as an order-taker and effecting non-recommended secondary market transactions.

MSRB Rule G-32 requires any firm selling a municipal security to a customer during the primary offering disclosure period, as defined in Rule G-32(d)(ix), to provide the customer a notice explaining how to obtain the official statement (OS) from the MSRB’s Electronic Municipal Market Access (EMMA) www.emma.msrb.org and that a copy of the OS is available on request.

The Rule G-32 official statement delivery requirement applies to all firms selling municipal securities during the primary offering disclosure period, regardless of whether they participated in the underwriting syndicate or conducted transactions in the secondary market. For additional information, see Regulatory Notice 09-35 (www.finra.org/notices/09-35). FINRA’s MSRB G-32 report card can help underwriters of municipal securities analyze and improve compliance with MSRB Rule G-32 and related reporting to EMMA. For more information, see www.finra.org/reportcenter/munibonds. If at some future time Private Portfolio engages in underwriting, we will use this information; at the moment, it is not applicable.

Uniform Practice RequirementsMSRB Rule-12 Accurately prepare confirmation, disclose yield and call information, if applicable, and forward each an a timely basis. Follow comparison and verification procedures. Follow MSRB close-out procedures, if appropriate.

SuitabilityMSRB Rule G-19 (See Suitability, this manual.)

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Prompt NoticeSEC Rule 15c2-12(c)We use a system called Items for Attention that automatically notifies our RRs if certain material events occur to a holding in one of their client’s accounts. Pershing’s corporate action department’s job is to keep us informed so we can do the same for our clients.

Books and Records – Municipal TransactionsMSRB Rules G-8, G-9 & G-14

Daniel Barba has identified these as the rules to be followed by the firm to comply with its book and record requirements: SEC Rules 17a-3 and 17a-4, and MSRB Rules G-8 and G-9.

To meet reporting requirements (MSRB Rule G-14), all municipal securities transactions are to be entered promptly on Pershing’s fixed income order entry system.

FIXED INCOME SECURITIESTRACE ReportingRules 6200 - 6250; NTM 03-58; SEC Rules 10b-5 and 14(e)(3)

To meet reporting requirements, corporate bond transactions must be entered promptly using Pershing’s order entry system. We do not use the FIPS System to trade debt. If we did, we would not employ manipulative or deceptive devices in our dealings.

Repurchase/Reverse Repurchase TransactionsSEC Rules 15c3-1, 15c3-3(b)(4)

RRs are strictly prohibited from agreeing to repurchase a security from a client for their own account at some future time, for the account of the broker/dealer, or for any other account.

Bonds Borrowed and Loaned TransactionsSEC Rule 153-3(b)(3)

N/A – PPI does not engage in this business.

Adjusted TradingRule 2120; SEC Rule 10b-5

PPI will not effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive, or fraudulent device or contrivance. To protect against such happenings, we will allow only our clearing firm or our main office to change trades once they have been entered.

Municipal SecuritiesMSRB Rules G-17 -- G-28; G-30, G-37 and G-38

N/A – Private Portfolio, Inc. does not engage in this business.

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Government SecuritiesGovernment Securities Act Amendments of 1993, Sections 102-107, SEC Rules 10b-5, 17a-3; NTM 95-48, 96-66

PPI sometimes deals in Treasuries for customers.

Mortgage Backed SecuritiesPPI trades GNMAs on a riskless principal basis for our customers.

Collateralized Mortgage ObligationsN/A – PPI does not engage in this business.

OPTIONSRule 2860; IM 2860-1 and -2; Rule 2220

Options PrincipalDaniel Barba, a qualified principal, is designated as the Registered Options Principal (ROP), Senior Registered Options Principal (SROP), and Compliance Registered Options Principal (CROP), and is responsible for overseeing all options business conducted through Private Portfolio, Inc.

Qualifications of RepresentativesAny Representative who has taken and passed the Series 7 examination since May, 1977, is qualified to place both puts and calls. Any Representative who has taken and passed the Series 7 examination prior to April, 1977, will provide proof of having taken an additional examination before engaging in put and call transactions.

The qualified PPI RRs currently conducting options business are: Daniel Barba, David Marshall, John Benton, and Mateo de Sola.

Allocation ProceduresRule 2860(b)(23)(c)

Private Portfolio, Inc. will follow the allocation procedures prescribed by Pershing; this is an automated random selection method for allocating to customers of exercise notices in respect of a short position in option contracts. The assignment procedure is disclosed to all options customers in the Client Option Agreement, including an explanation of the manner of operation and the consequences of that system. Customers shall be notified on a timely basis when PPI receives an automatic exercise report.

When accepting an exercise instruction after a cut-off time, but prior to the applicable expiration date, RRs must be sure that the circumstances are extraordinary and justify the acceptance. Daniel Barba will establish a nondiscriminatory procedure for accepting exercise instructions after the cut-off date. Mr. Barba will make sure that deposit requirements for customers who are exercising options are promptly met.

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Uncovered Short Option ContractsRule 2860(b)(16)(E)

PPI prohibits uncovered short options transactions unless the home office is already in possession of the signed “Special Disclosure Document”. If applicable, we observe limits on uncovered short option procedures. These specific procedures for all accounts engaged in short uncovered options transactions are required by revisions to FINRA Rules of Fair Practice.

