Document:

EX-10.1

Exhibit 10.1

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	:	 	 	 	 
	 

	 	In the Matter of
	 	:	 	 	 	 
	 

	 	 	 	:	 	 	 	 
	 

	 	TD AMERITRADE, INC.,
	 	 :
	 	 	 	OFFER OF SETTLEMENT
	 

	 	 	 	:
	 	 	 	OF TD AMERITRADE, INC.
	 

	 	Respondent.
	 	:	 	 	 	 
	 

	 	 	 	:	 	 	 	 
	 

	 	 	 	:	 	 	 	 
	 	 	 	 	 	 	 

I.

     TD Ameritrade, Inc. (“TDA” or “Respondent”), pursuant to Rule 240(a) of the Rules of Practice
of the Securities and Exchange Commission (“Commission”) [17 C.F.R. § 201.240(a)] submits this
Offer of Settlement (“Offer”) in anticipation of public administrative and cease-and-desist
proceedings to be instituted against it by the Commission, pursuant to Section 8A of the Securities
Act of 1933 (“Securities Act”) and Section 15(b) of the Securities Exchange Act of 1934 (“Exchange
Act”).

II.

     This Offer is submitted solely for the purpose of settling these proceedings, with the express
understanding that it will not be used in any way in these or any other proceedings, unless the
Offer is accepted by the Commission. If the Offer is not accepted by the Commission, the Offer is
withdrawn without prejudice to Respondent and shall not become a part of the record in these or any
other proceedings, except for the waiver expressed in Section V., below, with respect to Rule
240(c)(5) of the Commission’s Rules of Practice [17 C.F.R. § 201.240(c)(5)].

III.

     Consistent with the provisions of 17 C.F.R. § 202.5(f), Respondent waives any claim of Double
Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or
civil penalty herein.

IV.

     Respondent hereby waives any rights under the Equal Access to Justice Act, the Small Business
Regulatory Enforcement Fairness Act of 1996, or any other provision of

 

 

law to seek from the United States, or any agency, or any official of the United States acting in
his or her official capacity, directly or indirectly, reimbursement of attorney’s fees or other
fees, expenses, or costs expended by Respondent to defend against this action. For these purposes,
Respondent agrees that Respondent is not the prevailing party in this action since the parties have
reached a good faith settlement.

V.

     By submitting this Offer, Respondent hereby acknowledges its waiver of those rights specified
in Rules 240(c)(4) and (5) [17 C.F.R. §201.240(c)(4) and (5)] of the Commission’s Rules of
Practice. Respondent also hereby waives service of the Order.

VI.

     Solely for the purpose of these proceedings and any other proceedings brought by or on behalf
of the Commission or in which the Commission is a party, prior to a hearing pursuant to the
Commission’s Rules of Practice, 17 C.F.R. § 201.100 et seq., and without admitting
or denying the findings contained in the Commission’s Order Instituting Administrative and
Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 15(b)
of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a
Cease-and-Desist Order (“Order”), Respondent consents to the entry of the attached Order by the
Commission.

VII.

     Respondent undertakes to comply with the following:

A. Key Definitions

               1. Eligible Auction Rate Securities. As used in these undertakings, “Eligible ARS”
shall mean auction rate securities that were purchased at Respondent on or before February 13, 2008
and that have failed at auction at least once since February 13, 2008. Notwithstanding the
foregoing definition, the term “Eligible ARS” shall not include ARS that were purchased at
Respondent or through entities acquired by Respondent’s parent companies in accounts owned, managed
or advised by or through independent registered investment advisers.

               2. Eligible Customers. As used in these undertakings, “Eligible Customers” shall mean
the following current and former account owners who purchased Eligible ARS at Respondent on or
before February 13, 2008, did not transfer such Eligible ARS away from Respondent prior to the
Merger Date, and held those securities on February 13, 2008:

                    a. Natural persons (including their IRA accounts, testamentary trust and estate accounts,
custodial accounts established under the Uniform Transfers to Minors Act or the Uniform Gifts to
Minors Act, and guardianship accounts);

 

 

                    b. Charities, endowments or foundations with Internal Revenue Code Section 501(c)(3) status;
or

                    c. Small Businesses and Institutions. For purposes of this class of Eligible Customers,
“Small Businesses and Institutions” shall mean the following account owners with total assets at
Respondent of $10 million or less as of March 13, 2009: trusts; corporate trusts; corporations;
employee pension plans/ERISA and Taft Hartley Act plans; educational institutions; incorporated
not-for-profit organizations; limited liability companies; limited partnerships; non-public
companies; partnerships; personal holding companies; unincorporated associations; and government
and quasi-government entities.

                         i. In calculating total assets at Respondent for the purposes of this paragraph, Respondent
may include household accounts.

                         ii. If an account owner described within this paragraph had transferred his Eligible ARS away
from Respondent prior to March 13, 2009, then the date of the account owner’s request to transfer
his Eligible ARS shall be used for determining whether the account holder had total assets of $10
million or less.

                         iii. For purposes of this paragraph, “Small Businesses and Institutions” shall not include
broker-dealers or banks acting as conduits for their customers or customers that had total assets
of greater than $50 million as of the date of the Order.

                         iv. In no event shall Respondent be required to purchase more than $10 million of Eligible ARS
from any Small Business or Institution.

          B. Customer Notification — Customer Assistance Line and Internet Page. No later than
two (2) business days after the date of the Order, Respondent shall establish: 1) a dedicated
toll-free telephone assistance line, with appropriate staffing, to provide information and to
respond to questions concerning the terms of the Order; and 2) a public Internet page on its
corporate Web site(s), with a prominent link to that page appearing on Respondent’s relevant
homepage(s), to provide information concerning the terms of the Order and, via an e-mail address or
other reasonable means, to respond to questions concerning the terms of the Order. Respondent
shall maintain the telephone assistance line and Internet page through at least the Purchase
Deadline, as defined below.

