Sections: Investing in Folios | Services and Products of Others | Site Availability | Cash Investment Products | Order Routing and Execution | Statement of Financial Condition | Business Continuity & Contingency Planning | Privacy and Security | FDIC Insurance | SIPC and Supplemental Insurance | Website Protection | Email Safety | What to Do If You Suspect Internet Fraud | Ready-to-Go Folios (RTG) Performance | Financial Market Data Sources | Risks of Investing | General Investing Risks | Risks of Investing in Different Assets | Risks of Investing in Folios | Read Your Customer Agreement Carefully
Investing in Folios
There are risks involved in investing in any security, group of securities, or investment strategy. Past returns are no guarantee of future returns. Read Risks of Investing for more information.
Folios can be managed or unmanaged and are not registered investment companies. Folios that contain K-1 securities, such as limited partnership interests or ADRs, either directly or through ETFs or mutual funds that invest in them, may have different tax reporting cycles and tax withholding and might require us to report an investor’s personal information to issuers for tax, voting, or other special purposes. Read prospectuses and offering documents carefully.
Folio Institutional does not make any determination that any investment or strategy is suitable or appropriate for any specific person or purpose. It does not review investment objectives and does not review, recommend, or determine the suitability of, or provide advice regarding any investment or investment strategy. If you follow any investment or investment strategy, including a published Folio Ready-to-Go folio, you must determine for you and your client(s) whether the investment or investment strategy is suitable for you.
Services and Products of Others
Folio Institutional provides brokerage services that enable organizations and their members and/or customers to follow trading strategies, research, and/or investment ideas developed by such organizations. Such organizations may be licensed or unlicensed, professional or amateur, and, unless specifically noted otherwise, are unaffiliated with Folio Institutional.
Folio Institutional or one of its affiliates may provide such organizations technical or operational services, such as consulting on webpage design, folio construction methods, or web hosting, but the organizations are solely responsible for their own services, products, content, and any advertising material related to those activities, whether hosted on their websites, a third-party website with a link or reference to Folio Institutional, or a website hosted or co-branded with Folio Institutional.
We may pay such organizations referral fees, per subscriber fees, content fees, or other fees, or they may pay us for use of our platform or for services we provide to them. Notwithstanding the payment of such fees, we and the organization remain independent contractors and neither is an agent, representative, or partner of the other. Neither has any right, power, or authority to enter into any agreement for or on behalf of, to incur any obligation or liability for, or to otherwise bind the other. The payment of fees does not constitute or create an association, joint venture, co-ownership, co-authorship, or partnership or impose any partnership obligation or liability upon either.
It is important that you know that Folio Institutional does not endorse, review, or oversee any unaffiliated author’s or distributor’s content or website, or any of the policies, activities, products, or services offered or published by an author or distributor. We do not take responsibility for, and do not approve, endorse, review, recommend or guarantee the information displayed, claims made, or securities or strategies mentioned, offered or recommended by others wherever or however published.
An organization's use of our platform does not imply our recommendation, endorsement, approval, or oversight of such organization or its offerings, products, services, publications or any investment or investment strategy suggested or implied by or from the organization's content.
We periodically perform routine website maintenance to optimize the performance of our website and ensure its continued reliability. As a result, you may occasionally see a posted notification that a particular feature or service is temporarily unavailable.
We generally limit routine maintenance to non-business hours to minimize its potential impact on you. Most routine maintenance is brief, and any service or feature interruptions it may cause are resolved quickly.
We occasionally perform more significant website maintenance or upgrades that require longer times to complete. We generally provide advanced notification and details on our website regarding such maintenance and the expected duration and service impacts of any such activities.
Cash Investment Products
Cash investments at Folio Institutional receive extended FDIC Insurance coverage and may earn interest through our FDIC Insured Sweep Program. Cash can be allocated within any Folio using the ticker symbol FDIC.CASH. Separately, non-Folio cash deposits over $25,000 may be eligible for higher interest rates through the FDIC.PLUS product. Cash balances held in accounts but not invested in FDIC.CASH or FDIC.PLUS are also aggregated into and earn interest through the FDIC Insured Sweep Program. FDIC covers both the principal and accrued interest in each sweep account for any bank that fails. SIPC insurance does not apply to any amounts in bank deposits, nor does it apply to investments in FDIC.CASH or FDIC.PLUS under the Sweep Program.