Pursuant to these revised rules, Private Portfolio, Inc.–which only on occasion has public customers engaged in uncovered short option transactions–will focus increased attention on the suitability of such transactions; therefore:

• All accounts must be approved by Daniel Barba as to minimum net equity requirements for such accounts;

• There must be delivery of a special disclosure statement to customers that is intended to increase their awareness of the risks entailed in uncovered short option transactions. (See p. 94, below.)

Position and Exercise limitsRule 2860(b)(3), (b)(4), IM-2860-1

Private Portfolio, Inc. will observe option exercise and position limits. When necessary, we will observe the procedures for liquidating excess options positions. Private Portfolio, Inc. will observe the prohibitions against “acting in concert” on exercise and position limits.Reporting Options PositionsRule 2860(b)(5)

When required, PPI will file an “acting in concert” report. Through Pershing, PPI will file accurate, daily reports with FINRA on accounts with positions on the same side of the market totaling 200 contracts or more of the same option class.Verification of Customer Background and Financial Information2860(b)(16)(c)

Unless the information is already included in the customer’s account agreement, background and financial information upon which the account of every new options customer that is a natural person has been approved for options trading will be sent to the customer for verification within fifteen (15) days after the customer’s account has been approved for options trading. Within fifteen (15) days after PPI becomes aware of any material change in the customer’s financial situation, a copy of the background and financial information on file will be sent to the customer for verification.

Review/Approve New Accounts2860(b)(16); IM 2860-2

Daniel Barba must approve any customer’s account for options trading before an order will be accepted for an options transaction. In approving a customer’s account for options trading, due

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diligence will be exercised to assess suitability: customer’s financial situation, investment history, investment objectives, accounts with other brokerage firms, and level of options trading experience.

If the information is not already contained in the customer’s account agreement, the background and financial information used to approve a customer’s account for options trading shall be sent to the customer for verification within fifteen (15) days after the date of approval.

The written options agreement must be obtained from the customer within fifteen (15) days after the customer’s account has been approved for options trading. All options transactions will be approved with Daniel Barba’s autograph initials.

Before approving an investment partnership account for options trading, a written document must be obtained that designates the person(s) authorized to sign each agreement on behalf of the partnership, and that states that such authority specifically includes options trading.

Delivery of Disclosure Documents2860(b)(11)Each new client should be directed to the online Options Clearing Corporation (OCC) Options Disclosure Document within the allowable time frame.

OCC Disclosure Document and other information can be found at http://www.optionsclearing.com

Private Portfolio, Inc. will deliver a special risk-disclosure document (see below) to any customer approved for uncovered options transactions.

Supervision2860(b)(20)

Daniel Barba, our Senior Registered Options Principal (SROP) and designated Compliance Registered Options Principal (CROP), will periodically examine customer accounts and propose appropriate action to secure PPI’s compliance with securities laws and regulations and Association Rules with respect to our options business. The requirement that Mr. Barba have no sales functions shall not apply since PPI has received less than $1,000,000 in gross commissions on options business the preceding two fiscal years.

Mr. Barba will review each customer’s options account on a monthly basis to determine:

! • the compatibility of options transactions with investment objectives and with the types of ! transactions for which the account was approved;! • the size and frequency of options transactions;! • commission activity in the account;! • profit or loss in the account;! • undue concentration in any options class or classes, and! • compliance with the provisions of Regulation T of the Federal Reserve Board.

Discretionary Accounts2860(b)(18)

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PPI and its RRs will exercise discretionary power with respect to trading in option contracts in a customer's account, or accept orders for option contracts for an account from a person other than the customer, only in compliance with the provisions of Rule 2510 and under these circumstances:

• the written authorization of the customer specifically authorizes options trading in the account; and

• the account has been accepted in writing by a Registered Options Principal.Daniel Barba, as SROP, will review each discretionary account to determine that there is a reasonable basis for believing that the customer was able to understand and bear the risk of the strategies or transactions proposed, and shall maintain a record of the basis for such determination.

Eduardo Tovar will approve each discretionary order on the trade blotter on the day it is entered. Each discretionary order shall be identified as discretionary on the order at the time of entry. Mr. Tovar will do frequent supervisory reviews of discretionary accounts.

We do have some cases in which a broker is also an RIA; in that case, they do not have discretion as a broker, and so charge only the minimum commission, but do charge the usual and acceptable RIA charge. Branch Office Option Business2860(b)(20)(C)

Because of PPI’s size and business model, any branch office may transact an options business since Daniel Barba, the principal supervisor of each branch office, has been qualified as a Registered Options Principal. In addition, none of PPI’s branch offices have more than three registered representatives, and all are appropriately supervised by Mr. Barba, CROP and SROP.Maintenance of Records2860(b)(17)

See “Financial Reporting/Books and Records” section of this manual for maintenance of options books and records.