          C. Respondent’s Offer to Purchase Eligible ARS

               1. Offer Notices.

                    a. First Offer Notice. No later than fifteen (15) business days after the date of the
Order, or, for those Eligible Customers not identified

 

 

prior to this date despite Respondent’s best efforts, as soon as practicable thereafter, Respondent
shall offer to purchase, at par plus accrued and unpaid dividends/interest, Eligible ARS from
Eligible Customers (“Purchase Offer”), and explain what the Eligible Customers must do to accept,
in whole or in part, the Purchase Offer. Respondent shall also inform the Eligible Customers of
the relevant terms of the Order and any other material issues regarding the Eligible Customers’
rights.

                    b. Second Offer Notice. To the extent that any Eligible Customers have not responded
to the Purchase Offer on or before forty-five (45) days before the end of the applicable Offer
Period (defined below), Respondent shall provide any such Eligible Customers a second written
notice informing them again of the Respondent’s Purchase Offer, the relevant terms of the Order and
any other material issues regarding the Eligible Customers’ rights.

               2. Offer Periods.

                    a. First Offer Period. For those Eligible Customers with assets at Respondent of
$250,000 or less as of March 13, 2009, the Purchase Offer shall remain open for a period of
seventy-five (75) days from the date on which the Purchase Offer was sent (“First Offer Period”).
To the extent any Eligible Customer had transferred his Eligible ARS away from Respondent before
March 13, 2009, then the measurement date for the $250,000 threshold shall be the date on which the
transfer was requested by the Eligible Customer.

                    b. Second Offer Period. For those Eligible Customers with assets at Respondent of
more than $250,000 as of March 13, 2009, the Purchase Offer shall remain open until at least March
23, 2010 (“Second Offer Period”), subject to extension under the purchase procedures described
below. To the extent any Eligible Customer had transferred his Eligible ARS away from Respondent
before March 13, 2009, then the measurement date for the $250,000 threshold shall be the date on
which the transfer was requested by the Eligible Customer.

          D. Acceptance and Purchase Procedures

               1. Eligible Customer Acceptance. Eligible Customers may accept Respondent’s Purchase
Offer by notifying Respondent in writing at any time before midnight, Eastern Time, on the last day
of the applicable offer period, or such later date and time as may be extended by Respondent. An
acceptance must be received by Respondent prior to the expiration of the applicable offer period,
or such later date as may be extended by Respondent and the Commission staff.

               2. Purchase Notice. For those Eligible Customers who accept Respondent’s Purchase
Offer within the applicable Offer Period, Respondent shall send those Eligible Customers a notice
(“Purchase Notice”), indicating when (“Purchase Date”) and how Respondent will purchase their
Eligible ARS.

 

 

               3. Eligible Customers’ Right to Revoke. Eligible Customers may revoke their
acceptance of Respondent’s Purchase Offer up until Respondent purchases an Eligible Customer’s
Eligible ARS.

               4. Purchases Relating to Eligible Customers to Whom the First Offer Period Applies.
For those Eligible Customers to whom the First Offer Period applies, and who accept Respondent’s
Purchase Offer within the First Offer Period, Respondent shall purchase their Eligible ARS no later
than five (5) business days following expiration of the First Offer Period.

               5. Purchases Relating to Eligible Customers to Whom the Second Offer Period Applies.
For those Eligible Customers to whom the Second Offer Period applies, and who accept Respondent’s
Purchase Offer within the Second Offer Period, Respondent shall purchase their Eligible ARS as soon
as practicable and by no later than five (5) business days following the expiration of the Second
Offer Period.

                    a. Respondent shall use its best efforts to effectuate all purchases under this paragraph by
March 31, 2010, and in no event shall the purchases extend beyond June 30, 2010.

                    b. In the event that Respondent’s purchases under this paragraph extend beyond March 31, 2010,
then the Second Offer Period shall be extended from March 23, 2010 until June 23, 2010. Under such
circumstances, Respondent shall issue a notice of such extension in conformity with the federal
securities laws by no later than March 24, 2010.

               6. Purchases Relating to Eligible Customers Who Have Since Transferred Their Eligible ARS
Away from Respondent. Respondent’s purchase obligations described above apply equally to those
Eligible Customers who accept Respondent’s Purchase Offer within the applicable Offer Period, but
who have since transferred their Eligible ARS away from Respondent.

                    a. Respondent’s purchase obligations to these Eligible Customers shall be contingent on: (1)
Respondent receiving reasonably satisfactory assurance from the financial services firm currently
holding the Eligible Customer’s Eligible ARS that the bidding rights associated with the Eligible
ARS will be transferred to the Respondent; (2) the Eligible Customer opening a new account with
Respondent; and (3) the transfer of the Eligible ARS to the Eligible Customer’s new account with
Respondent.

                    b. Respondent shall use its best efforts to identify, contact and assist such Eligible
Customers to open a new account at Respondent and to transfer the Eligible ARS to such account, and
shall not charge such Eligible Customers any fees relating to or in connection with the transfer to
Respondent or custodianship by Respondent of such Eligible ARS.

 

 

          E. Customers Who Transferred Their Eligible ARS Away from Respondent before the Merger
Date. In the event that Respondent receives a purchase request from a customer who purchased
Eligible ARS at Respondent prior to February 13, 2008 but who transferred such Eligible ARS away
from Respondent before the Merger Date, Respondent shall engage in good faith negotiations with
such customer in an attempt to resolve the customer’s request. Respondent shall notify the
Commission staff of all such requests and their ultimate resolutions, if any.

          F. Reimbursement for Related Loan Expenses. Respondent shall use its best efforts to
identify Eligible Customers who took out loans from Respondent after February 13, 2008 secured by
Eligible ARS that were not successfully auctioning at the time the loan was taken and who paid
interest associated with the ARS-based portion of those loans in excess of the total interest and
dividends received on the Eligible ARS during the duration of the loan. Respondent shall reimburse
such customers for the excess expense, plus reasonable interest thereon. Such reimbursement shall
occur no later than seventy-five (75) days after the date of the Order.