Order Routing and Execution
SEC Rule 606 Quarterly Order Routing Reports
In accordance with U.S. Securities and Exchange Commission (SEC) Rule 606, Folio is publishing this quarterly report on our order routing practices. The report provides information on the venues where we route our “non-directed orders” in NMS stocks that are submitted to us on a held basis. A “non-directed order” means that we decide where the order is executed, in contrast to “directed orders” where the customer decides where the order is routed. At this time, Folio does not accept directed orders, so all of our orders are non-directed. Furthermore, orders submitted to us for execution during our Trading Windows are not held orders and thus are not included in the reports. The only orders included in our reports are orders submitted to us for execution outside of our Trading Windows. We refer to these orders as “Direct Trades”. Please see our website for description of our Trading Windows and Direct Trades.
This report is divided into three sections for each calendar month in the quarter: one for NMS securities that are included in the S&P 500 Index as of the first day of that quarter (“S&P 500 Stocks”); one for securities that are not included in the S&P 500 Index as of the first day of that quarter (“Non-S&P 500 Stocks”); and one for NMS securities that are option contracts (“Options”). Folio does not presently support option trading. For each section, this report identifies the venues most often selected by us, shows the percentage of various types of orders routed to the venues, and discusses the material aspects of our relationship with the venues.
Statement of Financial Condition
Under the Securities and Exchange Act of 1934, Folio Investments, Inc. is required to publish its audited statement of financial condition on an annual basis and its unaudited mid-year statement of financial condition. To read the latest copy of Folio Investments, Inc.'s Statement of Financial Condition, click the corresponding link:
12/31/2019 Audited Statement of Financial Condition
06/30/2019 Unaudited Statement of Financial Condition
12/31/2018 Audited Statement of Financial Condition
06/30/2018 Unaudited Statement of Financial Condition
Business Continuity & Contingency Planning
Securities industry regulations require that brokerage firms inform their clients of their plans to address the possibility of a business disruption that potentially results from a power outage, natural disaster, or other event. Folio Investments, Inc. has a comprehensive business continuity program in place, which we review, update and test on a regular basis. The plan provides for continuation of client service in the event of various types of interruption to our facilities and services, although obviously we cannot plan for or guarantee against all contingencies.
Our policy is to respond to significant business disruptions by safeguarding employees’ lives and firm property, making a financial and operational assessment then quickly recovering and resuming operations while protecting the firm’s books and records.
Examples of potential scenarios that our plans address:
- A power outage. Our primary facility has multiple layers of power supply, including battery and diesel generator power supplies, which address this contingency.
- Our primary call center becomes unavailable for any reason. We are able to transition to remote locations and continue to answer calls.
- External threats or damage to our primary facility. We can transition to our back-up facility with some, but in many cases minimal, disruption to services.
No contingency plan can eliminate all risk of service interruption. In creating our Business Continuity & Contingency Plan, we make certain assumptions regarding alternative facilities being accessible, sufficient personnel being available, and external organizations including securities markets and government agencies being operational. If these assumptions are not valid under particular circumstances, we are prepared to evaluate possibilities for minimizing the disruption to our services feasible as events unfold and will promptly provide clients with information about how to access their funds and securities.
We update our Business Continuity & Contingency Plan as needed and evaluate the plan at least annually. We will continue to post an updated summary of our plan on our website. You may also obtain our current Business Continuity & Contingency Plan summary by submitting a written request to:
Folio Investments, Inc.
ATTN: Business Continuity Plan
8180 Greensboro Drive, 8th Floor
McLean, VA 22102
Privacy and Security
Cookies and Do Not Track Requests
Use of do-not-track mechanisms that may be built into your web browser are not supported, and your use of a do-not-track mechanism will not disable activity tracking on our website. You can refuse or delete cookies. Most browsers and mobile devices offer their own settings to manage cookies. If you refuse a cookie when on our websites, or if you delete cookies, you may experience some inconvenience on our websites.