Customer Grievances2860(b)(17)(A)

In the home office, PPI maintains and keeps current a separate file for all options-related complaints, in which complaints can easily be identified and retrieved. This file includes:

• identification of complainant;• date complaint was received;• identification of registered representative servicing the account;• a general description of the matter complained of; • a record of what action, if any, has been taken with respect to the complaint

Suitability2860(b)(19)

Registered Representatives shall not recommend to any customer an option transaction unless the Representative has reasonable grounds to believe, upon the basis of information furnished by the

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customer, and after reasonable inquiry from the Representative, that the recommended transaction is suitable for the customer.

Registered Representatives shall not recommend opening options transactions to any customers unless they have a reasonable basis for believing that at the time of the recommendation, the customers have such knowledge and experience in financial matters that they may be capable of evaluating the risk of the recommended transactions and are financially able to bear the risk of recommended positions.

All forms of investing involve the assumption of risks, but both the purchasing and writing of exchange-traded options involve a high degree of risk, and are not suitable for many investors.

Such transactions should be entered into only by investors who:

• Have read and understand the OCC prospectus;

• Understand the nature and extent of their rights and obligations;

• Are aware of the risks involved, including the particular risks pertaining to the business and financial condition of the issuer of the underlying stock. Investors should not purchase options unless they are able to sustain a total loss of the premium and transaction costs. They should not write options unless they are able to sustain substantial financial losses.

Registered Representatives must be familiar with the risks involved in purchasing and writing options, and be able to discuss and explain the risks with all options customers.

Options Communications With the PublicRule 2220

Registered Representatives are prohibited from making unwarranted, exaggerated, or false claims with respect to all transactions, including options. Daniel Barba will review customer accounts regularly to guard against manipulative activity.

All oral and written communications with clients about options must:

• Not contain any false statements or omit any material facts;

• Not contain promises of specific results or exaggerated, unwarranted or unreasonable claims, opinions or forecasts;

• Not discuss the tax treatment of options strategies;

• Comply with the Disclosure Document’s delivery requirements of the Securities Act of 1933, unless a current OCC Risk Disclosure Document and applicable supplements have been previously furnished. This document must accompany any material supplied to a client concerning listed options;

• Indicate that exercise and/or closing transactions are subject to commission charges;

• Indicate that interest charges are incurred where the underlying securities are purchased on margin;

• Communicate the risks involved with the investment, along with the opportunities.

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All seminar or public speaking texts that describe the trading of options must have the approval of Eduardo Tovar or Daniel Barba.

The use of options worksheets is not permitted by Private Portfolio, Inc. A worksheet is any communication that evaluates option strategy risks and rewards at various price levels. When approval for an underlying security in an option has been withdrawn, customers must be given appropriate notice before executing the customer’s options transactions in that security.

Advertising and Sales literature

Prior to use, all options advertising and sales literature shall be approved by Daniel Barba, the CROP, to ensure that it complies with applicable standards. All Advertising and Sales literature pertaining to certain Option-related materials must be filed with FINRA within ten (10) days prior to first use or publication.

In accordance with requirements of the options exchange, copies of projections or performance reports will be easily accessible. All performance reports shall be approved in writing by Eduardo Tovar. (See also general rules about advertising materials, pp. 14-18.)

FINRA Approval Requirements and Review Procedures

All options advertising and educational material must be submitted to FINRA’s Advertising Department for approval at least ten (10) days prior to use. This applies only to advertising and educational material permitted to be used prior to delivery of an options disclosure document (ODD). It is prohibited to use any material that has been disapproved or for which changes have been recommended by FINRA’s Advertising Department until the material is resubmitted and approved, or changed as required. Sales literature must state that supporting documentation for claims, comparisons, recommendations, statistics, or other technical data will be supplied upon request.

Margin/OptionsDaniel Barba will ensure that the following practices occur:

• Ascertain that all purchases of options effected by customers are promptly paid in full.

• Make certain that customers meet minimum equity requirements established for margin transactions, and that initial Regulation T margin requirements are observed.

• Determine that appropriate margin maintenance requirements are not for uncovered short option positions, option straddle positions, short options covered by exchangeable or convertible securities, and conventional option positions.

• When covering short option positions or satisfying margin requests and exercise notices, make sure to refuse securities that are restricted, unregistered, or in any other manner are not salable under the registration provisions of the Securities Act of 1933.

Regulation T - OptionsIt is important that Representatives become familiar with the basic concepts of Regulation T and the “house” rules of Private Portfolio, Inc. and Pershing LLC. Be sure to advise your customers of applicable requirements before they enter into any option transaction.

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For purposes of Regulation T, exchange-traded options have no loan value. Although such options may be purchased either in a special cash account or in a margin account, full payment must be made within the time required by Regulation T, unless the account has available funds to cover the purchase.

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Special Statement For Uncovered Options WritersThere are special risks associated with uncovered options writing that expose the investor to potentially significant loss. This type of strategy, therefore, may not be suitable for all customers who are approved for options transactions.

1. The potential loss of uncovered call writing is unlimited. The writer of an uncovered call is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price.

2. The risk of writing uncovered put options is likewise substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instruments declines below the exercise price. Such loss could be substantial if there is a significant decline in the value of the underlying instrument.