          G. Relief for Eligible Customers Who Sold Below Par. Respondent shall use its best
efforts to identify any Eligible Customers who: (1) purchased Eligible ARS at Respondent on or
before February 13, 2008; and (2) subsequently sold those Eligible ARS below par between February
13, 2008 and the date of the Order (referred to as “Below Par Sellers”). Within seventy-five (75)
days of the date of the Order, Respondent shall pay any such identified Below Par Sellers the
difference between par and the price at which the Below Par Seller sold the Eligible ARS, plus
reasonable interest thereon. Respondent shall promptly pay any such Below Par Seller identified
thereafter.

          H. Consequential Damages Claims

               1. Special Arbitration Procedures. Respondent shall consent to participate, at the
election of an Eligible Customer, in the special arbitration procedures announced by FINRA on
December 16, 2008, and available on its website at
http://www.finra.org/web/groups/arbitrationmediation/@arbmed/documents/arbmed/p117445.pdf for the
exclusive purpose of arbitrating an Eligible Customer’s claim for consequential damages against
Respondent related to the customer’s investment in Eligible ARS. As explained by the special
arbitration procedures, the following shall apply:

                    a. Forum Fees. Respondent will pay all forum fees associated with the arbitration.

                    b. Burden of Proof. Eligible Customers shall bear the burden of proving by a
preponderance of the evidence the existence and amount of consequential damages suffered as a
result of the illiquidity of the Eligible ARS. Although it may defend itself against consequential
damage claims, Respondent shall not argue against liability for the illiquidity of the underlying
Eligible ARS position or use as
part of its defense any decision by the Eligible Customer not to borrow money from Respondent.

 

 

                    c. Other Damages. Eligible Customers who elect to use the special arbitration
procedures provided for within this subparagraph shall not be eligible for punitive damages, or any
other type of damages other than consequential damages. Eligible Customers proceeding under the
special arbitration procedures may not recover as consequential damages any attorneys’ fees
incurred in connection with the arbitration or any related mediation proceeding.

          I. Other Proceedings/Relief. All Eligible Customers who avail themselves of the
relief provided pursuant to the Order may pursue any remedies against Respondent available under
the law subject to any defenses Respondent may have. However, those customers that elect to
utilize the special arbitration procedures set forth above are limited to the remedies available in
that process and may not bring or pursue a claim relating to ARS in another forum.

          J. Reports and Meetings

               1. Within 45 days of the end of each month, beginning with a report covering the month ended
after the date of the Order and continuing through and including a report covering the month ended
June 30, 2010, Respondent shall submit a monthly written report detailing Respondent’s progress
with respect to its undertakings. The report shall be submitted to Noel M. Franklin, Esq., U.S.
Securities and Exchange Commission, 1801 California Street, Suite 1500, Denver, Colorado 80202 or
as directed in writing by the Commission Staff.

               2. Beginning in September 2009, Respondent shall confer at least quarterly with the Commission
staff to discuss its progress with respect to these undertakings. Such quarterly progress reports
shall continue until June, 2010.

               3. The reporting and conference deadlines set forth above may be amended or modified with
agreement from the Commission Staff.

VIII.

     Respondent hereby:

     A. Admits the jurisdiction of the Commission over it and over the matters set forth in the
Order;

     B. Consents to the issuance of the Order by the Commission, without otherwise admitting or
denying the findings set forth in the Order, in which the Commission:

 

 

          1. finds that Respondent willfully1 violated Section 17(a)(2) of the Securities
Act;

          2. orders that Respondent cease and desist from committing or causing any violations and any
future violations of Section 17(a)(2) of the Securities Act; and

          3. orders that Respondent is censured.

          4. The Division of Enforcement (“Division”) may, at any time following the entry of the Order,
petition the Commission to seek an order directing payment of up to the maximum civil penalty
allowable under the law in the event the Division believes that Respondent has not complied with
its undertakings as more fully described above. In determining whether to seek a penalty, the
Commission will take into consideration its traditional criteria in determining whether to assess
civil penalties, including the extent to which Respondent has satisfied its undertakings and
cooperated with the Commission and other regulators in their investigations. Respondent may not,
by way of defense to any such petition: (1) contest the findings in the Order; or (2) assert any
defense to liability or remedy, including, but not limited to, any statute of limitations defense.

IX.

     Respondent understands and agrees to comply with the Commission’s policy “not to permit a
defendant or respondent to consent to a judgment or order that imposes a sanction while denying the
allegations in the complaint or order for proceedings” (17 C.F.R. §202.5(e)). In compliance with
this policy, Respondent agrees: (i) not to take any action or to make or permit to be made any
public statement denying, directly or indirectly, any finding in the Order or creating the
impression that the Order is without factual basis; and (ii) that upon the filing of this Offer of
Settlement, Respondent hereby withdraws any papers previously filed in this proceeding to the
extent that they deny, directly or indirectly, any finding in the Order. If Respondent breaches
this agreement, the Division of Enforcement may petition the Commission to vacate the Order and
restore this proceeding to its active docket. Nothing in this provision affects Respondent’s: (i)
testimonial obligations; or (ii) right to take legal or factual positions in litigation or other
legal proceedings in which the Commission is not a party.

 

			
	1	 	A willful violation of the securities laws means merely
“‘the person charged with the duty knows what he is doing.’” Wonsover v. SEC,
205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977
(D.C. Cir. 1949)). There is no requirement that the actor “‘also be aware that
he is violating one of the Rules or Acts.’” Id. (quoting Gearhart & Otis, Inc.
v. SEC, 348 F.3d 798, 803 (D.C. Cir. 1965)).

 

 

X.

     Respondent states that it has read and understands the foregoing Offer, that this Offer is
made voluntarily, and that no promises, offers, threats, or inducements of any kind or nature
whatsoever have been made by the Commission or any member, officer, employee, agent, or
representative of the Commission in consideration of this Offer or otherwise to induce it to submit
to this Offer.

Dated: 2nd day of July, 2009.

	 	 	 	 	 
	 	TD Ameritrade, Inc.

