Court Opinion

ID: 2969749
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:56:25.052859+00
Date Added: 2024-06-11T11:37:12.393407
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
                3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

        (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                    )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6
                   )257+(6,;7+&,5&8,7
                     BBBBBBBBBBBBBBBBB

 81,7(' 67$7(6 2) $0(5,&$        ;
           3ODLQWLII$SSHOOHH     
                                   
                                     1R
           Y                      
                                    !
                                   
 &+5,6723+(5 0$56+$//             
         'HIHQGDQW$SSHOODQW 
                                  1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
     IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG
  1Rn/HVOH\%URRNV:HOOV'LVWULFWsXGJH
                    $UJXHG)HEUXDU\
               'HFLGHGDQG)LOHG$SULO
  %HIRUH'$8*+75(<DQG*,/0$1&LUFXLWsXGJHV
              &2//,(5'LVWULFWsXGJH
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('  0DUJDUHW 6 2j'RQQHOO 0F1$//< 	
2j'211(//)UDQNIRUW.HQWXFN\IRU$SSHOODQW*DU\'
$UEH]QLN $66,67$17 81,7(' 67$7(6 $77251(<

    
     7KH +RQRUDEOH &XUWLV / &ROOLHU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
(DVWHUQ 'LVWULFW RI 7HQQHVVHH VLWWLQJ E\ GHVLJQDWLRQ

                                   
     8QLWHG6WDWHVY0DUVKDOO                      1R

&OHYHODQG2KLRIRU$SSHOOHH21%5,()0DUJDUHW6
2j'RQQHOO 0F1$//< 	 2j'211(// )UDQNIRUW
.HQWXFN\IRU$SSHOODQW*DU\'$UEH]QLN$66,67$17
81,7(' 67$7(6 $77251(< &OHYHODQG 2KLR IRU
$SSHOOHH
  *,/0$1sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK
'$8*+75(< s MRLQHG  &2//,(5 ' s SS 
GHOLYHUHGDVHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJ
LQSDUW
                     BBBBBBBBBBBBBBBBB
                         23,1,21
                     BBBBBBBBBBBBBBBBB
  521$/' /(( *,/0$1 &LUFXLW sXGJH 7KLV FDVH
LQYROYHVWKHWKHIWRIIURPDEDQNjVDXWRPDWHGWHOOHU
PDFKLQH $70 E\ &KULVWRSKHU 0DUVKDOO D 3LQNHUWRQ
6HFXULW\&RPSDQ\FRXULHU0DUVKDOOZDVFRQYLFWHGRQWZR
FRXQWV RI EDQN ODUFHQ\ DQG SRVVHVVLQJ VWROHQ PRQH\ LQ
YLRODWLRQRI86&EDQGFRQHFRXQWRI
HQJDJLQJ LQ DQ XQODZIXO PRQHWDU\ WUDQVDFWLRQ H[FHHGLQJ
 LQ YLRODWLRQ RI  86&   WKUHH FRXQWV RI
PRQH\ ODXQGHULQJ LQ YLRODWLRQ RI  86&
D%LDQGRQHFRXQWRIILOLQJDIDOVHVWDWHPHQW
RQ D IHGHUDO FXUUHQF\ WUDQVDFWLRQ UHSRUW LQ YLRODWLRQ RI 
86&   DQG  D  +H ZDV VHQWHQFHG WR 
PRQWKV RI LPSULVRQPHQW RQ HDFK FRXQW WR EH VHUYHG
FRQFXUUHQWO\ ZLWK D \HDU SHULRG RI VXSHUYLVLRQ DIWHU KLV
UHOHDVH)RUWKHUHDVRQVVHWIRUEHORZZH9$&$7(KLVWKUHH
86&D%LPRQH\ODXQGHULQJFRQYLFWLRQV
DQGZLWKWKHFRQVHQWRIWKHJRYHUQPHQWZHDOVR9$&$7(
0DUVKDOOjV86&FFRQYLFWLRQ7KHVHFRXQWVRI
WKHLQGLFWPHQWDUH5(0$1'('WRWKHGLVWULFWFRXUWIRUHQWU\
RIDMXGJPHQWRIDFTXLWWDO:H$)),50WKHUHPDLQLQJWKUHH
FRQYLFWLRQV
1R                      8QLWHG6WDWHVY0DUVKDOO         

                      ,%$&.*5281'
$ )DFWXDOEDFNJURXQG
  6RFLHW\ %DQN QRZ NQRZQ DV .H\ %DQN KDG D FRQWUDFW
ZLWK 3LQNHUWRQ WR PDLQWDLQ WKH FDVK VXSSO\ RI 6RFLHW\jV
$70V  0DUVKDOO DORQJ ZLWK KLV SDUWQHU sLP 0\HUV ZHUH
3LQNHUWRQ FRXULHUV ZKR SHUIRUPHG $70 PDLQWHQDQFH
WKURXJKRXWWKH$NURQ&DQWRQDUHDLQ2KLR7RJHWKHUWKH\
VHUYLFHGEHWZHHQWHQDQGWZHOYHORFDWLRQVHDFKGD\
  7KH SURFHGXUHV IRU VHUYLFLQJ HDFK $70 ZHUH UDWKHU
HODERUDWHDVZDVWKHV\VWHPIRUDFFHVVLQJWKH$70YDXOW$W
HDFKPDFKLQHEHLQJVHUYLFHGWKHSDLURIFRXULHUVZRXOGKDYH
DPDVWHUNH\DOORZLQJHQWU\LQWRWKHUHVWULFWHGDFFHVVSRUWLRQ
RIWKH$70EXLOGLQJ2QFHWKHRXWVLGHGRRUZDVRSHQHGWKH
FRXULHUVKDGWRSXQFKLQDVHFXULW\FRGHWRGLVDUPWKHDODUP
V\VWHP  7KH FRXULHUV ZHUH WKHQ UHTXLUHG WR FDOO D FHQWUDO
$70 VHFXULW\ VHUYLFH LQ 'D\WRQ LQ RUGHU WR LGHQWLI\
WKHPVHOYHV DQG DGYLVH WKH VHUYLFH RI WKHLU SUHVHQFH DW WKH
$702QFHLQVLGHWKH$70EXLOGLQJWKHFRXULHUVRSHQHG
WKH$70YDXOW7KLVZDVGRQHE\XVLQJDFRPELQDWLRQORFN
XQLTXH WR HDFK $70 DGMXVWLQJ WKH KDQGOH LQ D VSHFLILF
PDQQHUDQGLQVHUWLQJDYDXOWFRPELQDWLRQNH\LQWRWKHYDXOW
GRRUGLDOWRDOORZWKHGRRUWRUHOHDVH7KHPRPHQWLWZDV
RSHQHG WKH VHFXULW\ VHUYLFH LQ 'D\WRQ ZDV DOHUWHG E\ DQ
HOHFWURQLFVLJQDOQRWLI\LQJWKHVHUYLFHWKDWWKHYDXOWKDGEHHQ
DFFHVVHG
   0DUVKDOO DQG 0\HUV VHUYLFHG WKH $70 DW WKH &X\DKRJD
)DOOV $YHQXH ORFDWLRQ RI WKH 6RFLHW\ %DQN $70 RQ
'HFHPEHU$IWHUSHUIRUPLQJWKHLUYDULRXVGXWLHV
WKH\OHIWRImH[WUDPRQH\lLQWKHYDXOWDSUDFWLFHWKDW
DOORZVWKH$70WREHVHUYLFHGDIWHUQRUPDOEDQNLQJKRXUV
0DUVKDOO WHVWLILHG DW WULDO WKDW WKLV ZDV DQ XQXVXDOO\ ODUJH
DPRXQW RI H[WUD PRQH\ WR OHDYH LQ WKH YDXOW  7KLV H[WUD
PRQH\KDGEHHQSUHSDFNDJHGLQWREULFNVDWWKHEDQN(DFK
EULFNFRQWDLQHGELOOVDQGZDVLQGLYLGXDOO\SDFNDJHGLQ
VKULQNZUDSSODVWLF7KUHHRIWKHEULFNVFRQWDLQHG
HDFKLQELOOVDQGWKUHHRIWKHEULFNVFRQWDLQHG
HDFKLQELOOV0DUVKDOOWHVWLILHGWKDWKHSODFHGWKHH[WUD
     8QLWHG6WDWHVY0DUVKDOO                     1R       1R                      8QLWHG6WDWHVY0DUVKDOO        