3. Uncovered options writing is thus suitable only for knowledgeable investors who understand the risks, have the financial capacity and willingness to incur potentially substantial losses, and have sufficient liquid assets to meet applicable margin requirements. (If the value of the underlying instrument moves against an uncovered writer’s options position, the investor’s broker may request significant additional margin payments.) If an investor does not make such margin payments, the broker may liquidate stock or options positions in the investor’s account, with little or no prior notice, in accordance with the investor’s margin agreement.

4. For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk is unlimited.

5. If a secondary market in options were to become unavailable, investors could not engage in closing transactions, and an options writer would remain obligated until expiration or assignment.

6. Writers of American-style options are subject to being assigned an exercise at any time after they have written the options, until the options expire. By contrast, writers of European-style options are subject to exercise assignment only during the exercise period.

NOTE: It is expected that you have read and understood the online booklet entitled CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS. In particular, your attention is directed to the chapter entitled “Risks of Buying and Writing Options”. This information can be found at: http://www.optionsclearing.com (Be aware that this statement is not intended to enumerate all risks entailed in writing uncovered options.)

Signature of Customer__________________________________ Date____________________

Signature of Registered Representative _______________________ R.R.#___________________

Signature of Registered Options Principal______________________ Date____________________

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INVESTMENT COMPANY PRODUCTSAND VARIABLE CONTRACTSProspectus Delivery’33 Act, Section 5(b)

Private Portfolio must provide delivery of a prospectus (an abbreviated form of the registration statement) prior to, or with any solicitation of, an order for open-end investment company shares. Although the format of investment company prospectuses will vary according to the type of company, some of the points it should cover are:

• The type of company (open or closed-end, management type, etc.;

• Objectives and investment policies of the company;

• Determination of offering price; (also included is information relating to sales commissions, net asset value, and redemption features, if any)

• Information relating to officers and management of the company. Management fees and contracts between the company and its advisors, including commissions paid to underwriters, are also usually discussed.

Redemption Procedures (Dealers Only)Rule 2830(j)

N/A – PPI is not an underwriter.

Verification of Customer SignaturesTo transfer a mutual fund account from another dealer to Private Portfolio, Inc., the Registered Representative must complete a Change of Dealer Request, have it signed by the customer, and present the form to Eduardo Tovar for approval. Blanket transfers can be effected by signatures from the receiving and delivering firms.

Signature GuaranteeSome funds require a guarantee of customers’ signatures. An officer of the client’s bank signs off on a signature guarantee form; this is then sent to the mutual fund so that they may proceed with proper execution.

Sales ChargesRules 2310, 2830(d)&(n); NTM 04-26

In the case of a load fund, the commission charged to the customer will be that amount stated by the fund. This varies from fund to fund.

PPI is forbidden by FINRA Rules of Fair Practice from accepting compensation from an underwriter when selling its mutual fund unless such compensation is disclosed in the fund prospectus. If the prospectus does not contain this disclosure, it should be amended or altered to provide this information.

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Reciprocal ActivityRule 2830(k); MSRB Rule G-31Anti-Reciprocal Rule

We are forbidden by FINRA’s Rules of Fair Practice to directly or indirectly favor or disfavor the distribution of any particular investment company’s shares on the basis of brokerage commissions received, or expected to be received, for execution of orders for the fund’s portfolio.

Additionally, if we are acting as an underwriter on an investment company’s shares, we may not suggest or encourage any additional remuneration or brokerage commissions for the sale of its shares, nor may we accept any such additional remuneration for distributing such shares unless as provided for in the prospectus.

Sales Literature ReviewAdvertising and sales literature for registered investment company securities must be filed with the FINRA Advertising Department within ten (10) days of first use or publication. FINRA will review the material for conformance with the standards contained in Article III, Section 35 of the FINRA Rules of Fair Practice as well as with applicable SEC regulations. There is a Service Charge for FINRA to review advertising materials. Please see the advertising and sales literature subsection under the heading General Broker/Dealer Activities in this manual for current charges.

It is PPI’s responsibility to comply with filing requirements, regardless of whether advertising and/or sales literature is prepared by the broker/dealer, the underwriter, the distributor, or another entity. (However, there is no need to file material that has been filed previously and that is used without change.)

Non-Cash CompensationRules 2820, 2830; NTM 95-56, 95-75

FINRA distinguishes between non-cash incentives that act at the point-of-sale to the investor and non-cash incentives that are earned on a delayed basis. Point-of-sale non-cash incentive programs reward an RR only if they sell a certain number of shares of a specific mutual fund or variable contract. Such programs are more likely to influence (or at the least give the perception of influencing) the salesperson to sell a specific mutual fund or variable contract or the products of only one offeror and have the potential to undermine PPI’s supervisory control over sales practices; this type of non-cash compensation is not allowed by PPI.

In contrast, a non-cash incentive earned on a delayed basis rewards an RR for the sale of any mutual fund or variable contract and only looks at total production—not production with respect to any specific mutual fund or mutual fund family, or variable contract security. Such delayed basis non-cash incentives do not influence the salesperson to recommend a specific mutual fund or variable contract or the products of only one offeror, permitting the associated person to focus on the best interests of the customer. FINRA limits non-cash sales incentives to situations where such non-cash incentives are earned on a delayed basis; such situations do not contain the potential to impact the point-of-sale recommendation by an RR to a customer or to undermine supervisory control over RRs.