Social Media Websites
Log Access Requests and IP addresses
Our website automatically collects logs based on information available to us when you use our website(s) such as details of your visits to our website including but not limited to traffic data, location data, logs and other communication data, and the resources that you access, as well as information about your computer and Internet connection, including your IP address, operating system and browser type. For example, we collect browser types to ensure that our website performs well for different browsers. We also collect access times for regulatory reasons and to continually improve the design and operation of our website(s). We limit access to this information and keep it confidential, except as we determine necessary to properly maintain your account or as required by law. When you visit our website(s), we capture and retain the IP address of the device you are using and may collect other device information to identify the device. An IP address does not identify you or your personal information. It is used primarily for security purpose but also may be shared with the SEC, other regulatory or government entities, or as otherwise required pursuant to judicial or other government requests for information, subpoenas, warrants, or orders.
Cash deposits at Folio Institutional are swept into our Bank Sweep Program and are insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency created by the U.S. Congress in 1933 to help maintain public confidence in the nation’s financial system. One of its primary duties is to insure deposits in banks and thrift institutions. The FDIC also examines and supervises member institutions. If you would like more information about FDIC insurance, visit www.fdic.gov or call the FDIC Consumer Hotline at 1-877-ASK-FDIC (1-877-275-3342).
SIPC and Supplemental Insurance
Folio Investments, Inc. is a member of the Securities Investor Protection Corporation (SIPC). A brochure explaining the coverage provided by SIPC is available on SIPC’s website at www.sipc.org. In addition to SIPC coverage, we have purchased from underwriters at Lloyds of London supplemental customer securities insurance. Together those coverages provide a total aggregate limit of $50 million limited to a combined return of $10 million to any single customer. Neither SIPC nor the supplemental insurance coverage protect against losses resulting from a decline in the market value of securities.
View our custodial brochure for more information on SIPC and FDIC coverage.
Access to Account Information
You must create your own account username, password, and security key to securely log into folioinstitutional.com. Passwords are stored in an encrypted form and our employees do not have access to them. We also use second factor authentication to provide you with an extra level of online security. When you contact us by phone, our customer service representatives will request account verification information before providing you with assistance, but will never ask you for your account password under any circumstances.
You are automatically logged out of the system after a period of time of inactivity. This helps protect you from the potential threat of others accessing your account through an unattended computer.
In certain circumstances your password is locked by our system. In that event you will be required to contact Customer Service at 1-888-485-3456.
We utilize Transport Layer Security/Secure Socket Layer (TLS/SSL) encryption for all browser access to our web platform services to ensure that any data entered into our website is encrypted to and from the browser being used. Depending on the browser, you can verify that TLS/SSL is enabled by clicking on the small company logo to the left of the URL, the padlock, or the key icons in the address bar. This action should display a digital certificate that verifies encryption and confirms the identity of our website. Check the certificate to ensure the web address that displays in the URL at the top of your browser matches the address on the certificate, that the certificate is signed by a trusted certificate authority, and that the date is current. Do not log into an account from any website if you’re unable to verify all of these items.
Protect Your Clients' Passwords
Passwords are the key to your clients' accounts, and they should be changed frequently. Don’t share passwords with others or store them as a file on your computer. Avoid using public computers, like those in cafes, libraries, hotels, etc. to access your account. They may contain keystroke monitoring software that Internet thieves can use to steal your username and password.
Password Protection Tips
- Use a combination of numbers, symbols and letters
- Avoid the obvious, like a child’s name or spouse’s birthday
- Use different passwords for each financial account you own
- Do not give your client's password to anyone, including us
- Change your password periodically
Monitoring activity in your clients' accounts is vital to their account’s security. Check it regularly and note account information displayed for accuracy. Be sure to report irregularities to Customer Service immediately.
Be sure to keep your anti-virus and anti-spyware software up to date. There are many free and paid solutions on the market.