PRQH\LQWKHYDXOWZLWKRXWGLVWXUELQJWKHSODVWLFSDFNDJLQJ          WKH GLDPRQG EUDFHOHW DQG WKH FROOHFWLEOH ZLQHV ZHUH
2QFHWKHVHUYLFLQJZDVFRPSOHWHWKHYDXOWZDVFORVHGWKH            PRWLYDWHGDWOHDVWLQSDUWE\DGHVLJQRULQWHQWWRFRQFHDORU
DODUPZDVDFWLYDWHGDQGWKHRXWVLGHGRRUZDVORFNHG                 GLVJXLVHWKHQDWXUHWKHORFDWLRQWKHVRXUFHWKHRZQHUVKLSRU
                                                                      WKHFRQWURORIWKHEDQNODUFHQ\SURFHHGV)XUWKHUPRUHIRUWKH
   7KUHH GD\V ODWHU RQ sDQXDU\   WKH FHQWUDO $70     UHDVRQV VWDWHG , EHOLHYH WKH FDVHV FLWHG E\ WKH PDMRULW\ LQ
VHFXULW\ VHUYLFH LQ 'D\WRQ UHFRUGHG DQ HOHFWURQLF VLJQDO DW   VXSSRUWRILWVFRQFOXVLRQDUHIDFWXDOO\GLVWLQFWIURPWKHFDVH
 SP LQGLFDWLQJ WKDW WKH YDXOW DW 6RFLHW\ %DQNjV        DW KDQG DQG GR QRW PDQGDWH YDFDWXU RI 0DUVKDOOjV PRQH\
&X\DKRJD)DOOV$70KDGEHHQDFFHVVHG7KHVLJQDOVKRZHG              ODXQGHULQJ FRQYLFWLRQV  &RQVHTXHQWO\ , PXVW UHVSHFWIXOO\
WKDWWKHYDXOWGRRUUHPDLQHGRSHQIRUVHFRQGVZDVFORVHG         GLVVHQWIURPWKDWSRUWLRQRIWKHPDMRULW\jVRSLQLRQYDFDWLQJ
DQGWKHQUHRSHQHGIRUJRRGVHFRQGVODWHU$OWKRXJKWKH             0DUVKDOOjVFRQYLFWLRQVRQ&RXQWV
$70 VHFXULW\ VHUYLFH LV VXSSRVHG WR UHVSRQG WR DQG
LQYHVWLJDWHXQDXWKRUL]HGRSHQLQJVRIWKHYDXOWQRVXFKDFWLRQ                                 ,,,&RQFOXVLRQ
ZDVWDNHQ7LQD$GROSKVRQZDVWKHILUVWSHUVRQWRXVHWKH
$70 DIWHU LW ZDV RSHQHG RQ sDQXDU\    $W WULDO       )RU WKH UHDVRQV GLVFXVVHG LQ SDUW , DERYH DQG IRU WKH
$GROSKVRQWHVWLILHGWKDWVKHQRWLFHGWKDWWKH$70UHVWULFWHG         UHDVRQVSXWIRUWKLQWKHPDMRULW\jVRSLQLRQ,FRQFXULQWKH
DFFHVV GRRU ZDV DMDU ZKHQ VKH ZDV FRQGXFWLQJ KHU              GHFLVLRQWR5(9(56(0DUVKDOOjVFRQYLFWLRQIRUSRVVHVVLQJ
WUDQVDFWLRQ EXW WKDW VKH GLG QRW VHH DQ\RQH DURXQG WKH      RUFRQFHDOLQJVWROHQEDQNSURSHUW\LQYLRODWLRQRI86&
PDFKLQHHLWKHUEHIRUHRUDIWHU                                       F,DOVRFRQFXUJHQHUDOO\ZLWKSDUWV,,$,,%,,&
                                                                      DQG ,,' RI WKH PDMRULW\jV RSLQLRQ  , PXVW UHVSHFWIXOO\
  0DUVKDOODQG0\HUVGLGQRWUHWXUQWRVHUYLFHWKH&X\DKRJD           GLVVHQWKRZHYHUIURPWKHPDMRULW\jVKROGLQJZLWKUHVSHFWWR
)DOOV$70DJDLQXQWLOWKHIROORZLQJGD\sDQXDU\             0DUVKDOOjV PRQH\ ODXQGHULQJ FRQYLFWLRQV XQGHU  86&
8SRQ DSSURDFKLQJ WKH $70 0\HUV QRWLFHG WKDW WKH               D%LDV,ZRXOG$)),50WKRVHFRQYLFWLRQVIRU
UHVWULFWHGDFFHVVGRRUWRWKHEXLOGLQJKDGEHHQOHIWVOLJKWO\         WKHUHDVRQVVWDWHGLQSDUW,,DERYH
DMDUEXWKHVDZQRRWKHUSHUVRQLQVLGH$IWHUFKHFNLQJWKH
YDXOWKHUHDOL]HGWKDWWKHWKUHHEULFNVZHUHPLVVLQJ
0\HUVWHVWLILHGDWWULDOWKDWWKHUHZHUHQRVLJQVRIIRUFHGHQWU\
RQWKH$70UHVWULFWHGDFFHVVGRRURUWKHYDXOW5DWKHUWKH
YDXOWDODUPKDGEHHQGHDFWLYDWHG+HDOVRWHVWLILHGWKDWWKH
RQO\SK\VLFDOHYLGHQFHDWWKHVFHQHFRQVLVWHGRIWKHSODVWLF
VKULQNZUDSWKDWKDGEHHQUHPRYHGIURPWKHSXUORLQHGPRQH\
7KHRQO\LQWDFWILQJHUSULQWVWKDWZHUHIRXQGRQWKHGLVFDUGHG
SODVWLFEHORQJHGWR0DUVKDOO
  $OPRVWIRXU\HDUVSULRUWRWKLVLQFLGHQW0DUVKDOOKDGILOHG
IRUEDQNUXSWF\,QWKHVXEVHTXHQW\HDUVKLVDQQXDOUHSRUWHG
LQFRPHUDQJHGIURPWR+HUDUHO\KDGPRUH
WKDQWZRWKRXVDQGGROODUVLQWKHEDQNDQGDVRI'HFHPEHU
 KH KDG DFFXPXODWHG  LQ FUHGLW FDUG GHEW
,PPHGLDWHO\DIWHUWKHODUFHQ\KRZHYHU0DUVKDOOjVILQDQFHV
LPSURYHG GUDPDWLFDOO\  2Q sDQXDU\   0DUVKDOO
    8QLWHG6WDWHVY0DUVKDOO                     1R      1R                      8QLWHG6WDWHVY0DUVKDOO         

WKHSDVW+HUHLQFRQWUDVW0DUVKDOOKDGQHYHUEHIRUHPDGH          GHSRVLWHGFDVKLQWRDQDFFRXQWDWWKH2KLR6DYLQJV
SXUFKDVHVVXFKDVWKHWKUHHVXSSRUWLQJKLVPRQH\ODXQGHULQJ          %DQN0DUVKDOOERXJKWDFDVKLHUjVFKHFNWKDWVDPHGD\IURP
FRQYLFWLRQV  $OWKRXJK KH ERXJKW ZLQH IURP WKH VDPH          )LUVW1DWLRQDO%DQNIRUZKLFKKHXVHGWRSD\RII
PHUFKDQWSUHYLRXVO\KHKDGQHYHUSXUFKDVHGFROOHFWLEOHZLQH        KLVFUHGLWFDUGEDODQFHLQIXOOIRXUGD\VODWHU2QsDQXDU\
7KHIDFW0DUVKDOOKDGQHYHUFRQGXFWHGVLPLODUWUDQVDFWLRQV           0DUVKDOOPDGHDFDVKGHSRVLWRILQWRKLVFUHGLW
SUHYLRXVO\ZKHQYLHZHGLQWKHFRQWH[WRIWKHRWKHUHYLGHQFH         XQLRQDFFRXQWEULQJLQJKLVEDODQFHWR
GLVFXVVHGDERYHZHLJKVLQIDYRURIKLVFRQYLFWLRQVRQWKHVH
FRXQWV                                                                7KH IROORZLQJ GD\ 0DUVKDOO WUDYHOHG IURP $NURQ WR
                                                                     &OHYHODQGWRFDOORQKLVVWHSEURWKHUsRKQ:HVWRQ:HVWRQ
   ,DJUHHZLWKWKHVHQWLPHQWH[SUHVVHGE\WKH6DQGHUVFRXUW        ZDVDQDFFRXQWH[HFXWLYHDW2OGH'LVFRXQWDEURNHUDJHILUP
DQGWKHPDMRULW\LQWKLVFDVHWKDWVHFWLRQLVDPRQH\          0DUVKDOOKDGQHYHUEHHQWR:HVWRQjVRIILFHEHIRUHWKLVYLVLW
ODXQGHULQJVWDWXWHQRWDmPRQH\VSHQGLQJVWDWXWHl)G        RQ sDQXDU\    8SRQ KLV DUULYDO DW :HVWRQjV RIILFH
DW+DG WKHHYLGHQFHRQO\EHHQVXIILFLHQWWRHVWDEOLVK         0DUVKDOO WROG :HVWRQ WKDW KH ZDQWHG WR LQYHVW PRQH\ LQ
0DUVKDOOSXUFKDVHGFRQVXPDEOHVZLWKWKHODUFHQ\SURFHHGV            mVKRUWWHUPVSHFXODWLYHDJJUHVVLYHWUDGLQJl+HLPSOLHGWKDW
LQVWHDG RI DOVR VXSSRUWLQJ D FRQFOXVLRQ KH ZDV PDNLQJ        WKH PRQH\ KH ZLVKHG WR LQYHVW EHORQJHG WR 5RELQ 0LOOHU
LQYHVWPHQWV,ZRXOGJODGO\MRLQWKHPDMRULW\jVRSLQLRQ,IWKH     0DUVKDOOjV JLUOIULHQG  0DUVKDOO WROG :HVWRQ WKDW KH KDG
HYLGHQFH KDG HVWDEOLVKHG 0DUVKDOO PHUHO\ PDGH                    LQ FDVK ORFDWHG LQ WKH WUXQN RI KLV FDU WR ZKLFK
VWUDLJKWIRUZDUGSXUFKDVHVZLWKWKHODUFHQ\SURFHHGV,ZRXOG         :HVWRQjVILUVWUHDFWLRQZDVmZKDWWKHKHOOLV5RELQGRLQJZLWK
KDYHFRQVLGHUHGYDFDWLQJWKHVHFRQYLFWLRQV,PLJKWDOVRKDYH       LQFDVK"l:HVWRQWROG0DUVKDOOWKDWKHFRXOGQRW
MRLQHG LQ WKH GHFLVLRQ WR YDFDWH LI WKH HYLGHQFH KDG QRW   DFFHSWFDVKDQGGLUHFWHG0DUVKDOOWRREWDLQDFDVKLHUjVFKHFN
HVWDEOLVKHG0DUVKDOOFOHDUO\H[SUHVVHGDGHVLUHDQGLQWHQWWR        0DUVKDOO WKHQ SURFHHGHG GLUHFWO\ WR D %DQN 2QH EUDQFK
FRQFHDO RU GLVJXLVH ERWK WKH ODUFHQ\ SURFHHGV DQG KLV        ZKHUHKHWROGsHDQ'DYLVDWHOOHUWKDWKHZDQWHGWRH[FKDQJH
FRQQHFWLRQ ZLWK WKHP ERWK EHIRUH DQG DIWHU WKH SXUFKDVHV     LQ FDVK IRU D FHUWLILHG FKHFN SD\DEOH WR 2OGH
)LQDOO\,PLJKWQRWKDYHGLVVHQWHGLQWKLVFDVHLIWKHHYLGHQFH     'LVFRXQW  'DYLV WHVWLILHG WKDW WKH  ZDV DOO LQ 
KDGQRWEHHQVXIILFLHQWWRSURYHEH\RQGDUHDVRQDEOHGRXEW         ELOOV
0DUVKDOOOLHGDERXWKRZKHDFTXLUHGWKH5ROH[DQGOLHGDERXW
KLV UHDVRQV IRU SXUFKDVLQJ WKH GLDPRQG EUDFHOHW  ,Q P\       8QGHU IHGHUDO ODZ FXUUHQF\WUDQVDFWLRQ UHSRUWV PXVW EH
RSLQLRQ KRZHYHU WKH HYLGHQFH LQ WKLV FDVH SUHFOXGHV P\     FRPSOHWHG IRU DOO EDQN WUDQVDFWLRQV LQYROYLQJ PRUH WKDQ
FRQFXUUHQFH LQ WKH PDMRULW\jV KROGLQJ ZLWK UHVSHFW WR WKLV     6HH  &)5  E m(DFK ILQDQFLDO
LVVXH                                                               LQVWLWXWLRQ RWKHU WKDQ D FDVLQR VKDOO ILOH D UHSRUW RI HDFK
                                                                     GHSRVLWZLWKGUDZDOH[FKDQJHRIFXUUHQF\RURWKHUSD\PHQW
   $VWKH7HQWK&LUFXLWVWDWHGLQ*DUFLD(PPDQXHOm,IZH            RUWUDQVIHUE\WKURXJKRUWRVXFKILQDQFLDOLQVWLWXWLRQZKLFK
KDG VDW RQ WKH MXU\ ZH PLJKW QRW KDYH FRQYLFWHG >WKH      LQYROYHVDWUDQVDFWLRQLQFXUUHQF\RIPRUHWKDQl
GHIHQGDQW@ IRU PRQH\ ODXQGHULQJ  %XW LQ UHYLHZLQJ >KLV@     %HFDXVH RI WKH DPRXQW LQYROYHG 'DYLV FDOOHG RYHU KHU
FRQYLFWLRQRQDSSHDOZHDUHXQDEOHWRKROGWKDWWKHMXU\jV          VXSHUYLVRU'LDQH$OGULGJH$OGULGJHWROG0DUVKDOOWKDWVKH
FRQFOXVLRQ ZDV XQUHDVRQDEOHl   )G DW  LQWHUQDO     ZRXOG KDYH WR VSHDN ZLWK :HVWRQ WR REWDLQ LGHQWLILFDWLRQ
TXRWDWLRQ PDUNV RPLWWHG  $IWHU FDUHIXOO\ UHYLHZLQJ WKH      DSSDUHQWO\ WR IDFLOLWDWH WKH FRPSOHWLRQ RI WKH WUDQVDFWLRQ
UHFRUGGHYHORSHGDWWULDO,EHOLHYHWKHHYLGHQFHZKHQYLHZHG       UHSRUW0DUVKDOOWKHQVWHSSHGRXWRIWKHWHOOHUOLQHWRXVHKLV
LQWKHOLJKWPRVWIDYRUDEOHWRWKHJRYHUQPHQWZRXOGDOORZD         FHOOXODUSKRQH+HVKRZHG$OGULGJHD)ORULGDGULYHUjVOLFHQVH
UDWLRQDOMXU\WRFRQFOXGH0DUVKDOOjVSXUFKDVHVRIWKH5ROH[         ZLWK D )ORULGD DGGUHVV HYHQ WKRXJK KH DOVR KDG DQ 2KLR
     8QLWHG6WDWHVY0DUVKDOO                       1R       1R                    8QLWHG6WDWHVY0DUVKDOO       