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Exceptions from the non-cash compensation prohibition would permit:

• gifts of up to $100 per RR annually;

• an occasional meal, ticket to a sporting event or theater, or entertainment for RRs and their guests;

• payment or reimbursement for training and educational meetings held by a broker/dealer or a mutual fund or insurance company for RRs of broker/dealers, as long as certain conditions are met;

• in-house sales incentive programs of broker/dealers for their own RRs;

• sales incentive programs of mutual funds and insurance companies for the associated persons of an affiliated broker/dealer; and

• contributions by any non-member company or other member to a broker/dealer's permissible in-house sales incentive program.

Mutual Funds & Unit Investment TrustsReview of Customer AccountsNTM 02-85; 04-30

Eduardo Tovar will be responsible for maintenance and supervision of all books and records, and for Registered Representatives’ sales activities in Mutual Funds securities transactions. He has the day-to-day responsibility for monitoring RRs’ compliance activities. In his daily review of Mutual Funds transactions on an account activity and sales blotter, Mr. Tovar will look for, among other things: making sure that customers receive the advantages of breakpoints to which they are entitled by using letters of intent or based on rights of accumulation; and correct sales loads charges. Mutual Fund activity is also reviewed by Pershing every time a trade is placed. Mr. Tovar’s daily trade activity review reveals anomalies, bad practice, and ensures proper procedures; things he looks for:

SwitchingNTM 91-39, 94-16, 95-80

Mutual funds are recognized and designed as a long-term investment and not as vehicles appropriate for speculative activities. In mutual funds, switching is the process of transferring an investment from one fund to another or selling out of a fund and purchasing another for the purpose of generating commissions. Switching is prohibited unless conducted in this manner: In some cases, customers may desire to direct their investments from one fund to another. If so, the RR will request a letter from the customer directing the change. This letter must include a statement acknowledging that additional costs will be incurred in the selling and repurchasing of separate funds. Under circumstances in which a customer is participating in a managed switching program, the Representative will obtain a copy of the contract for that program and direct this contract to Eduardo Tovar.

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BreakpointsIM 2830-1; NTM 94-16, 98-8, 02-85

A breakpoint is a reduction in sales charges based on the dollar volume of a purchase that exceeds a certain minimum. The sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced (breakpoint sales) on quantity transactions so as to share in the higher sales charges, is contrary to just and equitable principles of trade.

Mutual funds have established quantity levels, called breakpoints, at which the sales charge for the purchase of fund shares is reduced. It is incumbent upon each Registered Representative, when soliciting mutual fund sales, to inform the potential fund purchaser of the availability of reduced sales charges through purchases in larger quantities.

The actual sale of mutual fund shares in an amount just below a breakpoint may render the Registered Representative suspect of neglecting his obligation to provide full sales service, and may constitute a violation subject to serious penalties. It is important to note that different funds have different breakpoint schedules. Where diversification among two or more funds is recommended, the alternative of concentrating the purchase in one fund and receiving a reduced sales charge must be explained so that the purchaser may weigh the respective advantages of diversification against a reduced sales charge. In soliciting mutual fund sales, there are two primary means of effecting break- point levels:

Letters of IntentNTM 02-85

Registered Representatives will never sell funds without explaining to customers the use of a “Letter of Intent”. Nearly all mutual funds permit purchasers to execute a Letter of Intent at the time of their initial purchase. This letter enables, but does not obligate them, to purchase enough additional shares over a specified time period to attain the breakpoint level and secure the reduced sales charge. Failure to attain the breakpoint within the duration of the Letter of Intent subjects the purchase to a zero penalty, but obliges purchasers to pay the higher sales charge on the entire purchase. Because the terms of Letters of Intent differ among individual funds, before making an offering, Registered Representatives should fully understand the provisions of each applicable Letter of Intent.

Letters of Intent are particularly useful to fund purchasers utilizing dollar-cost averaging, anticipating receipt of additional money available for purchase, or wishing to make purchases on an installment basis. Most management companies will allow purchasers a ninety (90) day period of grace after an original purchase within which to execute a Letter of Intent to purchase additional shares at a reduced sales charge on the entire purchase.

Rights of Accumulation

Rights of Accumulation are similar to a Letter of Intent in that they provide an Accumulative Discount in the form of a lower sales charge to the investor. In order to benefit from a Right of Accumulation, either the shareholder or the broker/dealer must notify the fund underwriter that such transaction qualifies for the reduced sales charge. There are two primary differences between Letters of Intent and Rights of Accumulation:

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A Letter of Intent applies to purchases within a 13-month period; there are no time limits applied to the Rights of Accumulation provision.

A Right of Accumulation provides that only the current purchase can benefit from the lower breakpoint sales charge; all purchases under a Letter of Intent over a 13-month period qualify for the lower sales charge. Consult your Prospectus for provision.