 	 
	 	By:  	/s/ WILLIAM J. GERBER
 	 
	 	 	William J. Gerber 	 
	 	 	Chief Financial Officer 	 
	 

	 	 	 	 	 	 	 
	STATE OF NEBRASKA}
	 	 	 	 	 	 
	 

	 	 	 	}
	 	SS:
	COUNTY OF DOUGLAS}
	 	 	 	 	 	 

The foregoing instrument was acknowledged before me this 2nd day of July, 2009, by
William J. Gerber, who [X] is personally known to me or ___who has produced a [applicable State]
driver’s license as identification and who did take an oath.

	 	 	 
	/s/ NANCY L. LOWREY
	 	 
	 
	 	 
	Notary Public
	 	 
	State of [applicable State]
	 	 
	Commission Number

	 	:
	Commission Expiration

	 	: May 4, 2012EX-10.2

Exhibit 10.2

	 	 	 	 	 
	ATTORNEY GENERAL OF THE STATE OF NEW YORK 

INVESTOR PROTECTION BUREAU
	 	

x

:	 	 
	 

IN THE MATTER OF

	 	 	 
	 

	 	:	 	 
	TD AMERITRADE, INC.

	 	:	 	 
	 

	 	:

x	 	 
	 

	 	 	 

ASSURANCE OF DISCONTINUANCE

PURSUANT TO EXECUTIVE LAW § 63(15)

     On April 14, 2008, the Office of the Attorney General of the State of New York (the “Attorney
General”), commenced an investigation, pursuant to Article 23-A of the General Business Law (the
“Martin Act”), of TD Ameritrade, Inc. (“TD Ameritrade”), concerning TD Ameritrade’s marketing and
sale of auction rate securities (the “Investigation”). This Assurance of Discontinuance
(“Assurance”) contains the findings of the Attorney General’s Investigation and the relief agreed
to by the Attorney General and TD Ameritrade.

FINDINGS

     The Attorney General finds as follows:

I. Relevant Entity

     1. TD Ameritrade is a New York corporation. It is licensed to do business in the State of New
York and has offices located in New York City. TD Ameritrade is a registered broker/dealer
offering brokerage and investment products and services to investors across the United States. TD
Ameritrade was formed as a result of the consolidation of retail brokerage operations of
Ameritrade, Inc. and TD Waterhouse Investors Services, Inc. following Ameritrade Holding
Corporation’s acquisition of TD Waterhouse Group, Inc. on January 24, 2006 (the “Merger Date”).

-1-

 

II. Background on Auction Rate Securities

     2. Auction rate securities are long-term bonds issued by municipalities, corporations and
student loan companies, or perpetual equity instruments issued by closed end mutual funds, with
variable interest rates that reset through a bidding process known as a Dutch auction.

     3. At a Dutch auction, bidders generally state the number of auction rate securities they wish
to purchase and the minimum interest rate they are willing to accept. Bids are ranked, from lowest
to highest, according to the minimum interest rate each bidder is willing to accept. The lowest
interest rate required to sell all of the auction rate securities available at auction, known as
the “clearing rate,” becomes the rate paid to all holders of that particular security until the
next auction. The process is then repeated, typically every 7, 28 or 35 days.

     4. When there are not enough orders to purchase all of the auction rate securities being sold,
a “failed” auction occurs. In the event of a failed auction, investors cannot sell their auction
rate securities.

     5. To facilitate the auction process, the issuers of the auction rate securities select one or
more broker-dealers to underwrite the offering and/or manage the auction process.

     6. TD Ameritrade did not act as an underwriter, manager or agent for any issuer of auction
rate securities. Rather, TD Ameritrade acted as agent, both on a solicited and unsolicited basis,
for its customers by submitting their bids to purchase and orders to sell auction rate securities.
TD Ameritrade received revenue in connection with auction rate securities, including a fee for
acting as an agent for its customers.

-2-

 

			
	III.	 	TD Ameritrade Made Misrepresentations to Certain Investors
in Connection With the Sale of Auction Rate Securities

     7. TD Ameritrade represented to certain of its customers that auction rate securities were
“money market alternatives” and “liquid investments.” It did so through its registered
representatives, who represented to certain investors that auction rate securities were highly
liquid, safe, cash-equivalent investments.

     8. These representations were misleading as to certain investors. Auction rate securities
were in fact different from money market funds. As discussed above, the liquidity of an auction
rate security relied on the successful operation of the Dutch auction process. In the event of a
failed auction, investors can not sell their auction rate securities and are stuck holding
long-term investments. As discussed below, starting in the Fall of 2007, the auction rate
securities market faced dislocation and an increased risk of failure.

     9. Since the inception of the auction rate securities market, certain other broker-dealers
submitted support bids, purchase orders for the entirety of an auction rate security issue they
underwrote and for which they acted as the sole or lead broker. Support bids were broker-dealers’
proprietary orders that would be filled, in whole or in part, if there was otherwise insufficient
demand in an auction. When broker-dealers purchased auction rate securities through support bids,
auction rate securities were recorded on the broker-dealers’ balance sheets.

     10. As a distributing broker-dealer, TD Ameritrade did not submit bids to support the auctions
and did not hold any significant inventory of auction rate securities in its proprietary account.

-3-

 

     11. Because investors could not ascertain how much of an auction was filled through
broker-dealer proprietary trades, investors could not determine if auctions were clearing because
of normal marketplace demand, or because broker-dealers were making up for lack of demand through
support bids. Generally, investors were also not aware that the auction rate securities market was
dependent upon broker-dealers’ use of support bids for its operation. There was no way for
investors to monitor supply and demand in the market or to assess when broker-dealers may decide to
stop supporting the market, which could cause its collapse.

			
	IV.	 	By the Fall of 2007, The Auction Rate Securities Market Faced Dislocation

     12. In August 2007, the credit crisis and other deteriorating market conditions strained the
auction rate securities market. Some institutional investors withdrew from the market, decreasing
demand for auction rate securities.