GULYHUjVOLFHQVH$OWKRXJK$OGULGJHEHOLHYHGWKLVWREHDQ             WKHHYLGHQFHUHODWLQJWR0DUVKDOOjVLQWHQWZLWKUHVSHFWWRDQ
XQXVXDO WUDQVDFWLRQ VKH FRPSOHWHG WKH UHSRUW XVLQJ WKH          RYHUDOOSDWWHUQRIFRQGXFWZRXOGDOORZDUHDVRQDEOHMXURUWR
LQIRUPDWLRQWKDW0DUVKDOOKDGSURYLGHG                                 FRQFOXGHHDFKRIWKHSXUFKDVHVDWLVVXHKHUHZHUHGHVLJQHGWR
                                                                        FRQFHDOWKHVRXUFHRURULJLQRIWKHEDQNODUFHQ\SURFHHGV
   ,Q KHU WHVWLPRQ\ DW 0DUVKDOOjV WULDO $OGULGJH VDLG WKDW
0DUVKDOOKDGWROGKHUWKDWm>K@HZDVQRWWKHRZQHURIWKLV               6DQGHUVDOVRGLIIHUVIURPWKLVFDVHLQWKDWWKHFDUSXUFKDVHV
FXUUHQF\DQGWKDWKHZDVPHUHO\GURSSLQJWKHPRQH\RIIIRU             LQYROYHGLQ6DQGHUVZHUHSXEOLFDQGFRQVSLFXRXV6HHDOVR
WKLVRWKHUFXVWRPHUsRKQ:HVWRQDQGLWZDVQRWKLVPRQH\l            5RFNHOPDQ)GDW$VDUHVXOWWKHWUDQVDFWLRQVZHUH
$IWHU0DUVKDOOWROGKHUWKLVVKHVSRNHZLWK:HVWRQDFFHSWHG           OHVVXVHIXODVDPHDQVIRUKLGLQJLOOJRWWHQZHDOWK0DUVKDOOjV
WKH FDVK DQG JDYH 0DUVKDOO D  FDVKLHUjV FKHFN           SXUFKDVHV KRZHYHU LQYROYHG LWHPV WKDW FRXOG EH HDVLO\
SD\DEOHWR2OGH'LVFRXQW7KHFXUUHQF\WUDQVDFWLRQUHSRUW             KLGGHQ WUDQVSRUWHG RU VWRUHG  $Q\ IXWXUH WUDQVIHU RI
OLVWLQJ:HVWRQDVWKHRZQHURIWKHFDVKZDVWKHQILOHGDVDQ           RZQHUVKLSIRUWKHSXUSRVHRIFRQYHUWLQJWKHLWHPVEDFNLQWR
RIILFLDOEDQNUHFRUG                                                   FDVKFRXOGDOVREHFRQGXFWHGSULYDWHO\7KHFLUFXPVWDQFHV
                                                                        SUHVHQWKHUHDUHWKXVPRUHSUREDWLYHRIDQLQWHQWWRFRQFHDO
  0DUVKDOO UHWXUQHG WR :HVWRQjV RIILFH ZLWK WKH FKHFN           WKDQZDVWKHVLWXDWLRQLQ6DQGHUV6HH1RUPDQ)GDW
UHPDUNLQJWKDWmRQHRIWKHJLUOVDWWKHEDQNZDVDZHGE\WKH             LQGLFDWLQJ SULYDWH WUDQVDFWLRQV DUH PRUH LQGLFDWLYH RI
IDFWWKDWVKHKDGQHYHUVHHQVRPXFKPRQH\EHIRUHLQKHUOLIH           PRQH\ODXQGHULQJWKDQDUHWKRVHRISXEOLFUHFRUG
LQ Vl  $W 0DUVKDOOjV GLUHFWLRQ :HVWRQ RSHQHG D MRLQW
DFFRXQWZLWKULJKWVRIVXUYLYRUVKLSZLWK0LOOHUOLVWHGILUVW              $ILQDOLPSRUWDQWGLVWLQFWLRQWKDWFDQEHGUDZQEHWZHHQWKLV
DQG0DUVKDOOVHFRQG7KHMRLQWDFFRXQWOLVWHG0LOOHUjVDQQXDO          FDVH DQG WKH IDFWXDO VFHQDULRV RI 6DQGHUV DQG *DUFLD
LQFRPHDVDQG0DUVKDOOjVDV:HVWRQWKHQ                (PPDQXHOLVEDVHGRQWKHIDFWHDFKRIWKHWUDQVDFWLRQVDW
XVHG WKH DFFRXQW WR SXUFKDVH VWRFNV  6XEVHTXHQW WR WKH        LVVXHKHUHZDVXQLTXHLQ0DUVKDOOjVH[SHULHQFH,Q*DUFLD
DFFRXQWjVFUHDWLRQSKRQHFDOOVPDGHE\:HVWRQWR0LOOHULQ            (PPDQXHO WKH FRXUW RYHUWXUQHG PRQH\ ODXQGHULQJ
RUGHUWRGLVFXVVSRWHQWLDOWUDQVDFWLRQVZRXOGEHGLUHFWHGE\           FRQYLFWLRQV SUHPLVHG XSRQ WKH GHIHQGDQWjV SD\PHQW RI KLV
0LOOHU WR 0DUVKDOO ZKR ZRXOG DSSURYH RU GLVDSSURYH RI          UHVLGHQWLDOPRUWJDJHZLWKDFDVKLHUjVFKHFNGUDZQLQKLVRZQ
:HVWRQjVVXJJHVWLRQV                                                   QDPHDQGKLVSDUWLDOFDVKSD\PHQWIRUDWKRURXJKEUHGKRUVH
                                                                        *DUFLD(PPDQXHO)GDW,QHDFKLQVWDQFHWKH
   0DUVKDOOZLWKGUHZIURPWKHEURNHUDJHDFFRXQWRQ               FRXUW FRQFOXGHG WKHVH ZHUH VWUDLJKWIRUZDUG FRPPHUFLDO
sDQXDU\ZKLFKKHXVHGWRSXUFKDVHD5ROH[ZDWFK              WUDQVDFWLRQV HQWHUHG LQWR IRU WKH GHIHQGDQWjV LPPHGLDWH
DIHZZHHNVODWHU:KHQ:HVWRQVXEVHTXHQWO\DGPLUHGWKH                SHUVRQDOEHQHILWRIDW\SHZKLFKWKHGHIHQGDQWKDGFRQGXFWHG
ZDWFK0DUVKDOOIDOVHO\WROGKLPWKDWWKH5ROH[KDGEHHQD              SUHYLRXVO\  ,G  6LPLODUO\ LQ 6DQGHUV ERWK DXWRPRELOHV
JLIW IURP 0LOOHU  0DUVKDOO DOVR SXUFKDVHG D WKUHHFDUDW        VLPSO\UHSODFHGROGHUDXWRPRELOHVRIWKHVDPHPDNHDOUHDG\
GLDPRQGWHQQLVEUDFHOHWIRURQ)HEUXDU\DQG            RZQHGE\WKHGHIHQGDQWDQGKLVZLIH6DQGHUV)GDW
ZLQH ZRUWK DW OHDVW  RQ sXO\  DQG sXO\  RI WKDW   
VDPH\HDU7KHEUDFHOHWDQGWKHZLQHZHUHSXUFKDVHGZLWK
0DUVKDOOjVFUHGLWFDUGWKHEDODQFHRIZKLFKZDVSDLGE\XVLQJ             *DUFLD(PPDQXHO DQG 6DQGHUV WKHUHIRUH LQYROYHG
IXQGV WKDW 0DUVKDOO ODWHU ZLWKGUHZ IURP WKH EURNHUDJH            WUDQVDFWLRQVWKDWZHUHmRUGLQDU\lQRWRQO\EHFDXVHWKH\GLG
DFFRXQW%RWKWKH5ROH[VDOHVPDQDQGWKHZLQHPHUFKDQW                 QRWLQYROYHDQ\VRUWRIFRPSOH[ILQDQFLQJVFKHPHGHVLJQHG
NQHZ0DUVKDOOSULRUWRWKHSXUFKDVHVLQTXHVWLRQ7KHZLQH             WRFRQFHDOWKHSXUFKDVHUjVWUXHLGHQWLW\EXWDOVREHFDXVHWKH\
                                                                        ZHUHRIDW\SHWKHGHIHQGDQWVLQWKRVHFDVHVKDGFRQGXFWHGLQ
    8QLWHG6WDWHVY0DUVKDOO                      1R       1R                     8QLWHG6WDWHVY0DUVKDOO        

