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The New Account Agreement

Generally, a brokerage firm will require a customer to sign a new account agreement. You should carefully review the information contained in this document because it may affect your legal rights regarding your account. Ask to see any account documentation prepared for you by the sales representative. Do not sign the new account agreement unless you thoroughly understand it and agree with the terms and conditions it imposes on you. Do not rely on verbal representations from a sales representative that are not contained in this agreement. The sales representative will ask for information about your investment objectives and personal financial situation, including your income, net worth, and investment experience. Be honest. The sales representative will rely on this information to make appropriate investment recommendations for you.

Completion of the new account agreement requires that you make three critical decisions:

1. Who will control decision-making in your account? You will control the investment decisions made in your account unless you decide to give discretionary authority to your sales representative to make investment decisions for you. Discretionary authority allows a sales representative to make investment decisions based on what the sales representative believes to be best -without consulting you about the price, the type of security, the amount and when to buy or sell. Do not give discretionary authority to your sales representative without seriously considering whether this arrangement is appropriate for you.

2. How will you pay for your investment? Most investors maintain a cash account that requires payment in full for each a security purchase. An alternative type of account is a margin account. Buying securities through a margin account means that you can borrow money from the brokerage firm to buy securities and requires that you pay interest on that loan. You will be required to sign a margin agreement disclosing interest terms. If you purchase securities on margin (by borrowing money from the brokerage firm), the firm has authority to immediately sell any security in your account, without notice to you, to cover any shortfall resulting from a decline in the value of your securities. If the value of your account is less than the amount of the outstanding loan -even due to a one day market drop -you are liable for the balance. This may be a substantial amount of money even after your securities are sold. The margin account agreement generally provides that the securities in your margin account may be lent out by the brokerage firm at any time without notice or compensation to you.

3. How much risk should you assume? In a new account agreement, you must specify your overall investment objective in terms of risk. Categories of risk may have labels such as "income," "growth," or "aggressive growth." Be careful you understand the distinctions between these terms, and be certain that the risk level you choose accurately reflects your investment goals. Be sure that the investment products recommended to you reflect the category of risk you have selected.

When opening a new account, the brokerage firm may ask you to sign a legally binding contract to arbitrate any future dispute between you and the firm or your sales representative. This may be part of another document, such as a margin agreement. The federal securities laws do not require that you sign such an agreement. You may choose later to arbitrate a dispute for damages even if you do not sign the agreement. Signing such an agreement means that you give up the right to sue your sales representative and firm in court.

You may have your securities registered either in your name or in the name of your brokerage firm. Ask your sales representative about the relative advantages and disadvantages of each arrangement. If you plan to trade securities regularly, you may prefer to have the securities registered in the name of your brokerage firm to facilitate clearance, settlement, and dividend payment.