     13. From the Fall of 2007 through February of 2008, demand for auction rate securities
continued to erode and many broker-dealers’ auction rate securities inventory reached unprecedented
levels. In February 2008, many broker-dealers stopped supporting the auctions. Without the
benefit of support bids, the auction rate securities market collapsed, leaving investors who had
been led to believe that these securities were “money market alternatives” and “liquid
investments,” appropriate for managing short-term cash needs, holding long-term or perpetual
securities that could not be sold at par value.

V. Violations

     14. The foregoing acts and practices of TD Ameritrade violated provisions of the Martin Act,
Article 23-A of the General Business Law.

-4-

 

     15. The foregoing acts and practices of TD Ameritrade violated provisions of § 349 of the
General Business Law.

     16. The foregoing acts and practices of TD Ameritrade violated provisions of § 63(12) of the
Executive Law.

AGREEMENT

     WHEREAS, the parties agree to settle allegations that TD Ameritrade’s conduct violated the
Martin Act, General Business Law § 349 and Executive Law § 63(12) and the Attorney General can
bring an action when misrepresentations are made in connection with the sale of securities and
scienter need not be proven to establish a violation of the Martin Act, General Business Law § 349
and Executive Law § 63(12);

     WHEREAS, TD Ameritrade neither admits nor denies the Attorney General’s Findings set forth
above;

     WHEREAS, the Attorney General is willing to accept the terms of the Assurance pursuant to New
York Executive Law § 63(15), and to discontinue, as described in paragraph 52 below, its
Investigation of TD Ameritrade; and

     WHEREAS, the parties each believe that the obligations imposed by this Assurance are prudent
and appropriate;

     IT IS HEREBY UNDERSTOOD AND AGREED, by and between the parties, that:

-5-

 

I. Relief for Auction Rate Security Investors

     A. Purchases from Auction Rate Securities Investors

     17. TD Ameritrade will provide liquidity to Eligible Investors, as defined below, by
purchasing Eligible Auction Rate Securities, as defined below, that have failed at auction at least
once since February 13, 2008, at par, in the manner described below.

     18. “Eligible Auction Rate Securities,” for the purposes of this Assurance shall mean auction
rate securities purchased at TD Ameritrade on or before February 13, 2008 and that have failed at
auction at least once since February 13, 2008. Notwithstanding the foregoing definition, Eligible
Auction Rate Securities shall not include auction rate securities that were purchased at TD
Ameritrade or entities acquired by TD Ameritrade’s parent companies in accounts owned, managed or
advised by or through independent registered investment advisers.

     19. “Eligible Investors,” for the purposes of this Assurance, shall mean the following current
and former account owners who purchased Eligible Auction Rate Securities at TD Ameritrade on or
before February 13, 2008, did not transfer such Eligible Auction Rate Securities away from TD
Ameritrade prior to the Merger Date, and held those securities on February 13, 2008:

	 	a.	 	Natural persons (including their IRA accounts,
testamentary trust and estate accounts, custodian UGMA and UTMA accounts,
and guardianship accounts);
	 
	 	b.	 	Charities, endowments or foundations with Internal
Revenue Code Section501(c)(3) status; or

-6-

 

	 	c.	 	Small Businesses and Institutions. For purposes of this
provision, “Small Businesses and Institutions” shall mean the following
account owners with total assets at TD Ameritrade of $10 million or less as
of March 13, 2009: trusts; corporate trusts; corporations; employee pension
plans/ERISA and Taft Hartley Act plans; educational institutions;
incorporated not-for-profit organizations; limited liability companies;
limited partnerships; non-public companies; partnerships; personal holding
companies; unincorporated associations; and government and quasi-government
entities.

	 	i.	 	In calculating total assets at TD Ameritrade for
the purposes of Paragraph 19(c), TD Ameritrade may include household
accounts.
	 
	 	ii.	 	If an account owner described within Paragraph
19(c) transferred its Eligible Auction Rate Securities away from TD
Ameritrade prior to March 13, 2009, then the date of the account owner’s
request to transfer its Eligible Auction Rate Securities shall be used
for determining whether the account owner had $10 million or less at TD
Ameritrade.
	 
	 	iii.	 	“Small Businesses and Institutions” shall not
include broker-dealers or banks acting as conduits for their customers,
or customers that had total assets of greater than $50 million as of the
date of this Assurance.

-7-

 

	 	iv.	 	In no event shall TD Ameritrade be required by
this Assurance to purchase more than $10 million of auction rate
securities from any Small Business or Institution.

     20. TD Ameritrade shall offer to purchase, at par plus accrued and unpaid dividends/interest,
from Eligible Investors their Eligible Auction Rate Securities that have failed at auction at least
once since February 13, 2008 (the “Purchase Offer”). The Purchase Offer shall remain open as
follows:

	 	a.	 	First Offer Period. For those Eligible Investors with assets at TD
Ameritrade of $250,000 or less as of March 13, 2009, the Purchase Offer shall remain
open for a period of seventy-five (75) days from the date on which the Purchase Offer
was sent (“First Offer Period”). To the extent that any Eligible Investor transferred
their Eligible Auction Rate Securities away from TD Ameritrade before March 13, 2009,
then the measurement date for the $250,000 threshold shall be the date on which the
transfer was requested by the Eligible Investor.
	 
	 	b.	 	Second Offer Period. For those Eligible Investors with assets at TD
Ameritrade of more than $250,000 as of March 13, 2009, the Purchase Offer shall remain
open until at least March 23, 2010 (“Second Offer Period”), subject to extension
pursuant to paragraph 23(b) below. To the extent that any Eligible Investor
transferred their Eligible Auction Rate Securities away from TD Ameritrade before
March 13, 2009, then the measurement date for the $250,000 threshold shall be the date
on which the transfer was requested by the Eligible Investor.