ZDWFKSULRUWRWKHWKHIW$OWKRXJK0DUVKDOOZDVVHHQZHDULQJ          PHUFKDQWKDGLQIDFWIUHTXHQWO\VROGZLQHWR0DUVKDOOLQWKH
WKHZDWFKDIWHUWKHSXUFKDVHKHZDVVWLOOLQDSRVLWLRQWRGHQ\       SDVW
WKHUHODWLRQVKLSEHWZHHQWKHZDWFKDQGWKHODUFHQ\SURFHHGV
LQ SDUW EHFDXVH KH XVHG KLV FUHGLW FDUG WR EX\ WKH ZDWFK      :HVWRQ ILUVW OHDUQHG DERXW WKH sDQXDU\   $70
0RUHRYHULQOLJKWRIDGGLWLRQDOHYLGHQFH0DUVKDOOVRXJKWWR           ODUFHQ\RQ$XJXVWZKHQKHDOVRGLVFRYHUHGWKDW
FRQFHDOWKHVRXUFHRIWKHZDWFKE\VD\LQJLWZDVDJLIWIURP          0DUVKDOOZDVDVXVSHFW:RUULHGWKDWKHZRXOGEHLPSOLFDWHG
KLV JLUOIULHQG D UHDVRQDEOH MXURU FRXOG KDYH FRQFOXGHG         LQWKHFULPH:HVWRQVHFUHWO\PHWZLWK0LOOHUDQGLQTXLUHGDV
0DUVKDOO SXUFKDVHG WKH ZDWFK DORQJ ZLWK WKH RWKHU LWHPV      WRWKHVRXUFHRIWKH:HVWRQWKHQPHWZLWKDQ)%,
ZLWKDQLQWHQWWRFRQYHUWSURFHHGVIURPWKHEDQNODUFHQ\LQWR          DJHQW D IHZ GD\V ODWHU WR GLVFXVV WKH EURNHUDJH DFFRXQW
DVVHWVQRWLPPHGLDWHO\WUDFHDEOHWRKLVFULPHWKDWFRXOGEH            0DUVKDOO VXEVHTXHQWO\ YLVLWHG :HVWRQ DQG GHPDQGHG DQ
KHOGIRUDORQJSHULRGRIWLPHDQGWKHQUHFRQYHUWHGLQWRFDVK          H[SODQDWLRQ IRU WKH PHHWLQJ ZLWK WKH )%,  'XULQJ WKH
ZKHQWKHQHHGDURVH(YHQWKRXJKWKHVWDWHPHQWZDVPDGH               GLVFXVVLRQWKDWHQVXHG0DUVKDOOLQGLFDWHGWKDWKHZDQWHGWKH
VXEVHTXHQWWRWKHSXUFKDVHRIWKHZDWFKWKHMXU\FRXOGKDYH           DFFRXQWWRmGLVDSSHDUl,QUHVSRQVH:HVWRQWROGKLPWKDWmLI
FRQFOXGHGWKHVWDWHPHQWZDVLQGLFDWLYHRI0DUVKDOOjVLQWHQW            WKHSROLFHRUZKDWKDYH\RXFRPHLQDQGWDNHDORRNDWWKH
DWWKHWLPHRIWKHWUDQVDFWLRQ                                        DFFRXQW,FDQPDNHWKHDFFRXQWORRNDVLIWKHUHLVQRWKLQJ
                                                                       WKHUHDQGDOOWKHDVVHWVDUHJRQHl
   ,QUHDFKLQJDFRQFOXVLRQFRQWUDU\WRWKHRQH,UHDFKKHUH
WKHPDMRULW\KDVUHOLHGXSRQWZRFDVHVLQSDUWLFXODU8QLWHG             0DUVKDOOWKHQLQVWUXFWHG:HVWRQWRWUDQVIHUWKHPRQH\IURP
6WDWHV Y 6DQGHUV  )G  WK &LU  DQG WKH    WKHMRLQWDFFRXQWLQWRDQLQGLYLGXDODFFRXQWLQ0LOOHUjVQDPH
SUHYLRXVO\FLWHG*DUFLD(PPDQXHO:KLOH,GRQRWGLVDJUHH             RQO\  :HVWRQ FRQWLQXHG WR TXHVWLRQ 0DUVKDOO DERXW WKH
ZLWK WKH PDMRULW\jV LQWHUSUHWDWLRQ RI WKHVH WZR FDVHV , GR   VRXUFHRIWKHIXQGVZLWK0DUVKDOOILQDOO\DGPLWWLQJWKDWWKH
EHOLHYH WKHFDVHVPD\EHGLVWLQJXLVKHGIDFWXDOO\LQVHYHUDO           PRQH\ZDVKLV$FFRUGLQJWR0DUVKDOOjVH[SODQDWLRQKHKDG
FUXFLDO ZD\V IURP WKH FDVH DW KDQG  6LJQLILFDQWO\ , QRWH   DFFXPXODWHGWKHRYHUDORQJSHULRGRIWLPHDQGKDG
6DQGHUVLQYROYHGDGHIHQGDQWHQJDJHGLQDQRQJRLQJGUXJ               WDNHQ RXW ODUJH FDVK DGYDQFHV RQ FUHGLW FDUGV ZLWK WKH
WUDIILFNLQJ HQWHUSULVH ZKR ZDV FRQYLFWHG RI PRQH\               LQWHQWLRQRIPD[LQJWKHPRXWVRWKDWKLVWKHQZLIHFRXOGQRW
ODXQGHULQJRQWKHEDVLVRIWZRLVRODWHGILQDQFLDOWUDQVDFWLRQV        XVHWKHFDUGV+HFODLPHGWKDWKHKDGODWHUSDLGRIIWKHFUHGLW
)GDWVHHDOVR8QLWHG6WDWHVY5RFNOHPDQ          FDUGEDODQFHVZKLOHNHHSLQJWKHEXONRIWKHPRQH\KLGGHQ
)GWK&LU,QFRQWUDVWWKLVFDVHLQYROYHVD           DZD\
GHIHQGDQW ZKR FRPPLWWHG RQH VSHFLILHG XQODZIXO DFW WKH
EDQN ODUFHQ\ DQG WKHQ HQJDJHG LQ RQJRLQJ HIIRUWV RYHU D      % 3URFHGXUDOEDFNJURXQG
SHULRG RI VHYHUDO PRQWKV WR GLVJXLVH FRQFHDO DQG XVH WKH
SURFHHGV RI WKDW VLQJOH FULPH  $OWKRXJK WKH PRQH\                $IWHUVHYHUDO\HDUVRILQYHVWLJDWLRQ0DUVKDOOZDVILQDOO\
ODXQGHULQJVWDWXWHLVQRWGHVLJQHGWRSXQLVKDQRQJRLQJFRXUVH         LQGLFWHGRQ'HFHPEHU+HZDVFKDUJHGZLWKEDQN
RI FRQGXFW WKH FRXUVH RI FRQGXFW PD\ VWLOO EH UHOHYDQW WR   ODUFHQ\PRQH\ODXQGHULQJDQGFDXVLQJDEDQNWRILOHDIDOVH
GHWHUPLQLQJDGHIHQGDQWjVLQWHQWZLWKUHJDUGWRDSDUWLFXODU           FXUUHQF\WUDQVDFWLRQUHSRUW3ULRUWRKLVWULDO0DUVKDOOILOHG
WUDQVDFWLRQ  6HH 6DQGHUV  )G DW Q GLVWLQJXLVKLQJ     D PRWLRQ LQ OLPLQH VHHNLQJ WR H[FOXGH HYLGHQFH RI KLV
8QLWHG6WDWHVY)UDQNOLQ)GWK&LURQ            mZHDOWK DQG DVVHWV DIWHU WKH DOOHJHG ODUFHQ\ WRRN SODFH RQ
WKHEDVLVmGHIHQGDQWjVDFWLYLWLHVLQ)UDQNOLQLQYROYHGERWKD          sDQXDU\l0DUVKDOOFODLPHGWKDWVXFKHYLGHQFHZDV
JUHDWHU TXDQWLW\ RI DFWLYLW\ DQG DFWLYLW\ RI D TXDOLWDWLYHO\   LUUHOHYDQWDQGXQGXO\SUHMXGLFLDO7KHGLVWULFWFRXUWGHQLHG
GLIIHUHQWQDWXUHWKDQWKDWSUHVHQWHGKHUHl+HUH,EHOLHYH         0DUVKDOOjVPRWLRQ
     8QLWHG6WDWHVY0DUVKDOO                     1R       1R                     8QLWHG6WDWHVY0DUVKDOO       

