August 2012

To our Clients:

In recent months there have been a number of high profile failures of commodity investment firms. MF Global and Peregrine Financial have been in the news and are charged with misuse of customer funds.

These events highlight the differences in the way the commodities industry and the broker-dealer industry are allowed to operate via their respective regulators. Securities broker-dealers are regulated by the Financial Industry Regulatory Authority (FINRA) and the Securities & Exchange Commission (SEC) which have strict rules regarding the separation of customer funds and firm funds. Commodity brokers are regulated by the Commodity Futures Trading Commission (CFTC), which has different rules.

As you may know, Bernardi Securities, Inc. clears through Pershing LLC, a division of the Bank of New York Mellon. This relationship allows us to focus on helping you manage your bond portfolio. Pershing provides custody and safekeeping services along with processing all cashiering, interest payment, security redemption, trade confirmation, and statement mailing functions.

Industry rules require Pershing LLC to segregate customer funds from its own assets. This means that your assets are not a part of Pershing’s operating or investment accounts. Pershing is required to keep sufficient net capital to assure the return of customer assets in the event of failure or liquidation.

Bernardi Securities, Inc. and Pershing are both members of the Securities Investor Protection Corporation (SIPC), a non-profit organization that provides coverage to investors if their brokerage firm becomes insolvent. It covers the replacement of missing securities and cash up to $500,000, with a limit of $100,000 for cash. Pershing provides additional account coverage through Lloyds of London which protects your assets up to an overall aggregate level of $1 billion for assets in the custody of Pershing.

We believe our clearing relationship with Pershing provides our customers with the highest level of protection available today. This agreement allows us to focus on our main mission-managing customer bond portfolios and providing high quality offerings. We do not have custody or access to customer funds and have no desire to seek it.

We hope this letter provides you with an additional level of comfort. Please feel free to contact me at (312) 281-2010 if you have any questions.

 

Sincerely yours,

Eric Bederman

Chief Operating & Compliance Officer

 

This document has been prepared by Bernardi Securities, Inc. (BSI) for our clients and other interested parties. Within this document, we may express opinions about the direction of financial markets, investment sectors, trends, and taxes. These opinions should not be considered predictions of future results, and are subject to change at any time. Past performance is not indicative of future returns. Nothing in this document represents a recommendation of any particular strategy, security or investment product. This information is provided for educational purposes only and was obtained from sources considered reliable, but is not guaranteed and not necessarily complete. BSI offerings are made by prospectus or official statement only. Income may be subject to state and local taxes and the federal alternative minimum tax. Additional risks associated with investing in municipal bonds include credit risk, interest rate risk, and reinvestment risk. Please consult your tax professional regarding the suitability of tax-free investing. Please consult your investment specialist for more information.

Municipal bonds not FDIC insured * May lose principal * Not appropriate for all investors