Our policy is not to require Registered Representatives to evidence that customers have been advised of the use of Letters of Intent and Rights of Accumulation in connection with the sale of mutual funds. This is because we feel that soon choices will become fewer and simpler. And, too, this information is in fund prospectuses.

Market Timing and Late Trading Activities Rules 2110, 2120; NTM 03-50)

Market Timing is the act of attempting to predict the future direction of the market, typically through the use of technical indicators or economic data, and the practice of switching among mutual fund asset classes in an attempt to profit from the changes in their market outlook. Because it is very difficult to be successful at market timing continuously over the long-run, there are very good reasons for the average investor to avoid market timing and focus on investing for the long-run.

Late Trading of mutual fund shares occurs when investors placing trades after 4 PM receive the 4 PM price. These late traders can use the information revealed after 4 PM to guide their trades: buying funds when their current value is greater than their 4 PM value and selling the funds when the reverse is true. Doing so allows them to earn abnormal returns at the expense of the fund's long-term shareholders.

Both practices are prohibited by PPI.

“In the conduct of business, [PPI and its associates] will observe high standards of commercial honor and just and equitable principles of trade. [We] will not effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance.” [Rules 2110 and 2120]

Adjusted TradingRule 2120; SEC Rule 10b-5

Adjusted trading (sometimes called fee trading) is prohibited. It is a practice used to sell securities without recognizing any or all of the true loss from that sale. To hide the loss, the investor agrees to overpay for a newly purchased security in exchange for the broker/dealer's agreement to overpay for the security that the investor wants to sell. The broker/dealer incurs a loss by purchasing the investor's underwater bond at an above-market price. At the same time, the broker/dealer offsets that loss by selling the investor a new bond at an above-market price. Thus the transactions are completely neutral from the broker/dealer's perspective. However, from the investor’s perspective, the transactions effectively defer the recognition of losses on the security sold by establishing an excessively high book value for the security purchased.

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High-Yield DebtSEC Rule 10b-5, FIPS (Fixed Income Pricing System)

High-Yield Debt is a formal name for junk bonds. PPI does not permit trading in junk bonds, that is, all bonds in the following credit categories as defined by FINRA as "Non-Investment Grade": BB, B, CCC, CC, C, C, and NA/NR.

Selling DividendsRule 2830(e)

Selling Dividends means inducing a prospective customer to buy shares in order to profit from a dividend scheduled in the near future.

In recommending the purchase of investment company securities, it is prohibited to state or to imply that the purchase of such securities shortly before an ex-dividend date is advantageous to the purchaser, unless there are specific, clearly described tax or other advantages to the purchaser; RRs may not represent that distributions of long-term capital gains by an investment company are or should be viewed as part of the income yield from an investment in such company's securities.

Class B Mutual Fund SharesRule 2830(d) and (n)

Be aware: Class B shares do not impose a front-end sales charge, but they may carry higher expenses compared to Class A shares. These expenses are assessed over the lifetime of the customer’s investment. Class B shares also may impose a contingent deferred sales charge (CDSC), payable depending on time constraints for selling shares.

Investors who purchase Class B shares cannot take advantage of breakpoint discounts available on large purchases of Class A shares.

Before purchasing Class B mutual fund shares, make sure it is in your customers’ best interest, and not just a way to receive higher commissions from the sale of Class B shares; other classes of fund shares might be more cost effective.

Confirmation

All mutual fund trades should be confirmed to the attention of Eduardo Tovar within seven (7) calendar days, ten (10) days at the latest. PPI’s home office should receive from the fund copies of all monthly customer statements.

Bank Affiliated Broker/Dealer (BABD)N/A – PPI is not a BABD.

Variable AnnuitiesN/A – PPI does not engage in this business.

Underwriting ActivitiesN/A – PPI does not engage in this business.

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Municipal UnderwritingsN/A – PPI does not engage in this business.

Private PlacementsN/A – PPI does not engage in this business.

Hedge FundsN/A – PPI does not engage in this business.

Direct Participation ProgramsN/A – PPI does not engage in this business.

INSIDER TRADINGNTM 89-5

RRs take note: Insider Trading is, simply, the buying or selling of a security by someone who has access to material, nonpublic information about the security. Insider trading is illegal when the material information is still nonpublic; illegal insider trading, therefore, includes tipping others when you have any sort of nonpublic information–so brokers and even family members can be guilty.

Insider trading is currently a top enforcement priority of the Securities and Exchange Commission (SEC) and the United States Attorneys. In recent years, many professionals in the securities industry have been criminally prosecuted for insider trading violations, and many more, including persons associated with investment advisors, have been the subject of injunctive actions. The SEC has received and used authority to obtain civil penalties of up to three times the profit gained or loss avoided in insider trading cases. Insider trading violations may also lead to administrative sanctions, such as being barred from employment in the securities industry, as well as private damage actions brought by persons who traded in the market at about the same time as the person who traded on inside information. Even in the absence of litigation brought by the government or a private party, violation of insider trading prohibitions will result in your termination by PPI.