When you are done viewing your account remember to log out and close your browser. Failing to do so exposes you to risk.
Browser Compatibility Requirements
Our website and platform are compatible with the following web browsers:
- Internet Explorer
- Google Chrome (PC, Mac, Linux)
- Mozilla Firefox (PC, Mac, Linux)
- Apple Safari (PC, Mac)
We encourage use of the most current versions of web browsers for optimal browsing. If you have trouble using our website and you are not using one of these browsers, we suggest you try using one from the list above. All of these browsers can be downloaded for free and will deliver an optimal experience.
To protect yourself from online fraud, it is safer not to provide your usernames, passwords, or other personal information to websites that you reach through email links. You can go directly to the websites instead by typing their web addresses into your browser, searching for them online, or by using your bookmarks. You can find information about our products and services, or log into your account, by typing www.folioinstitutional.com into your browser.
Internet phishing scams ask you to verify sensitive information through email. Do not reply to any email purporting to be from Folio Institutional asking for personal account information.
What to Do If You Suspect Internet Fraud
Immediately report suspicious account activity by email using the contact us form on our website.
Ready-to-Go Folios (RTG) Performance
Ready-to-Go Folio (RTG) performance is updated daily and assumes cash distribution reinvestment. RTG performance does not represent actual performance experienced by customers. No fees or trading costs are included in the reported performance because the Folios are model based. If an RTG has less than one year of performance history, the Since Inception return figure is not annualized and represents an aggregate total return. See how returns are calculated and why returns in client accounts may differ.
Financial Market Data Sources
Risks of Investing
Markets can be very volatile during periods of significant expansion and contraction. Although the market has historically increased over the long term, there have been periods of significant down markets. You should carefully consider your risk tolerance, time horizon, and financial objectives before making investment decisions.
General Investing Risks
The value of equity securities fluctuates in response to issuer, political, market, and economic developments. In the short term, equity prices can fluctuate dramatically in response to these developments. Different parts of the market and different types of equity securities can react differently to these developments. Issuer, political, or economic developments can affect a single issuer, issuers within an industry or economic sector or geographic region, or the market as a whole. Weather, terrorism and other geo-political risks have led, and may in the future lead, to increased short-term market volatility and may have adverse long-term effects on world economies and markets generally.
Foreign Investment Risk
Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations can involve additional risks relating to political, economic, or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies; withholding or other taxes; trading, settlement, custodial, and other operational risks; and less stringent investor protection and disclosure standards in some foreign markets. All of these factors can make foreign investments, especially those in emerging markets, more volatile and potentially less liquid than U.S. investments. In addition, foreign markets can perform differently from the U.S. market.
Investing Style Risks
Growth stocks can react differently to issuer, political, market, and economic developments than the market as a whole and other types of stocks. Growth stocks tend to be more expensive relative to their earnings or assets compared to other types of stocks. As a result, growth stocks tend to be more sensitive to changes in their earnings and more volatile than other types of stocks.
Value stocks can react differently to issuer, political, market, and economic developments than the market as a whole and other types of stocks. Value stocks tend to be inexpensive relative to their earnings or assets compared to other types of stocks. However, value stocks can continue to be inexpensive for long periods of time and may not ever realize their full value.
Sector/Industry stocks have different risks based on their primary business operations and how they are affected by economic cycles. Certain industries/sectors are cyclical-meaning that they closely follow the economic cycle. For example, when there is an economic downturn, cyclical stocks tend to lose value. Other industries/sectors are non-cyclical and are generally less affected by market cycles, such as economic downturns. Sectors/Industries face risks such as industry specific government regulation, input price changes, interest rate changes, intense competition, lower consumer demand, patent expirations and more.
Risks of Investing in Different Assets
Inverse and Leveraged ETFs
The Securities and Exchange Commission (SEC) and FINRA, the organizations which regulate the securities industry, issued an Investor Alert on June 31, 2009 advising retail investors of the risks associated with “leveraged and inverse ETFs”. Specifically, they warn that these instruments tend to deviate from—and may underperform relative to—their benchmarks for periods longer than one trading day by design. These deviations may be substantial for longer periods.
