Disclosures
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Callable Securities Disclosure

HilltopSecurities Inc. Callable Securities Disclosure

HilltopSecurities ("HTS") Impartial Lottery Process: When a security is subject to a partial redemption, pursuant to FINRA Rule 4340, which has been incorporated into the FINRA Consolidated Rulebook, HTS must have procedures in place that are designed to treat clients fairly in accordance with an impartial lottery process. Below is a description of the impartial lottery process:

When an issuer initiates a partial call of securities, the depository holding such securities (typically, the Depository Trust Corporation "DTC") conducts an impartial computerized lottery using an incremental random number technique to determine the allocation of called securities to its participants (including HTS) for which it holds securities on deposit. Because DTC's lottery is random and impartial, in the case of a partial call, Depository Participants may or may not receive an allocation of securities selected for call.

When HTS is notified that it received an allocation of called securities, HTS conducts a similar computer-generated random lottery. The lottery determines the accounts that will be selected and the number of securities in the account that will be redeemed. Allocations are based on the number of trading units (e.g $1,000 lots for bonds) that the accounts hold. The probability of any trading unit held by an account being selected as called in a partial call is proportional to the total number of trading units being held through HTS. Once the lottery is completed, HTS notifies any brokers whose client accounts have received an allocation. Securities registered in customer name, either in transit or held in custody, are excluded from the HTS lottery process.

HTS systems initiate the lottery process by identifying the accounts that hold the called security, the total par value of the called securities held in the accounts and the trading unit of such security (e.g. $1,000).

Example (unit of trade = $1,000)

Example Customer Account Par Value Number of Trading Units
123456789 $100,000

100

456789123 $75,000

75

789101112 $150,000

150

159753258 $50,000

50

 

In brief, that allocation process involves the following steps:

Additional Information about the Impartial Lottery Process

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