Purpose of Statement of PolicyThe purpose of this Statement of Firm Policy is to explain:

• the general legal prohibitions regarding insider trading;• the meaning of the key concepts underlying the prohibition; • RRs obligations in the event they learn of material nonpublic information; and • PPI’s educational program regarding insider trading.

The Basic Insider Trading ProhibitionIn general, insider trading doctrine under federal securities laws prohibits any person (including investment advisors) from:

• trading on the basis of material, non-public information;

• tipping such information to others;

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• recommending the purchase or sale of securities on the basis of such information; or

• assisting someone who is engaged in any of the above activities.

Thus, insider trading is not limited to insiders. It applies to non-insiders, such as investment analysts and stock brokers. In addition, it is not limited to persons who trade: it also covers persons who tip material non-public information or recommend securities on the basis of such information.

Basic ConceptsThe three critical concepts in insider trading cases are briefly discussed below.Fiduciary Duty/Misappropriation In two decisions, Dirks v SEC and Chiarella v United States, the Supreme Court held that insider trading does not always violate the Federal securities laws. The general tenor of these two decisions and recent lower court decisions is that, other than in the case of information related to tender offers, insider trading does not violate the Federal securities laws if the trading, recommendation, or disclosing of the information does not result in a breach of duty.A typical breach of duty arises when insiders, such as a corporate officers, purchase securities of their corporation on the basis of material non-public information. Such conduct breaches a duty owed to the corporation’s shareholders. The duty breached, however, need not be to shareholders to support liability for insider trading. Lower court decisions hold that under a “misappropriation” theory, outsiders (such as investment analysts) may be liable if they breach a duty to anyone by: (1) obtaining information improperly or (2) using properly-obtained information for an improper purpose. For example, if information is given confidentially to an analyst and the analyst uses that information for trading purposes, liability could arise under the misappropriation theory. Similarly, an analyst who trades in breach of a duty owed either to employer or client may be liable under the misappropriation theory.

The situations in which a person can trade on the basis of material non-public information without breaching a duty are so rare, complex, and uncertain that the only safe course is not to trade, tip, or recommend securities on the basis of material non-public information. At a minimum, you should confer with legal counsel before considering doing so.MaterialityInsider trading restrictions arise only when the information used for trading, tipping, or recommendations is “material”. (A fact is material if there is a decision to purchase or sell securities.) The information need not be so important that it would have changed an investor’s decision to buy or sell; rather, it is enough that it is the type of information on which reasonable investors rely to make purchase or sale decisions.On the other hand, not every tidbit of information about a security is material. It has been held that information that merely tests “the meaning of public information” or that fills in the “interstices in analysis” is not material.

Resolving Close Cases. The Supreme Court has held that in close cases, doubts about whether or not information is material should be resolved in favor of a finding of materiality. Be aware that judgments regarding materiality may be reviewed by a court or by the SEC with the 20-20 vision of hindsight.

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Effect on Market Price. Any information that, upon disclosure, is likely to have a significant affect on the market price of securities should be considered material.

Future Events. The materiality of facts relating to the possible occurrence of future events depends on the likelihood that the event will occur, and the significance of the event if it does occur.

Illustrations. The following list, though not exhaustive, illustrates the types of matters that might be considered material:

• A joint venture, merger or acquisition;

• The declaration or omission of dividends;

• The acquisition or loss of a significant contract;

• A change in control or a significant change in management;

• A call of securities for redemption;

• The borrowing of a significant amount of funds;

• The purchase or sale of a significant asset;

• A significant change in capital investment plans, a significant labor dispute, or disputes with subcontractors or suppliers;

• An event requiring a company to file a current report of Form 8-K with the SEC;

• Establishment of a program to make purchases of the company’s own shares;

• A tender offer for another company’s securities;

• An event of technical default or default on interest and/or principal payments;

• Advance knowledge of an upcoming publication that is expected to affect the market price of the stock.

Nonpublic Just as an investor is permitted to trade on the basis of information that is not material, he may also trade on the basis of information that is public. Information is considered public if it has been disseminated in a manner that makes it available to investors generally. To satisfy the dissemination requirement, the stock exchanges require exchange-traded issuers to disclose information to: 1) national business and financial newswire services (Dow Jones and Reuters); 2) national services (Associated Press); and 3) The New York Times and The Wall Street Journal. When information appears in one or more of these publications, or on the broad tape, it normally can be used immediately as public information.

Local Disclosure. An article in a local newspaper would be sufficient publication for a local company that is only locally traded, but not for a national company that is nationally traded.

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Information in SEC Reports. In general, you may assume that information in reports filed with the SEC is public. If, however, it comes to your attention that particularly significant information in a report filed with the SEC has not otherwise been disclosed to the public, then you should not make purchases or sales or recommendations on the basis of that information without first discussing the matter with Eduardo Tovar.

Information in Brokerage Reports. You may generally assume that information in bulletins published by a brokerage firm is public. As with SEC reports, however, if it comes to your attention that particularly significant information in a brokerage firm report has not otherwise been disclosed to the public, then you should assume that it is non-public. In that case, you should neither purchase, sell, nor make recommendations on the basis of that information without first discussing the matter with Eduardo Tovar, nor discuss with other employees or persons outside PPI.