What are inverse and leveraged ETFs?
Leveraged ETFs are securities that attempt to replicate multiples of the performance of an underlying financial index. Inverse ETFs are designed to replicate the opposite direction of these same indices, often at a multiple. These ETFs often use a combination of futures, swaps, short sales, and other derivatives to achieve these objectives.
Why don’t they track their indices well over longer periods of time?
Most leveraged and inverse ETFs are designed to achieve these results on a daily basis only. This means that over periods longer than a trading day, the value of these ETFs can and usually do deviate from the performance of the index they are designed to track. Over longer periods of time or in situations of high volatility, these deviations can be substantial.
What you should know
Customers should carefully evaluate leveraged and inverse ETFs by looking closely at their prospectuses and considering their own financial goals and risk tolerance before trading these securities. Buy-and-hold investors should be particularly cautious when evaluating these investments, because they may not track their underlying indices over longer periods of time and may have additional risks inherent to the nature of their underlying assets. Even experienced retail investors should reflect carefully before retaining these securities longer than one trading day.
Cash or Cash Equivalents Risk
Inflation Risk: The risk that the value of an account, including interest, does not keep pace with inflation, thus reducing purchasing power.
Fixed Income Investing Risk
The chance that an investor will not be able to sell bonds at desired prices and that large purchases or sales of high-yield bond issues may cause substantial price swings.
Interest Rate Risk
Interest Rate increases (decreases) can cause the price of a debt security to decrease (increase). Longer-maturity bonds typically decline more than those with short maturities based on changing interest rate risks.
Types of Credit Risk
- Downgrade Risk: The chance that bonds will have their credit ratings reduced, which could reduce the income level of the bond. Specifically, companies issuing high-yield bonds are generally not as financially strong as companies rated investment grade.
- Default Risk: The chance that a bond issuer will fail to make its scheduled interest or principal payments.
- Credit Spread Risk: The chance that the market value of a bond will decline and/or the price performance of a bond will be worse than that of other bonds. This is based on the yield premium between Treasury bonds and non-Treasury bonds where the spread can increase and the market price of the bond will decline.
Risks of Investing in Folios
Since Folios contain individual securities that rise and fall in value, the value of your Folios will also rise and fall in value. You can lose money even if you are well-diversified. When the stock market suffers widespread declines even well-diversified and extremely conservative investments are likely to fall in value. Additionally, Exchange-Traded Funds (ETF), Mutual Funds and American Depositary Receipts (ADR) are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost.
Risks of Online Investing
On occasion things can go wrong and you need to be prepared. For examples, computers can crash and orders can pile up.
While we have put significant resources into building and testing our computer systems, you should expect that computer glitches, slowdowns, and crashes may occasionally occur.
We cannot guarantee that you will always be able to access our Web site or place the trades you want, when you want them.
We are not liable for any damages or losses that you suffer if you cannot get access to our site. Please make sure that you are prepared to handle the problems we have described here and others described in your customer agreement.
Methods for Selecting Securities for Ready-to-Go Folios
In the Methodology section of each Folio, there is an overview of some of the steps involved in our selection of the securities in each Folio. Many of our selection methods depend on receiving data about the securities that can be held in a Folio. If this information is erroneous, we are not liable for any damages or losses that you may suffer as a result.
We Do Not Recommend Any Securities to You
We do not review your financial situation or tolerance for risk. We do not determine if the Folios, securities, strategy, or tools to select Folios will result in suitable or profitable investments for your situation. We do not make recommendations to you personally. You must determine if you can afford the risks of investing, using our tools and the results they provide.
No Investment, Legal, or Tax Advice
This site is not intended to provide tax, legal, insurance or investment advice, and nothing on this site should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by Folio Institutional or any third party. You alone are solely responsible for determining whether any investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should consult an attorney or tax professional regarding your specific legal or tax situation.
Read Your Customer Agreement Carefully
This document has not covered all of the risks that you take on by investing online. Please read the customer agreement carefully to learn more about the risks of investing online.