-8-

 

     21. No later than fifteen (15) business days from the date of this Assurance, TD Ameritrade
shall undertake its best efforts to identify and provide notice to Eligible Investors of the
relevant terms of this Assurance. Said notice shall explain what Eligible Investors must do to
accept, in whole or in part, the Purchase Offer, including how Eligible Investors may accept the
Purchase Offer. TD Ameritrade shall also provide written notice of the relevant terms of this
Assurance to any subsequently identified Eligible Investors.

     22. To the extent that any Eligible Investors have not responded to the Purchase Offer on or
before forty-five (45) days before the end of the applicable offer period (defined in paragraph
20(a) and (b) above), TD Ameritrade shall provide any such Eligible Investor with a second written
notice informing them again of the Purchase Offer, including the date by which the applicable offer
period will end. TD Ameritrade shall also inform them of the relevant terms of this Assurance and
any other material issues regarding the Eligible Investors’ rights.

     23. Eligible Investors may accept the Purchase Offer by notifying TD Ameritrade, as described
in the Purchase Offer, at any time before midnight, Eastern Time, on the last day of the applicable
offer period. An acceptance must be received by TD Ameritrade prior to the expiration of the
applicable offer period, or any extension thereof, to be effective. The purchases will be
conducted as follows:

	 	a.	 	Purchases Relating to Eligible Investors to Whom the First Offer
Period Applies. For those Eligible Investors to whom the First Offer Period
applies, and who accept the Purchase Offer within the First Offer Period, TD
Ameritrade shall purchase their Eligible Auction

-9-

 

	 	 	 	Rate Securities no later than five (5) business days following the expiration
of the First Offer Period.
	 
	 	b.	 	Purchases Relating to Eligible Investors to Whom the Second Offer
Period Applies. For those Eligible Investors to whom the Second Offer Period
applies, and who accept the Purchase Offer within the Second Offer Period, TD
Ameritrade shall purchase their Eligible Auction Rate Securities as soon as
practicable and, in any event, no later than five (5) business days following the
expiration of the Second Offer Period (the “Purchase Deadline”). TD Ameritrade
shall use its best efforts to effectuate all purchases under this paragraph by
March 31, 2010, and in no event shall the purchases extend beyond June 30, 2010.
In the event TD Ameritrade’s purchases under this paragraph extend beyond March
23, 2010, then the Second Offer Period shall be extended from March 23, 2010 until
June 23, 2010.
	 
	 	c.	 	An Eligible Investor may revoke their acceptance of TD Ameritrade’s
Purchase Offer at any time up until TD Ameritrade purchases such Eligible
Investor’s Eligible Auction Rate Securities or provides notice of TD Ameritrade’s
intent to purchase such Eligible Auction Rate Securities.
	 
	 	d.	 	TD Ameritrade’s obligation under this paragraph to those Eligible
Investors who custodied their Eligible Auction Rate Securities away from TD
Ameritrade as of the date of this Assurance shall be contingent on: (1) TD
Ameritrade receiving reasonably satisfactory

-10-

 

	 	 	 	assurance from the financial institution currently holding the Eligible
Investor’s Eligible Auction Rate Securities that the bidding rights associated
with such Eligible Auction Rate Securities will be transferred to TD
Ameritrade; and (2) transfer of the Eligible Auction Rate Securities back to TD
Ameritrade.
	 
	 	e.	 	TD Ameritrade shall use its best efforts to identify, contact and
assist any Eligible Investor who has transferred the Eligible Auction Rate
Securities out of TD Ameritrade’s custody in returning such Auction Rate
Securities to TD Ameritrade’s custody, and shall not charge such Eligible Investor
any fees relating to or in connection with the return to TD Ameritrade or
custodianship by TD Ameritrade of such Eligible Auction Rate Securities.

     24. In the event that TD Ameritrade receives a purchase request from a customer who purchased
Eligible Auction Rate Securities at TD Ameritrade prior to February 13, 2008, but who transferred
such Eligible Auction Rate Securities away from TD Ameritrade prior to the Merger Date, TD
Ameritrade shall engage in good faith negotiations with such customer in an attempt to resolve the
customer’s request. TD Ameritrade shall promptly notify the Attorney General of all such requests.

     25. No later than two (2) business days after the date of this Assurance, TD Ameritrade shall
establish: (a) a dedicated toll-free telephone assistance line, with appropriate staffing, to
provide information and to respond to questions concerning the terms of this Assurance; and (b) a
public Internet page on its corporate Web site(s), with a prominent link to that page appearing on
TD Ameritrade’s relevant homepage(s), to

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provide information concerning the terms of this Assurance and, via an e-mail address or other
reasonable means, to respond to questions concerning the terms of this Assurance. TD Ameritrade
shall maintain the telephone assistance line and Internet page through at least the last day of the
Purchase Deadline, or any extension thereof.

     B. Relief for Eligible Investors Who Sold Below Par

     27. No later than seventy-five (75) days from the date of this Assurance, TD Ameritrade shall
undertake its best efforts to identify any Eligible Investor who sold Eligible Auction Rate
Securities below par between February 13, 2008 and the date of this Assurance (“Below Par Seller”)
and pay them the difference between par and the price at which the Eligible Investor sold the
Eligible Auction Rate Securities, plus reasonable interest thereon. TD Ameritrade shall promptly
pay any such Below Par Seller identified thereafter.

     C. Reimbursement for Related Loan Expenses

     28. As soon as practicable, but not later than seventy-five (75) days from the date of this
Assurance, TD Ameritrade shall make best efforts to identify Eligible Investors who took out loans
from TD Ameritrade after February 13, 2008, that were secured by Eligible Auction Rate Securities
that were not successfully auctioning at the time the loan was taken out from TD Ameritrade, and
paid interest associated with the auction rate securities based portion of those loans in excess of
the total interest and dividends received on the auction rate securities during the duration of the
loan. TD Ameritrade shall reimburse such customers promptly for the excess expense, plus
reasonable interest thereon.