   0DUVKDOOWHVWLILHGLQKLVRZQGHIHQVHDWWULDOZKLFKEHJDQ        DQG VHUYLFHV DV D ZD\ RI FRQFHDOLQJ RU GLVJXLVLQJ WKH
LQ0DUFKRI+HFODLPHGWRKDYHHDUQHGDSSUR[LPDWHO\            ZHOOVSULQJ RI WKH FDVK 6HH 8QLWHG 6WDWHV Y sDFNVRQ 
LQXQUHSRUWHGLQFRPHPDLQO\GXULQJ7KLV            )GWK&LUFLWHGZLWKDSSURYDOLQ8QLWHG
PRQH\ KH VDLG KDG EHHQ VWRUHG LQ KLV FORVHW GXH WR KLV   6WDWHVY6DPRXU)GWK&LURYHUUXOHG
GLVWUXVWRIDEDQNjVDELOLW\WRNHHSWKHFDVKIURPKLVH[ZLIH       RQRWKHUJURXQGVE\8QLWHG6WDWHVY5HHG)GWK
0DUVKDOO FODLPHG WKDW WKHVH IXQGV ZHUH WKH VRXUFH RI WKH     &LU1RUPDQ)GWK&LUVHH
LQLWLDOGHSRVLWLQWRWKHEURNHUDJHDFFRXQW+HDOVRSURIIHUHG        DOVR8QLWHG6WDWHVY&HQFHU)GWK&LU
VHYHUDOH[KLELWVWRVXSSRUWKLVH[SODQDWLRQDVWRWKHVRXUFHRI       KROGLQJHYLGHQFHEDURZQHUXVHGGUXJSURFHHGVWRUXQ
WKH PRQH\ DW LVVXH  7KH H[KLELWV LQFOXGHG  D UHFHQW    KLV EXVLQHVV ZDV VXIILFLHQW WR VXSSRUW PRQH\ ODXQGHULQJ
&UXLVLQj7LPHVPDJD]LQHLQZKLFK0DUVKDOODGYHUWLVHGKLV              FRQYLFWLRQ
EXVLQHVVRIIL[LQJXSROGFDUVDQGVHOOLQJDXWRSDUWVKDQG
SULQWHGUHFHLSWVIURPLQGLFDWLQJZRUNWKDW0DUVKDOO             5DWKHU WKDQ YLHZLQJ WKHVH SXUFKDVHV DV mZHDUDEOH RU
KDGGRQHRQVHYHUDOFDUVDQGWKHPRQH\KHKDGUHFHLYHGIURP           FRQVXPDEOHLWHPVlRUDVmRUGLQDU\FRPPHUFLDOWUDQVDFWLRQVl
WKRVH MREVHYLGHQFHUHJDUGLQJWKHPDUNHWIRUVLPLODUO\          HQWHUHG LQWR IRU 0DUVKDOOjV mSUHVHQW SHUVRQDO EHQHILWl ,
UHVWRUHG YHKLFOHV  HYLGHQFH WKDW 0DUVKDOO KDG VROG D      EHOLHYH D MXU\ ORRNLQJ DW WKH HYLGHQFH LQ WKH OLJKW PRVW
UHVWRUHGDQWLTXHYHKLFOHWR6X]DQQH6WHSKHQVLQD           IDYRUDEOH WR WKH JRYHUQPHQW DQG FRQVLGHULQJ 0DUVKDOOjV
EDQNDFFRXQWVWDWHPHQWIURPWKDWDOOHJHGO\UHIOHFWHGKLV         DGPLVVLRQVRQWKHVWDQGFRXOGKDYHIRXQGWKHWKUHHSXUFKDVHV
SURSHQVLW\WRVDYHPRQH\DQGSD\UROOVWXEVIURPWKHMRE          LQYROYHGmLQYHVWPHQWVlRIZKLFKWKH7HQWK&LUFXLWVDLGLQ
0DUVKDOO KHOG DW WKH WLPH RI KLV WULDO  (DFK RI WKH       *DUFLD(PPDQXHO m2Q WKH RQH KDQG FDVHV LQYROYLQJ
JRYHUQPHQWjVREMHFWLRQVWRWKHVHH[KLELWVZDVVXVWDLQHGE\            LQYHVWPHQWVPDGHZLWKLOOHJDOSURFHHGVDUHFORVHWRWKHFRUH
WKHGLVWULFWFRXUWRQWKHJURXQGWKDWWKH\ZHUHWRRUHPRWHLQ         RIWKHVWDWXWHjVSXUSRVHRIFULPLQDOL]LQJFKDQJLQJFDVKLQWRDQ
WLPHIURPWKH ODUFHQ\WREHRIDQ\UHOHYDQFH7KHGLVWULFW          µRVWHQVLEO\OHJLWLPDWHIRUPVXFKDVEXVLQHVVSURILWVRUORDQV
FRXUW GLG KRZHYHU DOORZ 0DUVKDOO WR SXW RQ HYLGHQFH         EHIRUHXVLQJWKRVHIXQGVIRUSHUVRQDOEHQHILWjl)G
UHJDUGLQJKLVHDUQLQJVDQGILQDQFLDOVWDWXVSULRUWR           HPSKDVLVLQRULJLQDO
   $WWKHFRQFOXVLRQRI0DUVKDOOjVWHVWLPRQ\RQ:HGQHVGD\               7KHHYLGHQFHDGGXFHGDWWULDOLQGLFDWHG0DUVKDOOGLGQRW
0DUFK   DV 0DUVKDOO ZDV VWHSSLQJ RII WKH ZLWQHVV     SXUFKDVH WKH ZLQH IRU FRQVXPSWLRQ DQG LQ IDFW GLG QRW
VWDQGWKHGLVWULFWFRXUWLQVWUXFWHGWKHSDUWLHVDQGWKHMXU\WR      FRQVXPHWKHZLQHLPPHGLDWHO\EXWUDWKHULQWHQGHGWRKROGLW
EHSUHVHQWDWDPWKHQH[WPRUQLQJIRUWKHFRQWLQXDWLRQ         DVDQLQYHVWPHQWDVKHDGPLWWHG7KHHYLGHQFHDOVRLQGLFDWHG
RIWKHWULDO:KHQFRXUWUHFRQYHQHGWKHQH[WGD\0DUVKDOOjV         0DUVKDOOKDGQHYHUSUHYLRXVO\SXUFKDVHGFROOHFWLEOHZLQHV
FRXQVHOLQIRUPHGWKHFRXUWWKDW0DUVKDOOZDVQRWSUHVHQWDQG          :KHQKHSXUFKDVHGWKHGLDPRQGEUDFHOHW0DUVKDOOWROGWKH
WKDW KH FRXOG QRW EH ORFDWHG  +LV FRXQVHO WKHQ ZDLYHG      VWRUHFOHUNKHZDVEX\LQJLWIRUKLVJLUOIULHQGLQZKRVHQDPH
0DUVKDOOjVSUHVHQFHDQGWKHFRXUWEHJDQWRGLVFXVVWKHMXU\          KHDWWHPSWHGWRKLGHWKHEURNHUDJHDFFRXQW\HWQRWKLQJLQWKH
LQVWUXFWLRQVZLWKWKHODZ\HUV1RWKLQJLQWKHUHFRUGLQGLFDWHV       UHFRUGLQGLFDWHVWKHEUDFHOHWZDVHYHUJLYHQWRKHU$JDLQWKH
LI RU ZKHQ 0DUVKDOO UHDSSHDUHG DOWKRXJK WKH JRYHUQPHQW        MXU\FRXOGKDYHFRQFOXGHGRQWKHEDVLVRIWKHUHFRUGWKDW
PDLQWDLQVWKDWKHDUULYHGVKRUWO\DIWHUDP                     0DUVKDOOKDGQHYHUPDGHDVLPLODUSXUFKDVHSULRUWRWKHEDQN
                                                                      ODUFHQ\
 2Q $SULO   WKH MXU\ UHWXUQHG D YHUGLFW DJDLQVW
0DUVKDOORQDOOVHYHQFRXQWV+HZDVODWHUVHQWHQFHGWR             6LPLODUO\LQWKHFDVHRIWKH5ROH[ZDWFKQRHYLGHQFHZDV
PRQWKV RI LQFDUFHUDWLRQ RQ HDFK FRXQW WR EH VHUYHG           SUHVHQWHG WR LQGLFDWH 0DUVKDOO KDG HYHU SXUFKDVHG VXFK D
       8QLWHG6WDWHVY0DUVKDOO                            1R         1R                      8QLWHG6WDWHVY0DUVKDOO          

,WKLQNLWZHLJKVMXVWDVKHDYLO\LQVXSSRUWRIDIILUPLQJWKH                     FRQFXUUHQWO\ IROORZHG E\  \HDUV RI VXSHUYLVHG UHOHDVH
PRQH\ODXQGHULQJFRQYLFWLRQV0DUVKDOOKDGHQRXJKPRQH\                          0DUVKDOOILOHGDWLPHO\QRWLFHRIDSSHDOWKUHHGD\VODWHU+H
LQ WKH EURNHUDJH DFFRXQW WR PDNH WKH SXUFKDVHV GLUHFWO\                  FKDOOHQJHV KLV FRQYLFWLRQV RQ PXOWLSOH JURXQGV  )LUVW KH
,QVWHDG DIWHU XVLQJ FUHGLW FDUGV WR PDNH WKH SXUFKDVHV                  DUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQDGPLWWLQJHYLGHQFHRI
0DUVKDOOXVHGIXQGVIURPWKHEURNHUDJHDFFRXQWWRSD\WKH                         WKH GUDPDWLF LPSURYHPHQW LQ KLV ILQDQFLDO VWDWXV DIWHU WKH
FUHGLWDFFRXQWEDODQFH                                                           PRQH\ ZDV VWROHQ  +H WKHQ DVVHUWV WKDW WKH FRXUW ZDV
                                                                                  PLVWDNHQZKHQLWH[FOXGHGHYLGHQFHRIKLVDOWHUQDWLYHVRXUFHV
  7KLV HYLGHQFH ZRXOG KDYH DOORZHG D UHDVRQDEOH MXU\ WR                   RILQFRPHDIWHU0DUVKDOOQH[WFODLPVWKDWWKHGLVWULFW
FRQFOXGH0DUVKDOOPDGHDQHIIRUWWRSODFHGLVWDQFHEHWZHHQ                        FRXUW HUUHG ZKHQ LW SURFHHGHG ZLWK WKH FKDUJH FRQIHUHQFH
WKH LOOJRWWHQ JDLQV IURP WKH ODUFHQ\ DQG WKH DVVHWV KH                  GHVSLWHKLVDEVHQFHIURPWKHFRXUWURRPDWWKHWLPH)LQDOO\
SXUFKDVHGWRUHSODFHWKHFDVK6HH1RUPDQ)GDW                       KHFKDOOHQJHVWKHVXIILFLHQF\RIWKHHYLGHQFHVXSSRUWLQJKLV
KROGLQJLQWHQWWRFRQFHDOFRXOGEHLQIHUUHGE\IXQQHOLQJRI                      FRQYLFWLRQVIRUODUFHQ\IRUILOLQJDIDOVHFXUUHQF\WUDQVDFWLRQ
PRQH\WKURXJKVHYHUDOVRXUFHVSULRUWRXOWLPDWHSXUFKDVH                        UHSRUW DQG IRU WKH WKUHH PRQH\ODXQGHULQJ FRQYLFWLRQV
0RUHRYHU WKH XVH RI WKH FUHGLW FDUG FUHDWHG GRFXPHQWDU\                  UHODWLQJWRWKHSXUFKDVHVRIWKHZDWFKEUDFHOHWDQGZLQH
HYLGHQFHRIKRZKHDFTXLUHGWKHDVVHWVDQGWKHSDSHUWUDLO
FRXOG EH XVHG WR PLVOHDG DQ LQYHVWLJDWRU  6HH *DUFLD                                            ,,$1$/<6,6
(PPDQXHO)GDWILQGLQJVXFKHYLGHQFHZDV
SUREDWLYH RI LQWHQW WR FRQFHDO DQG VXSSRUWHG PRQH\                         $ 7KHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQZKHQLW
ODXQGHULQJFRQYLFWLRQV,QWKHHYHQWODZHQIRUFHPHQWWKH                           DGPLWWHGHYLGHQFHRI0DUVKDOOjVmVXGGHQZHDOWKl
EDQN RU 0DUVKDOOjV IRUPHU HPSOR\HU KDG GLVFRYHUHG WKH
SXUFKDVHVRULQTXLUHGDERXWWKHP0DUVKDOOZRXOGKDYHEHHQ                          ,QVXSSRUWRIWKHFKDUJHWKDW0DUVKDOOZDVWKHSHUSHWUDWRU
DEOHWRDQVZHUKHPDGHWKHSXUFKDVHVZLWKKLVFUHGLWFDUGDQG                     RI WKH ODUFHQ\ WKH JRYHUQPHQW SURIIHUHG HYLGHQFH RI
WRSURGXFHFUHGLWFDUGUHFHLSWVWRVXSSRUWKLVVWRU\                             0DUVKDOOjVVXGGHQXQH[SODLQHGZHDOWKLQWKHGD\VIROORZLQJ
                                                                                  WKH FULPH  0DUVKDOO RZHG RYHU  RQ KLV FUHGLW FDUG
   $GGLWLRQDOO\ , DP XQDEOH WR DJUHH ZLWK WKH PDMRULW\jV                 LPPHGLDWHO\SULRUWRsDQXDU\DQGKDGUHSRUWHGKLV
FKDUDFWHUL]DWLRQ RI WKH DFTXLVLWLRQ RI D 5ROH[ ZDWFK D                   DQQXDOLQFRPHWREHEHWZHHQDQGIRUWKH
GLDPRQGWHQQLVEUDFHOHWDQGVHYHUDOWKRXVDQGGROODUVZRUWK                       SDVWVHYHUDO\HDUV1HYHUWKHOHVVZLWKLQDIHZGD\VIROORZLQJ
RIFROOHFWLEOHZLQHZLWKLQDUHODWLYHO\ VKRUWSHULRGRIWKH                    WKH ODUFHQ\ KH SDLG RII KLV FUHGLWFDUG EDODQFH LQ IXOO DQG
ODUFHQ\ DV D mIHZ LVRODWHG SXUFKDVHV RI ZHDUDEOH RU                      GHSRVLWHGRYHULQFDVKZLWKWZRILQDQFLDOLQVWLWXWLRQV
FRQVXPDEOH LWHPVl WKDW GR QRW IDOO ZLWKLQ WKH SXUYLHZ RI                 DQGDEURNHUDJHILUP0DUVKDOOFKDOOHQJHVWKHGLVWULFWFRXUWjV
   ,Q HDFK LQVWDQFH 0DUVKDOO FRQYHUWHG WKH mGLUW\l                GHQLDO RI KLV PRWLRQ LQ OLPLQH VHHNLQJ WR H[FOXGH WKLV
SURFHHGVIURPWKHEDQNUREEHU\LQWRDmFOHDQlDVVHWWKDWFRXOG                    HYLGHQFHRIKLVVXGGHQXQH[SODLQHGZHDOWKFODLPLQJWKDWLW
EHKHOGIRUDVXEVWDQWLDOSHULRGRIWLPHZLWKRXWVLJQLILFDQW                      ZDVLUUHOHYDQWDQGXQGXO\SUHMXGLFLDO
GHSUHFLDWLRQ LQ YDOXH  $ FHQWUDO IRFXV RI VXEVHFWLRQ
D%LLVWRFULPLQDOL]HWKHFRQYHUVLRQRIFDVKLQWRJRRGV                    ,Q8QLWHG6WDWHVY$PHULQH)GWK&LU
                                                                                  WKLV FRXUW DGGUHVVHG WKH UHOHYDQFH DQG DGPLVVLELOLW\ RI
                                                                                  VXGGHQZHDOWKHYLGHQFHLQDFDVHLQYROYLQJDGHOLYHU\WUXFN
                                                                                 GULYHU FKDUJHG ZLWK VWHDOLQJ RYHU  WKDW KH ZDV
     $OWKRXJK      0DUVKDOO   DGPLWWHG   WKH   ZLQH   ZDV   SXUFKDVHG   DV
              800 8:57, QRWH  LW LV FOHDU IURP 0DUVKDOOjV WHVWLPRQ\ DQG WKH
                                                                             DQ
                                                                                  VXSSRVHG WR GHOLYHU DV SDUW RI KLV MRE  $OWKRXJK WKH
                                                                                  JRYHUQPHQW KDG QR GLUHFW SURRI RI KLV JXLOW LW SUHVHQWHG
LQYHVWPHQW
WHVWLPRQ\ RI 5RQ .RO\ WKH ZLQH PHUFKDQW WKDW WKHVH ZLQHV PD\ IDLUO\ EH
FKDUDFWHUL]HG DV mFROOHFWLEOHl                                                   HYLGHQFHRIWKHGHIHQGDQWjVRSSRUWXQLW\WRFRPPLWWKHFULPH
    8QLWHG6WDWHVY0DUVKDOO                     1R       1R                      8QLWHG6WDWHVY0DUVKDOO        