Tender OffersMany recent insider trading cases have involved trading on the basis of material non-public information regarding tender offers (an offer to purchase some or all of shareholders' shares in a corporation). Tender offers are subject to particularly strict regulations under the securities laws. Under no circumstances should you trade in securities while in possession of material non-public information regarding a tender offer.

Procedures to Follow When Receiving Insider InformationIf employees receive material non-public information, they should not trade in securities to which that information relates, tip the information to others who are likely to trade, or recommend purchases or sales on the basis of that information. Instead, contact Eduardo Tovar immediately, and refrain from disclosing the information to anyone else at Private Portfolio, Inc., or any persons outside PPI until specifically advised to do so. Access to any non-public information shall be restricted only to those individuals with a need-to-know status.

While we recognize that it is important not to allow the prohibitions against insider trading to affect our ability to do proper investment research for clients, compliance with the above procedures is necessary for the protection of both PPI and its associates. If we were to publish a research report or make recommendations based on material non-public information that was improperly obtained or used, the potential liability could be staggering. PPI could be subject to disciplinary action by the SEC, criminal prosecutions brought by the United States Attorney, and damage actions brought by private parties. While the probability of research analysts being exposed to material non-public information is greater than that of counselors or other employees, it is imperative that all employees have a full understanding of the basics set forth above.

Provisions for Investigating Suspect TradesIf the home office discovers that an employee of Private Portfolio, Inc. has a proprietary trading account, the principals will conduct appropriate analyses and investigation in accordance with SEC requirements. In addition, PPI will maintain a separate book and record to include a summary of the investigation and analyses.

If PPI conducts investment banking, research, or arbitrage activities, they must maintain some form of watch lists and restricted lists, and conduct reviews of employee and proprietary trading in securities that appear on those lists.

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A restricted list is a current list of securities in which proprietary, employee, and certain solicited customer transactions are restricted or prohibited. Eduardo Tovar will oversee any restricted and/or watch lists, and make needed additions or deletions on a case-by-case basis.

Updates On New or Revised RegulationsTo ensure that everyone associated with Private Portfolio, Inc. understands our policy on insider trading, PPI requires RRs to sign the attestation below, which will be filed in personnel files in the home office.

PPI will also ensure that all employees are made aware, in writing, whenever significant revisions are made to these WSPs, or new or revised regulations are issued by regulatory agencies. In addition, Eduardo Tovar, Principal of PPI, will review these Procedures at least annually with all Registered Representatives, and answer any questions representatives may have on this topic.

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Attestation – Insider Trading

Print out, sign, and return with original signature to:

Eduardo TovarPrivate Portfolio, Inc.7534 La Jolla Blvd.La Jolla, California 92037

I attest that I have read and understand the foregoing Insider Trading prohibitions and procedures and will comply in all respects with such procedures.

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Name:_________________________________! RR#______________________(print)

x_____________________________________ __________________________Representative’s Signature ! ! ! ! Date:

There is not a universal set of procedures appropriate for all broker/dealers concerning the adoption, maintenance, and enforcement of adequate written procedures designed to prevent Insider Trading.

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Investment Banking, Arbitrage, Research FirmsN/A – PPI does not engage in any of these types of business.

Chinese Wall ProceduresNTM 91-45; IM 2110-4

A Chinese Wall is the ethical barrier between different divisions of a financial institution to avoid conflict of interest. Maintaining client confidentiality is crucial to any firm. Clients must be able to trust that information about themselves will not be exploited for the benefit of other clients with different interests. In other words, clients must be able to trust in Chinese Walls.

The Insider Trading and Securities Fraud Enforcement Act of 1988 requires all broker/dealers “to establish, maintain and enforce written procedures reasonably designed” to prevent the misuse of material, non-public information. PPI agrees that these procedures should include an approach, adequate under the 1988 Act, that may detect and prevent insider trading, in addition to the Insider Trading section of these procedures.

As deemed appropriate to the nature and scope of PPI’s business–i.e. general securities, Options, and Mutual Funds–and its organizational structure, Private Portfolio, Inc. has set forth the following Chinese Wall Procedures.

RecordsPPI will document and maintain written records of each transaction, along with copies of agreements that reflect the nature of transactions. At a minimum, these documents will include: 1) name of each company; 2) date of the transaction; and 3) a description of payment.

PolicyStandards have been set in these WSPs for maintaining documentation that imposes requirements necessary to adequate Chinese Walls–such as monitoring employees’ outside securities accounts, insider trading education and warnings for RRs, and monitoring of employee accounts. PPI permits an employee to maintain a securities account with another broker/dealer, and requires the employee to have duplicate confirmations and account statements sent to PPI as the employing member with supervisory responsibility.

http://www.finra.org/web/groups/rules_regs/documents/notice_to_members/p019298.pdfPPI provides this link to Notice to Members 91-45 concerning “Chinese Wall Procedures, and will continue to keep current on such procedures. RRs: Please review this particular Notice to Members for more information about this topic.

TRADING/MARKET MAKINGN/A – PPI does not trade for its own account, and does not make markets.

Online Trading & Day-TradingN/A – PPI does not promote day-trading strategies.

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