-12-

 

     D. Consequential Damages Arbitration Process

     29. TD Ameritrade shall consent to participate in a special arbitration process
(“Arbitration”) for the exclusive purpose of arbitrating any Eligible Investor’s consequential
damages claim arising from their inability to sell Eligible Auction Rate Securities. TD Ameritrade
shall notify Eligible Investors of the terms of the Arbitration process through the notice
described in paragraph 21 above.

     30. The Arbitration shall be conducted by a single public arbitrator (as defined by section
12100(u) of the NASD Code of Arbitration Procedures for Customer Disputes, eff. April 16, 2007),
under the auspices of FINRA. TD Ameritrade will pay all applicable forum and filing fees.

     31. Any Eligible Investors who choose to pursue such claims in the Arbitration shall bear the
burden of proving that they suffered consequential damages and that such damages were caused by
their inability to access funds invested in Eligible Auction Rate Securities. In the Arbitration,
TD Ameritrade shall be able to defend itself against such claims; provided, however, that TD
Ameritrade shall not contest liability for the illiquidity of the underlying auction rate
securities position or use as part of its defense any decision by an Eligible Investor not to
borrow money from TD Ameritrade.

     32. Eligible Investors who elect to use the special arbitration process provided for herein
shall not be eligible for punitive damages, or for any other type of damages other than
consequential damages.

     33. All customers, including but not limited to Eligible Investors who avail themselves of the
relief provided pursuant to this Assurance, may pursue any remedies against TD Ameritrade available
under the law. However, Eligible Investors that elect to

-13-

 

utilize the special arbitration process set forth above are limited to the remedies available
in that process and may not bring or pursue a claim relating to Eligible Auction Rate Securities in
another forum.

     E. Reports and Meetings

     34. Within 45 days of the end of each month beginning with a report covering the month ended
after the date of this Assurance and continuing through and including a report covering the month
ended June 30, 2010, TD Ameritrade shall submit a monthly written report detailing TD Ameritrade’s
progress with respect to its obligations pursuant to this Assurance. TD Ameritrade shall, at the
option of the Attorney General, confer with the Attorney General on a quarterly basis to discuss TD
Ameritrade’s progress to date. Such quarterly meetings shall continue until June 2010. The
reporting or meeting deadlines set forth above may be amended with written permission from the
Attorney General.

     F. Other Relief

     35. TD Ameritrade admits the jurisdiction of the Attorney General. TD Ameritrade will cease
and desist from engaging in any acts in violation of the Martin Act, General Business Law § 349
and/or Executive Law § 63(12) and will comply with the Martin Act, General Business Law § 349 and
Executive Law § 63(12).

II. Other Provisions

     36. The Attorney General retains the right under Executive Law § 63(15) to compel compliance
with this Assurance. Evidence of a violation of this Assurance proven in a court of competent
jurisdiction shall constitute prima facie proof of a violation of the Martin Act,
General Business Law §349 and/or Executive Law §63(12)

-14-

 

in any civil action or proceeding hereafter commenced by the Attorney General against TD
Ameritrade.

     37. Should the Attorney General prove in a court of competent jurisdiction that a material
breach of this Assurance by TD Ameritrade has occurred, TD Ameritrade shall pay to the Attorney
General the cost, if any, of such determination and of enforcing this Assurance, including without
limitation legal fees, expenses and court costs.

     38. If TD Ameritrade defaults on any obligation under this Assurance, the Attorney General may
terminate this Assurance, at his sole discretion, upon 10 days written notice to TD Ameritrade. TD
Ameritrade agrees that any statute of limitations or other time related defenses applicable to the
subject of the Assurance and any claims arising from or relating thereto are tolled from and after
the date of this Assurance. In the event of such termination, TD Ameritrade expressly agrees and
acknowledges that this Assurance shall in no way bar or otherwise preclude the Attorney General
from commencing, conducting or prosecuting any investigation, action or proceeding, however
denominated, related to the Assurance, against TD Ameritrade, or from using in any way any
statements, documents or other materials produced or provided by TD Ameritrade prior to or after
the date of this Assurance, including, without limitation, such statements, documents or other
materials, if any, provided for purposes of settlement negotiations, except as may otherwise be
provided in a written agreement with the Attorney General.

     39. Except in an action by the Attorney General to enforce the obligations of TD Ameritrade in
this Assurance or in the event of termination of this Assurance by the Attorney General, neither
this Assurance nor any acts performed or documents executed

-15-

 

in furtherance of this Assurance: (a) may be deemed or used as an admission of, or evidence
of, the validity of any alleged wrongdoing, liability or lack of wrongdoing or liability; or (b)
may be deemed or used as an admission of or evidence of any such alleged fault or omission of TD
Ameritrade in any civil, criminal, arbitration or administrative proceeding in any court,
administrative agency or other tribunal. This Assurance shall not confer any rights upon persons
or entities who are not a party to this Assurance.

     40. TD Ameritrade shall cooperate fully and promptly with the Attorney General and shall use
its best efforts to ensure that all the current and former officers, directors, trustees, agents,
members, partners and employees of TD Ameritrade (and of any of TD Ameritrade’s parent companies,
subsidiaries or affiliates) cooperate fully and promptly with the Attorney General in any pending
or subsequently initiated investigation, litigation or other proceeding relating to auction rate
securities and/or the subject matter of the Assurance. Such cooperation shall include, without
limitation, and on a best efforts basis:

	 	(a)	 	production, voluntarily and without service of subpoena, upon the
request of the Attorney General, of all documents or other tangible evidence
requested by the Attorney General and any compilations or summaries of
information or data that the Attorney General requests that TD Ameritrade (or
TD Ameritrade’s parent companies, subsidiaries or affiliates) prepare, except
to the extent such production would require the disclosure of information
protected by the attorney-client and/or work product privileges;
	 
	 	(b)	 	without the necessity of a subpoena, having the current (and making
all reasonable efforts to cause the former) officers, directors, trustees,
agents, members, partners and employees of TD Ameritrade (and of any of TD
Ameritrade’s parent companies, subsidiaries or affiliates) attend any
Proceedings (as hereinafter defined) in New York State or elsewhere at which
the presence of any such persons is requested by the Attorney General and
having