7KHJRYHUQPHQWWKHQLQWURGXFHGHYLGHQFHRIWKHGHIHQGDQWjV            LQ WKLV FDVH ZRXOG DOORZ D UHDVRQDEOH MXURU WR FRQFOXGH
PRGHVWPHDQVSULRUWRWKHGDWHRIWKHODUFHQ\DVFRQWUDVWHG          0DUVKDOOZDVPRWLYDWHGIURPLPPHGLDWHO\DIWHUWKHUREEHU\
ZLWKKLVSD\PHQWRIROGGHEWVDQGDGRZQSD\PHQWRQ            XQWLO DW OHDVW $XJXVW  E\ D GHVLUH WR GLVWDQFH KLPVHOI
DQHZFDULQWKHIRUPRIELOOVWKHVDPHGHQRPLQDWLRQDV          IURPWKHODUFHQ\SURFHHGVWKDWLVWRmFRQFHDO>DQG@GLVJXLVH
WKHPRQH\VWROHQLPPHGLDWHO\DIWHUWKHPRQH\GLVDSSHDUHG            WKH QDWXUH WKH ORFDWLRQ WKH VRXUFH WKH RZQHUVKLS RU WKH
,GDW7KLVFRXUWKHOGWKDWmXQGHUWKHWRWDOIDFWVRI       FRQWUROl RI WKH ODUFHQ\ SURFHHGV   86&
WKLVFDVHZKHUHWKHUHZDVPXFKRWKHUHYLGHQFHRIJXLOWWKLV         D%L)RUH[DPSOHRQsDQXDU\ZKHQ
WHVWLPRQ\ ZDV UHOHYDQW DQG DGPLVVLEOHl  ,G DW          0DUVKDOODWWHPSWHGWRH[FKDQJHDODUJHSRUWLRQRIWKHODUFHQ\
)XUWKHUPRUHWKHFRXUWDOVRGHFODUHGWKDWLWZDVSURSHUIRUWKH       SURFHHGVLQWRDFDVKLHUjVFKHFNVRKHFRXOGRSHQDEURNHUDJH
MXU\WRLQIHUIURPWKLVHYLGHQFHWKDWmWKHIXQGVHPSOR\HGE\          DFFRXQW LQ KLV JLUOIULHQGjV QDPH KH HQFRXQWHUHG VXVSLFLRQ
>WKHGHIHQGDQW@WRSD\GHEWVDQGWREX\DFDUFDPHIURPWKH           DQG WKRURXJK TXHVWLRQLQJ IURP WKH EDQN WHOOHU  +H DOVR
PLVVLQJl,GVHHDOVR8QLWHG6WDWHVY2j1HDO          OHDUQHGODUJHWUDQVDFWLRQVKDGWREHUHSRUWHGWRWKHIHGHUDO
)G   WK &LU  KROGLQJ VXGGHQZHDOWK           JRYHUQPHQW
HYLGHQFH ZDV DGPLVVLEOH ZKHUH PRQH\ LQ WKH VDPH
GHQRPLQDWLRQ DV WKDW ZKLFK ZDV VWROHQ ZDV IRXQG RQ WKH          )URPWKLVHYLGHQFHWKHMXU\FRXOGKDYHLQIHUUHGDPRWLYH
GHIHQGDQWVKRUWO\DIWHUWKHWKHIW                                 RQ 0DUVKDOOjV SDUW WR FRQYHUW WKH FDVK LQWR RWKHU IRUPV RI
                                                                      DSSUHFLDEOHDVVHWVEHFDXVHKHNQHZLIKHSODFHGWKHSURFHHGV
  0DUVKDOOVHHNVWRGLVWLQJXLVK$PHULQHE\FODLPLQJWKDWLQ           LQ D EDQN KH PLJKW KDYH WR DQVZHU VRPH XQFRPIRUWDEOH
WKH SUHVHQW FDVH WKHUH ZDV LQVXIILFLHQW mRWKHU HYLGHQFHl WR   TXHVWLRQV DERXW WKH PRQH\jV RULJLQV  )XUWKHUPRUH LQ
VXSSRUWWKHDGPLVVLRQRIWKHVXGGHQZHDOWKHYLGHQFH:H              UHVSRQVHWRTXHVWLRQLQJDERXWKLVLGHQWLW\DQGWKHVRXUFHRI
GLVDJUHH,Q$PHULQHWKHJRYHUQPHQWjVRQO\RWKHUHYLGHQFH           WKH IXQGV 0DUVKDOO SURFHHGHG WR SURGXFH KLV )ORULGD
EHVLGHV WKH GHIHQGDQWjV XQH[SODLQHG LQFUHDVH LQ ILQDQFLDO       LGHQWLILFDWLRQUDWKHUWKDQKLV2KLROLFHQVHDQGLQIRUPHGWKH
UHVRXUFHVZDVKLVRSSRUWXQLW\WRFRPPLWWKHFULPHDQGKLVXVH         WHOOHUWKHPRQH\EHORQJHGWRKLVVWHSEURWKHU0RQWKVODWHU
RI FXUUHQF\ LQ WKH VDPH GHQRPLQDWLRQ DV WKDW ZKLFK ZDV       LQ$XJXVWZKHQ0DUVKDOOOHDUQHGWKH)%,KDGEHHQ
VWROHQ  6LPLODUO\ WKH JRYHUQPHQW LQ WKH SUHVHQW FDVH        DVNLQJ TXHVWLRQV DERXW WKH EURNHUDJH DFFRXQW KH WROG KLV
SURGXFHG HYLGHQFH RI 0DUVKDOOjV RSSRUWXQLW\ WR VWHDO WKH       VWHSEURWKHUWRPDNHWKHDFFRXQWmGLVDSSHDUl7DNLQJLQWR
PRQH\ DQG WKH IDFW WKDW KH VWDUWHG WKH  EURNHUDJH     DFFRXQWDOOWKHHYLGHQFHRIWKLVQDWXUHLQWKHUHFRUG,EHOLHYH
DFFRXQWXVLQJWZRWKRXVDQGELOOV                               DMXU\FRXOGKDYHGHWHUPLQHGLWZDVSUREDWLYHRIWKHW\SHRI
                                                                      mGHVLJQWRFRQFHDOlERWKWKHDVVHWVWKHPVHOYHVDVZHOODVWKHLU
  7KHFLUFXPVWDQWLDOHYLGHQFHDJDLQVW0DUVKDOOLQIDFWZDV          LOOHJDORULJLQVZKLFKWKH8QLWHG6WDWHV&RXUWRI$SSHDOVIRU
HYHQJUHDWHUWKDQWKDWZKLFKZDVDYDLODEOHLQ$PHULQH)RU           WKH7HQWK&LUFXLWIRXQGUHOHYDQWLQ8QLWHG6WDWHVY*DUFLD
H[DPSOHWKHUHZDVHYLGHQFHWKDWWKHRQO\ILQJHUSULQWVRQWKH         (PPDQXHO)GWK&LUDQRWKHUFDVH
VKULQNZUDSZHUHWKRVHRI0DUVKDOODVZHOODVWKHWHVWLPRQ\           FLWHGE\WKHPDMRULW\2QFHWKHMXU\UHDFKHGWKLVFRQFOXVLRQ
RI YDULRXV ZLWQHVVHV GHWDLOLQJ 0DUVKDOOjV HUUDWLF EHKDYLRU     LW FRXOG KDYH ORJLFDOO\ LQIHUUHG 0DUVKDOO DFWHG ZLWK WKDW
LQFRQVLVWHQWVWDWHPHQWVDQGKLVQHUYRXVQHVVDERXWWKH)%,            GHVLJQWRFRQFHDOLQWKHWUDQVDFWLRQVLQYROYHGKHUH
LQYHVWLJDWLRQ:HWKHUHIRUHFRQFOXGHWKDWWKHGLVWULFWFRXUW
GLGQRWDEXVHLWVGLVFUHWLRQLQGHQ\LQJ0DUVKDOOjVPRWLRQLQ            ,QVXSSRUWRILWVKROGLQJWKHPDMRULW\UHOLHVLQSDUWRQWKH
OLPLQHRULQDGPLWWLQJHYLGHQFHRIKLVVXGGHQZHDOWK6HH            IDFW0DUVKDOOSXUFKDVHGWKHZLQHDQGWKHGLDPRQGEUDFHOHW
7UHSHOY5RDGZD\([SUHVV,QF)GWK&LU          XVLQJYDOLGFUHGLWFDUGVLVVXHGLQKLVRZQQDPH9LHZLQJWKLV
                                                                      IDFWLQWKHOLJKWPRVWIDYRUDEOHWRWKHJRYHUQPHQWKRZHYHU
    8QLWHG6WDWHVY0DUVKDOO                       1R     1R                       8QLWHG6WDWHVY0DUVKDOO        

