Regulation Best Interest Disclosure
Dalmore Group LLC
Regulation Best Interest Disclosure
December 10, 2021
This guide summarizes important information concerning the scope and terms of the brokerage services we offer and details the potential conflicts of interest that may arise through our delivery of brokerage services to you. We encourage you to review this information carefully, along with any applicable account agreement(s) and disclosure documentation that you may receive from us.
As you review this information, we would like to remind you that Dalmore Group LLC (“Dalmore”) is registered with the U.S. Securities and Exchange Commission (“SEC”) as a broker-dealer and is also a member of the Financial Industry Regulatory Authority, Inc (“FINRA”) and Securities Investor Protection Corporation (“SIPC”). We are not investment advisers. We do not provide investment advisory services. Any recommendations made regarding your brokerage investments will be made in a broker-dealer capacity. Our brokerage services are the primary focus of this guide. In addition, our Form CRS contains important information about the types of services we offer, along with general information related to compensation, potential conflicts of interest, disciplinary action, and other reportable legal information. Form CRS is available via the website at Investor.gov/CRS.
Dalmore offers limited investment products and services. We offer investors the opportunity to make unsolicited self-directed investments on an agency-basis of interests in registered and unregistered securities offerings, including private placements offered under Regulation D, Regulation A, Regulation Crowdfunding, and EB-5 investment programs. A private placement is a non-public offering of securities exempt from full SEC registration requirements. “Institutional Investors” as defined in FINRA Rule 4512(c) and includes (i) a bank, savings and loan association, an insurance company or registered investment company; (ii) an investment adviser registered either with the SEC or with a state securities regulatory agency; or (iii) any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million. “Accredited Investors” as defined in SEC Rule 501(a) and includes natural persons with a net worth of more than $1 million (not including the person’s primary residence) or with an annual income of at least $200,000 each year for the last two years (or $300,000 combined income with the person’s spouse or spousal equivalent) and expect making the same amount during the current year.
Most private placements have a minimum investment amount which can vary by issuer and placement. Investment minimums may be waived and listed in the private placement memorandum (“PPM”) or similar offering documents.
When Dalmore offers a private placement, we do so on a best-efforts basis, meaning we do not agree to raise all the money requested by the issuer. Once you subscribe for a private placement, we will not monitor your investment regularly. Moreover, we do not agree to enter into a fiduciary relationship with you. It is important for you to understand that should our Registered Representatives make a recommendation to you, we are obligated to ensure that such recommendation is in your best interest, considering reasonably available alternatives, and based on your stated investment objective, risk tolerance, liquidity needs, time horizon, financial needs, tax status, and other financial information you provide us. You may accept or reject any recommendation. It is also your responsibility to monitor your investments, and we encourage you to do so regularly. We do not commit to providing ongoing monitoring of any securities. If you prefer ongoing monitoring of your investments, you should speak with a financial professional about whether an advisory services relationship is more appropriate for you. From time to time, we may provide you with additional information and resources to assist you with managing your investment. This may include but is not limited to educational resources, financial reports, summaries, and/or updates about the issuer. When we offer this information, we do so as a courtesy. These activities are not designed to monitor specific investment holdings. They do not contain specific investment recommendations about investment holdings. You should not consider them a recommendation to trade or hold any particular security.
We also have contracted North Capital Private Securities Corporation (“NCPS”), an Alternative Trading System (“ATS”), named Public-Private Execution Network Alternative Trading System or PPEX ATS that offers non-accredited and accredited investors the opportunity to buy or sell exempt securities on the secondary market. We do not make any recommendations concerning any securities transaction on PPEX ATS. In addition, securities you own or may wish to purchase may not be available for secondary trading on PPEX ATS. You will be required to open an account that will be custodied with a third-party custodian for any secondary trading. Your custodian will be identified within your account paperwork.
We do not offer all types of securities but limit investment opportunities available to private placements, unregistered interests, and specific other securities. Other security products or brokerage services may be more suitable for you.
It is important for you to understand that all investment recommendations and activities involve risk, including the risk that you may lose your entire principal. Higher-risk investments, including private placements and other unregistered interests, may have the potential for higher returns but also greater losses. The higher your “risk tolerance,” meaning the amount of risk or loss you are willing and able to accept in order to achieve your investment goals, the more you may decide to invest in higher-risk investments offering the potential for greater returns. Any recommendations are based in part on your risk tolerance and investment objective. We encourage you to carefully consider your investment objective and risk tolerance before investing.
Private Placements are extremely speculative, illiquid, and include unique risks. While we will take reasonable care in developing and making recommendations to you, private placements involve risk, and you may lose money. There is no guarantee that any private placement will meet the stated investment goals or that our recommended investment strategy will perform as anticipated. Please consult any available PPM or other offering documents for any security we recommend discussing risks associated with the product.
The PPM contains important information about a particular investment’s business, operations, financial condition, and risks. The risks below include a summary of risk factors and are not meant to be all-inclusive. These include the following:
- Investments are Generally Risky and Offer No Guarantee of Success. All investments generally bear the risk of partial or complete loss of capital. There is no guarantee that an investment will be profitable.
- Illiquidity. Private placements have limited transferability, and investors may not be able to liquidate their interest in an issuer. Because of a variety of restrictions upon the transferability of the issuance, including restrictions imposed by federal securities laws, an investor may be required to retain their investment indefinitely. As a result of the foregoing factors, prospective investors must understand that there may never be a market of any kind for the purchase and sale of the interests.