-16-

 

	 	 	 	such current (and making all reasonable efforts to cause the former)
officers, directors, trustees, agents, members, partners and employees
answer any and all inquiries that may be put by the Attorney General to
any of them at any proceedings or otherwise, except to the extent such
production would require the disclosure of information protected by the
attorney-client and/or work product privileges; “Proceedings” include, but
are not limited to, any meetings, interviews, depositions, hearings,
trials, grand jury proceedings or other proceedings;
	 
	 	(c)	 	fully, fairly and truthfully disclosing all information and
producing all records and other evidence in its possession, custody or
control (or the possession, custody or control of TD Ameritrade parent
companies, subsidiaries or affiliates) relevant to all inquiries made by the
Attorney General concerning the subject matter of the Assurance, except to
the extent such inquiries call for the disclosure of information protected by
the attorney-client and/or work product privileges; and
	 
	 	(d)	 	making outside counsel reasonably available to provide comprehensive
presentations concerning any internal investigation relating to all matters
in the Assurance and to answer questions, except to the extent such
presentations or questions call for the disclosure of information protected
by the attorney-client and/or work product privileges.

     41. In the event TD Ameritrade fails to comply with paragraph 40 of the Assurance, the
Attorney General shall be entitled to specific performance, in addition to any other available
remedies.

     42. The Attorney General has agreed to the terms of this Assurance based on, among other
things, the representations made to the Attorney General by TD Ameritrade, its counsel, and the
Attorney General’s own factual Investigation. To the extent that any material representations are
later found to be inaccurate or misleading, this Assurance is voidable by the Attorney General in
its sole discretion.

-17-

 

     43. TD Ameritrade shall, upon request by the Attorney General, provide all documentation and
information reasonably necessary for the Attorney General to verify compliance with this Assurance.

     44. All notices, reports, requests, and other communications to any party pursuant to this
Assurance shall be in writing and shall be directed as follows:

     If to TD Ameritrade:

Richard J. Morvillo, Esq.

Mayer Brown LLP

1909 K Street, N.W.

Washington, DC 20006-1101

     If to the Attorney General:

Office of the Attorney General of the State of New York

120 Broadway, 23rd Floor

New York, New York 10271

Attn: David A. Markowitz

     45. This Assurance and any dispute related thereto shall be governed by the laws of the State
of New York without regard to any conflicts of laws principles.

     46. TD Ameritrade consents to the jurisdiction of the Attorney General in any proceeding or
action to enforce this Assurance.

     47. TD Ameritrade agrees not to take any action or to make or permit to be made any public
statement denying, directly or indirectly, any finding in this Assurance or creating the impression
that this Assurance is without factual basis. Nothing in this paragraph affects TD Ameritrade’s:
(a) testimonial obligations; or (b) right to take legal or factual positions in defense of
litigation or other legal proceedings to which the Attorney General is not a party.

-18-

 

     48. This Assurance may not be amended except by an instrument in writing signed on behalf of
all the parties to this Assurance.

     49. This Assurance constitutes the entire agreement between the Attorney General and TD
Ameritrade and supersedes any prior communication, understanding or agreement, whether written or
oral, concerning the subject matter of this Assurance. No representation, inducement, promise,
understanding, condition or warranty not set forth in this Assurance has been relied upon by any
party to this Assurance.

     50. In the event that one or more provisions contained in this Assurance shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Assurance.

     51. This Assurance may be executed in one or more counterparts, and shall become effective
when such counterparts have been signed by each of the parties hereto.

     52. Upon execution by the parties to this Assurance, the Attorney General agrees to suspend,
pursuant to Executive Law § 63(15), this Investigation as and against TD Ameritrade solely with
respect to its marketing and sale of auction rate securities to Eligible Investors. The Attorney
General reserves the right to investigate and commence any proceeding the Attorney General deems
appropriate, in its sole discretion, relating in any way to (a) customers who request a purchase
from TD Ameritrade and who purchased Eligible Auction Rate Securities at TD Ameritrade prior to
February 13, 2008, but transferred such Eligible Auction Rate Securities away prior to the Merger
Date; or (b) any account owner described in Paragraph 19(c) above that was excluded from the

-19-

 

definition of Eligible Investor because it had over $10 million in assets at TD Ameritrade or
total assets greater than $50 million.

     53. Any payments and all correspondence related to this Assurance must reference AOD # 09-116.

     WHEREFORE, the following signatures are affixed hereto on the dates set forth below.

ANDREW M. CUOMO,

Attorney General of the State of New York

	 	 	 	 	 
	By:

	 	/s/ DAVID A. MARKOWITZ
 

	 	 
	 

	 	          David A. Markowitz	 	 
	 

	 	          Chief, Investor Protection Bureau	 	 
	 

	 	          120 Broadway, 23rd Floor	 	 
	 

	 	          New York, New York 10271	 	 
	 

	 	          (212) 416-8198	 	 

Dated: July 20, 2009

-20-

 

	 	 	 	 	 	 	 	 	 
	 	 	TD AMERITRADE, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ WILLIAM J. GERBER
 

	 	 
	 	 	 	 	Name: William J. Gerber	 	 
	 	 	 	 	Title: Executive Vice President, Chief Financial Officer	 	 

ACKNOWLEDGMENT

     On this 14 day of July, 2009, before me personally came William J. Gerber, known to me, who,
being duly sworn by me, did depose and say that he is the Executive Vice President, Chief Financial
Officer of TD Ameritrade, Inc. the entity described in the foregoing Assurance, and is duly
authorized by TD Ameritrade, Inc. to execute the same, and that he signed his name in my presence
by like authorization.

	 	 	 
	/s/ NANCY L. LOWREY
 

	 	 
	Notary Public
	 	 

My commission expires:

May 4, 2012

Assurance of Discontinuance

Reviewed By:

	 	 	 
	/s/ PAT S. CONTI
 

	 	 

Attorneys for TD Ameritrade, Inc.

Dated: July 14, 2009

-21-

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