1RUPDQ)GWK&LUDFDVHFLWHGE\WKH             KROGLQJWKDWHYLGHQWLDU\UXOLQJVDUHUHYHUVHGRQO\LIWKH
PDMRULW\VWDWHG                                                     GLVWULFWFRXUWDEXVHVLWVGLVFUHWLRQ
  7KHVWDWXWHGRHVQRWUHTXLUHWKDWWKHUHEHDQ\LQWHQWLRQRU            0DUVKDOOjVEULHIDOVRLQFOXGHGDVXPPDU\FKDOOHQJHWRWKH
  GHVLJQWRFRQFHDOWKHLGHQWLW\RIWKHSHUVRQGHDOLQJZLWK           MXU\ LQVWUXFWLRQV WKDW SHUPLWWHG WKH MXU\ WR LQIHU IURP WKH
  WKHSURSHUW\,WUHTXLUHVLQVWHDGWKDWDGHIHQGDQWNQRZ          VXGGHQZHDOWK HYLGHQFH WKDW 0DUVKDOOjV H[SHQGLWXUHV
  WKDW WKH WUDQVDFWLRQ LV GHVLJQHG LQ ZKROH RU LQ SDUW WR   LPPHGLDWHO\ DIWHU WKH ODUFHQ\ ZHUH IXQGHG E\ WKH VWROHQ
  FRQFHDORUGLVJXLVHWKHQDWXUHWKHORFDWLRQWKHVRXUFH           PRQH\7KHGLVWULFWFRXUWjVLQVWUXFWLRQVKRZHYHUDFFXUDWHO\
  WKHRZQHUVKLSRUWKHFRQWURORIWKHSURFHHGVRIVSHFLILHG         UHIOHFWHGWKHKROGLQJLQ$PHULQH6HH$PHULQH)GDW
  XQODZIXODFWLYLW\7KHUHLVQRFRQWHQWLRQWKDWWKHPRQH\           :HDOVRFRQFOXGHWKDWWKH\GLGQRWKDYHWKHSRWHQWLDO
  XVHG WR EX\ WKH FDU ZDV QRW WKH SURFHHGV RI VSHFLILHG     WRFRQIXVHRUPLVOHDGWKHMXU\6HH,QQHVY+RZHOO&RUS
  XQODZIXODFWLYLW\7KHFRQWHQWLRQLVUDWKHUWKDWWKHUH           )GWK&LUGHFODULQJWKDWMXU\LQVWUXFWLRQV
  ZDV QR SURRI WKDW 1RUPDQ LQWHQGHG WR GLVJXLVH WKH           DUH WR EH mUHYLHZHG DV D ZKROH WR GHWHUPLQH ZKHWKHU WKH\
  QDWXUH ORFDWLRQ VRXUFH RZQHUVKLS RU FRQWURO RI WKH       DGHTXDWHO\ LQIRUP WKH MXU\ RI UHOHYDQW FRQVLGHUDWLRQV DQG
  PRQH\:HGLVDJUHH7KHSRLQWLVQRWZKHWKHUWKHVHOOHU           SURYLGH D EDVLV LQ ODZ IRU WKH MXU\ WR UHDFK LWV GHFLVLRQl
  RIWKHFDULVGHFHLYHGDVWRZKR1RUPDQZDVEXWUDWKHU             LQWHUQDOTXRWDWLRQVRPLWWHG
  WKDWE\FKDQJLQJWKHSURFHHGVRIXQODZIXODFWLYLW\IURP
  WKHIRUPRIPRQH\RUPRUHSURSHUO\DEDQNDFFRXQWn             % 7KHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQZKHQLW
  WKURXJKWKHXVHRIRWKHUXQGLVFORVHGEXVLQHVVDFFRXQWV                H[FOXGHG HYLGHQFH RI 0DUVKDOOjV RWKHU VRXUFHV RI
  nLQWRWKHIRUPRIDQDXWRPRELOH1RUPDQPDGHLWPRUH                  LQFRPH EHJLQQLQJ PRUH WKDQ WKUHH \HDUV DIWHU WKH
  GLIILFXOWIRUWKHWUXHRZQHURIWKHPRQH\WRWUDFHZKDW                WKHIW
  KDGKDSSHQHGWRLW
                                                                         0DUVKDOO WHQGHUHG QXPHURXV H[KLELWV UHODWLQJ WR KLV
  8QGHURXUFDVHVWKLVLVVXIILFLHQWWRPDNHRXWDYLRODWLRQRI      OHJLWLPDWH VRXUFHV RI LQFRPH RIIHUHG IRU WKH SXUSRVH RI
  WKHVWDWXWH                                                        H[SODLQLQJWKHVRXUFHRIWKHPRQH\WKDWKHZDVLQYHVWLQJDQG
                                                                      VSHQGLQJLQHDUO\7KHVHH[KLELWVUDQJHGIURPKDQG
,GDW,QWKLVFDVHWKHHYLGHQFHZDVLQDOOOLNHOLKRRG       SULQWHGUHFHLSWVVKRZLQJWKDWKHKDGIL[HGXSYDULRXVROGFDUV
LQVXIILFLHQWWRDOORZDFRQFOXVLRQ0DUVKDOOZDVPRWLYDWHGE\          LQ H[FKDQJH IRU PRQH\ WR D EDQN DFFRXQW VWDWHPHQW WKDW
DGHVLUHWRFRQFHDOKLVRZQLGHQWLW\GXULQJWKHWUDQVDFWLRQVDW       0DUVKDOOFODLPHGUHIOHFWHGKLVSURSHQVLW\WRVDYHPRQH\$OO
LVVXH  7KH UHFRUG KRZHYHU DPSO\ VXSSRUWV D FRQFOXVLRQ      RI WKLV SURIIHUHG HYLGHQFH KRZHYHU LQYROYHG DOWHUQDWLYH
0DUVKDOO HQJDJHG LQ WKRVH WUDQVDFWLRQV LQ DQ DWWHPSW WR       VRXUFHVRILQFRPHIURPRQZDUGPRUHWKDQWKUHH\HDUV
FRQFHDORUGLVJXLVHKLVFRQQHFWLRQZLWKWKHODUFHQ\SURFHHGV          DIWHUWKHODUFHQ\KDGRFFXUUHG$OWKRXJKWKHGLVWULFWFRXUW
IURP ODZ HQIRUFHPHQW WKH YLFWLP EDQN DQG KLV IRUPHU          DOORZHG 0DUVKDOO WR LQWURGXFH H[KLELWV DQG WHVWLPRQ\
HPSOR\HU                                                             UHJDUGLQJKLVILQDQFHVSULRUWRWKHHYLGHQFHDWLVVXHZDV
                                                                      H[FOXGHGDVLUUHOHYDQW%HFDXVHSURRIRI0DUVKDOOjVILQDQFHV
  7KHVWDUWLQJSRLQWIRUP\DQDO\VLVLVDQH[DPLQDWLRQRIWKH         IURP  RQZDUG DSSHDUV WR KDYH QR UHOHYDQFH WR KLV
WRWDOLW\RIWKHHYLGHQFHSODFHGEHIRUHWKHMXU\DQGWKHORJLFDO       ILQDQFLDO WUDQVDFWLRQV LQ HDUO\  ZH FRQFOXGH WKDW WKH
LQIHUHQFHV WKH MXU\ FRXOG KDYH GUDZQ IURP WKDW HYLGHQFH      GLVWULFWFRXUWjVH[FOXVLRQRIVXFKHYLGHQFHZDVQRWDQDEXVH
:LWKWKLVVWDUWLQJSRLQW,GRQRWORRNDWHDFKWUDQVDFWLRQLQ        RIGLVFUHWLRQ6HH7UHSHOY5RDGZD\([SUHVV,QF)G
LVRODWLRQ,QVWHDG,VHHHDFKRIWKHWKUHHSXUFKDVHVZLWKLQWKH
FRQWH[WRIDOOWKHHYLGHQFH9LHZHGDVDZKROHWKHHYLGHQFH
    8QLWHG6WDWHVY0DUVKDOO                         1R       1R                     8QLWHG6WDWHVY0DUVKDOO       