- Forward-Looking Statements. Issuer material may contain forward-looking statements. When used in the material, including but not limited to words such as “believe,” “anticipate,” “intend,” “plan,” “seek,” “will be,” “expects,” “estimates,” “projects” and similar expressions identify such forward-looking statements. Such statements regarding future events and/or the future financial performance of an issuer are subject to certain risks and uncertainties which could cause actual events or the actual future results of the Issuer to differ materially from such forward-looking statements. Certain of these risks include changes in the issuer’s markets, technological advances, changes in applicable regulations, and new entries into the market. In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by the issuer or any other person that the objective and plans of the Issuer will be achieved.
- Changes in Capital Markets and the Economy. Each Issuer is materially affected by conditions in the global capital markets and the economy. Concerns over inflation, energy costs, geopolitical issues, availability, and the cost of credit may contribute to increased volatility and diminished expectations for the economy, the markets, or this investment going forward. Among others not listed, these factors may increase the likelihood of Issuer failure and investment loss. In addition, small and new businesses may be particularly susceptible to such factors.
Because the risks of each issuer and private placement are unique, it’s important to review the PPM or other offering material, understand the unique risks of the particular investment under consideration, and ask your registered representative additional questions about the business practices and risks associated with any recommended private placement.
Brokerage fees and our compensation
It is important to consider that while private placements may provide a cost-effective way to invest in private companies, they are not for everyone, given the risks, fees, and costs involved. You will pay transaction-based fees when you subscribe to a private placement. These transaction-based fees are generally referred to as a “commission” or a “sales concession.”
For each placement, we receive sales compensation based on the amount of money invested. The amount of compensation is generally 1-6% of your initial investment, but the exact amount varies by issuer. Again, exact terms of fees and expenses vary between each private placement offering. The specific fees and expenses associated with a private placement are listed in the PPM or similar offering document.
You will not be charged a transaction fee for each transaction in secondary trading through PPEX ATS. However, Dalmore will receive a 2% commission from the issuer, with 33.33% of the commission will be paid to PPEX ATS by Dalmore.
Conflicts of interest
Potential conflicts of interest may exist when we provide services to you. A conflict of interest is a situation in which we engage in a transaction or activity where our interest is materially adverse to your interest. The mere presence of a conflict of interest does not imply that harm to your interests will occur, but we must acknowledge the presence of such conflicts. Moreover, our regulatory obligations require that we establish, maintain, and enforce written policies and procedures reasonably designed to address potential conflicts of interest associated with any recommendations to you.
Our conflicts of interest are typically the result of compensation structures and other financial arrangements between us, our Registered Representatives, clients, and third parties. Securities rules allow for us, our Registered Representatives, and our affiliates to earn compensation when we provide brokerage services to you. However, the compensation that we and our Registered Representatives receive from you varies based upon the product or service you purchase, which may create a financial incentive to recommend investment products and services that generate greater compensation.
We are committed to taking appropriate steps to identify, mitigate and avoid conflicts of interest to ensure we act in your best interest when providing brokerage services to you. Below you will find additional information related to potential conflicts of interest. This information is not intended to be an all-inclusive list of potential conflicts but generally describes those conflicts that may be material to your brokerage relationship. In addition to this disclosure, conflicts of interest are disclosed to you in various agreement(s) and disclosure documents and other information we make available to you.
Compensation We Receive from Clients
You may pay certain fees (commissions and sales concessions) in connection with investing in a private placement. Although you won’t pay fees for transactions on the secondary market platform, Dalmore will receive commissions from the issuer. Where these fees apply, the more transactions you enter into, the more compensation that we and your financial professional receive. This compensation may create an incentive for us to encourage you to invest in private placements and trade in the secondary market.
Registered Representatives are compensated based on the percentage of revenue generated from sales of products and services to clients. This compensation may vary by the product or service associated with a brokerage recommendation. Private placements typically carry higher fees than other types of securities. Therefore, Registered Representatives may be incentivized to recommend these products over other brokerage products. We maintain policies and procedures designed to ensure that recommendations are in your best interest.
We may enter into placement agent and other such agreements with certain sponsors of private placement offerings from time to time. We may receive fees or other compensation by introducing a private placement sponsor to a client who invests in the offering. We maintain policies and procedures designed to ensure that recommendations are in your best interest.
Compensation Received by Registered Representatives
Personal Trading Activities
Registered Representatives may invest in the same private placements offered to clients. This may create a conflict of interest in that they may invest without paying a commission. Sometimes, additional fees are earned based on the total amount raised or a minimum amount raised. Our written supervisory procedures are designed to assure that the personal securities transactions, activities, and interests of the Registered Representatives of Dalmore will not interfere with making decisions in the best interests of our customers or implementing such decisions while, at the same time, allowing Dalmore Registered Representatives to invest for their accounts. The Firm has procedures to monitor the personal trading activities and securities holdings of each of the Firm’s Registered Representatives. It includes procedures for limitations on personal securities transactions of associated persons. These policies are designed to discourage and prohibit personal trading that would disadvantage clients.
You can visit Investor.gov/CRS for a free and simple search tool to research our financial professionals and us. You can also call your Registered Representative at (929) 207-3164 to request up-to-date disclosure information or to ask any questions you have about this brochure or services offered by Dalmore Group LLC.