  WK &LU  KROGLQJ WKDW DOO HYLGHQWLDU\           :KRHYHU NQRZLQJ WKDW WKH SURSHUW\ LQYROYHG LQ D
UXOLQJVDUHVXEMHFWWRUHYLHZIRUDEXVHRIGLVFUHWLRQ                     ILQDQFLDO WUDQVDFWLRQ UHSUHVHQWV WKH SURFHHGV RI VRPH
                                                                            IRUP RI XQODZIXO DFWLYLW\ FRQGXFWV RU DWWHPSWV WR
& 7KH GLVWULFW FRXUWjV GHFLVLRQ WR FRQGXFW WKH FKDUJH               FRQGXFW VXFK D ILQDQFLDO WUDQVDFWLRQ ZKLFK LQ IDFW
   FRQIHUHQFH DQG SRVVLEO\ D SRUWLRQ RI WKH FORVLQJ                 LQYROYHVWKHSURFHHGVRIVSHFLILHGXQODZIXODFWLYLW\
   DUJXPHQWVLQ0DUVKDOOjVDEVHQFHGRHVQRWFRQVWLWXWH                     NQRZLQJWKDWWKHWUDQVDFWLRQLVGHVLJQHGLQZKROHRULQ
   UHYHUVLEOHHUURU                                                         SDUWWRFRQFHDORUGLVJXLVHWKHQDWXUHWKHORFDWLRQWKH
                                                                            VRXUFHWKHRZQHUVKLSRUWKHFRQWURORIWKHSURFHHGVRI
   0DUVKDOO FKDOOHQJHV WKH GHFLVLRQ RI WKH GLVWULFW FRXUW WR        VSHFLILHGXQODZIXODFWLYLW\VKDOOEH>JXLOW\RIDFULPH@
DFFHSW KLV ODZ\HUjV ZDLYHU RI KLV SUHVHQFH DW WKH
FRPPHQFHPHQWRIWKHFKDUJHFRQIHUHQFHRQ$SULO                   7KHXQGHUO\LQJFRQGXFWIRU&RXQWLV0DUVKDOOjVSXUFKDVHRI
$FFRUGLQJ WR 0DUVKDOO KH ZDV DEVHQW IURP WKH FKDUJH              WKH5ROH[&RXQWVWHPVRXWRIKLVSXUFKDVHRIWKHGLDPRQG
FRQIHUHQFH DQG IRU D SRUWLRQ RI WKH FORVLQJ DUJXPHQWV            WHQQLV EUDFHOHW DQG &RXQW  LQYROYHV KLV SXUFKDVH RI WKH
DOWKRXJKWKHUHLVQRGRFXPHQWDWLRQRIZKHQKHDUULYHGQRU                 ZLQH7KHPDMRULW\KDVFRUUHFWO\VWDWHGWKHWKUHHHVVHQWLDO
DQ\ H[SODQDWLRQ IRU ZK\ KH ZDV DEVHQW  7KH JRYHUQPHQW           HOHPHQWVRIWKHFULPH
PDLQWDLQVWKDWKHDUULYHGLQWKHFRXUWURRPVKRUWO\DIWHUWKH
FKDUJHFRQIHUHQFHEHJDQ1HLWKHU0DUVKDOOQRUKLVODZ\HU                   XVHRIIXQGVWKDWDUHSURFHHGVRIXQODZIXODFWLYLW\
ORGJHGDQ\REMHFWLRQZLWKWKHGLVWULFWFRXUWFRQFHUQLQJWKLV
DOOHJHGHUURU                                                              NQRZOHGJHWKDWWKHIXQGVDUHSURFHHGVRIXQODZIXO
                                                                            DFWLYLW\DQG
  7KHUHLVQRGRXEWWKDWWKHDFFXVHGKDVDFRQVWLWXWLRQDOULJKW
WR EH SUHVHQW DW DOO WKH FULWLFDO VWDJHV RI KLV WULDO  6HH      FRQGXFWLQJ RU DWWHPSWLQJ WR FRQGXFW D ILQDQFLDO
.HQWXFN\ Y 6WLQFHU  86    m>'@XH               WUDQVDFWLRQNQRZLQJWKDWWKHWUDQVDFWLRQLVGHVLJQHGLQ
SURFHVV FOHDUO\ UHTXLUHV WKDW D GHIHQGDQW EH DOORZHG WR EH         ZKROH RU LQ SDUW WR FRQFHDO RU GLVJXLVH WKH QDWXUH
SUHVHQW WR WKH H[WHQW WKDW D IDLU DQG MXVW KHDULQJ ZRXOG EH      ORFDWLRQVRXUFHRZQHUVKLSRUFRQWURORIWKHSURFHHGV
WKZDUWHGE\KLVDEVHQFHlFLWDWLRQVDQGLQWHUQDOTXRWDWLRQV
RPLWWHG7KLVULJKWKRZHYHULVDZDLYDEOHRQHVRORQJDV             8QLWHG6WDWHVY3ULQFH)GWK&LU,
WKHGHIHQGDQWjVZDLYHULVNQRZLQJDQGYROXQWDU\6HH'LD]Y             DJUHHZLWKP\IHOORZSDQHOLVWVWKDWWKHILUVWWZRHOHPHQWVDUH
8QLWHG6WDWHV867REHDNQRZLQJ                 QRW DW LVVXH KHUH  5DWKHU 0DUVKDOOjV FKDOOHQJH WR WKHVH
DQG YROXQWDU\ ZDLYHU D GHIHQGDQW mPXVW EH DZDUH RI WKH          FRQYLFWLRQVDVVHUWVDODFNRIHYLGHQFHSHUWDLQLQJWRWKHWKLUG
SURFHVVHVWDNLQJSODFHRIKLVULJKWDQGRIKLVREOLJDWLRQWREH          HOHPHQWLQWHQWWRFRQFHDORUGLVJXLVH
SUHVHQW DQG KH PXVW KDYH QR VRXQG UHDVRQ IRU UHPDLQLQJ
DZD\l6HH7D\ORUY8QLWHG6WDWHV86Q                  $IWHUYLHZLQJWKHHYLGHQFHSUHVHQWHGDWWULDODVDZKROHLQ
FLWDWLRQVDQGLQWHUQDOTXRWDWLRQVRPLWWHG                       WKHOLJKWPRVWIDYRUDEOHWRWKHSURVHFXWLRQ,KDYHFRQFOXGHG
                                                                          DQG D MXU\ FRXOG KDYH IRXQG WKH UHFRUG ZRXOG VXSSRUW D
   ,Q)LQQH\Y5RWKJHUEHU)GWK&LUWKLV            ILQGLQJRQWKHWKLUGHOHPHQWEH\RQGDUHDVRQDEOHGRXEW7KH
FRXUWGHWHUPLQHGWKDWWKHGLVWULFWFRXUWVKRXOGKDYHKHOGDQ              IDFW 0DUVKDOO FKRVH QRW WR FRQFHDO KLV LGHQWLW\ IURP WKRVH
HYLGHQWLDU\KHDULQJWRGHFLGHZKHWKHUWKHGHIHQGDQWjVDEVHQFH             ZKRP KH PDGH WKH SXUFKDVHV DOWKRXJK D UHOHYDQW
ZDVYROXQWDU\VRWKDWmWKHLVVXHPLJKWKDYHEHHQIRUHFORVHG              FRQVLGHUDWLRQLVQRWGLVSRVLWLYH,QUHVSRQVHWRDQDUJXPHQW
DQG IXUWKHU OLWLJDWLRQ DYRLGHGl  ,G DW   ,I QR VXFK   VLPLODUWRWKDWSUHVHQWHGE\$SSHOODQWKHUHWKH8QLWHG6WDWHV
ILQGLQJLVPDGHKRZHYHUDVLQ)LQQH\ZHORRNWRWKHUHFRUG             &RXUWRI$SSHDOVIRUWKH(LJKWK&LUFXLWLQ8QLWHG6WDWHVY
     8QLWHG6WDWHVY0DUVKDOO                          1R        1R                     8QLWHG6WDWHVY0DUVKDOO       

DEVHQFH RI HYLGHQFH LQGLFDWLQJ DQ LQWHQW WR FRQFHDO KLV              DVDZKROHWRGHWHUPLQHZKHWKHURUQRWDGHIHQGDQWNQRZLQJO\
LGHQWLW\,GRQRWEHOLHYHLWLVGLVSRVLWLYHKHUH                           DQGYROXQWDULO\ZDLYHGKLVULJKWWREHSUHVHQWDWKLVWULDO6HH
                                                                             LG
   2QDSSHDO0DUVKDOOFODLPVWKHHYLGHQFHSUHVHQWHGGXULQJ
KLVWULDOZDVLQVXIILFLHQWWRVXSSRUWKLVWKUHHFRQYLFWLRQVIRU                 %HFDXVH0DUVKDOOGLGQRWWLPHO\REMHFWWRKLVDEVHQFHDW
PRQH\ODXQGHULQJ,ILQGLWQHFHVVDU\DWWKLVSRLQWWRUHLWHUDWH            WULDO ZH PD\ UHYHUVH KLV FRQYLFWLRQ EDVHG RQ WKLV DOOHJHG
WKH VWDQGDUG RI UHYLHZ WR EH DSSOLHG LQ WKLV FRQWH[W  $Q         YLRODWLRQRIKLVGXHSURFHVVULJKWVRQO\LIZHGHWHUPLQHWKH
DSSHOODWHFRXUWUHYLHZLQJDFKDOOHQJHWRWKHVXIILFLHQF\RIWKH              GLVWULFWFRXUWjVDFWLRQFRQVWLWXWHGSODLQHUURU6HH)HG5&LY
HYLGHQFHDGGXFHGDWWULDOPXVWGHWHUPLQHZKHWKHUYLHZLQJ                    3E7KLVFRXUWKDVGHVFULEHGWKHSODLQHUURUDQDO\VLVDV
WKHWULDOWHVWLPRQ\DQGH[KLELWVLQWKHOLJKWPRVWIDYRUDEOHWR              FRQVLVWLQJ RI IRXU LQTXLULHV  ZKHWKHU DQ HUURU DFWXDOO\
WKHSURVHFXWLRQDQ\UDWLRQDOWULHURIIDFWFRXOGKDYHIRXQGWKH             RFFXUUHGLQWKHGLVWULFWFRXUWWKHREYLRXVQHVVRIWKDWHUURU
HVVHQWLDOHOHPHQWVRIWKHFULPHEH\RQGDUHDVRQDEOHGRXEW                    ZKHWKHU WKH HUURU DIIHFWHG VXEVWDQWLDO ULJKWV DQG
sDFNVRQY9LUJLQLD867KHDSSHOODWH                 ZKHWKHU WKH FRPSURPLVH RI VXEVWDQWLDO ULJKWV VHULRXVO\
FRXUW PD\ QRW UHZHLJK WKH HYLGHQFH UHHYDOXDWH WKH                   DIIHFWHGWKHIDLUQHVVLQWHJULW\RUSXEOLFUHSXWDWLRQRIMXGLFLDO
FUHGLELOLW\RIZLWQHVVHVRUVXEVWLWXWHLWVMXGJPHQWIRUWKDWRI             SURFHHGLQJV6HH8QLWHG6WDWHVY7KRPDV)G
WKHMXU\8QLWHG6WDWHVY+LOODUG)GWK&LU              WK&LU
0RVWLPSRUWDQWO\WKHUHYLHZLQJFRXUWPXVWORRNDW
WKHHYLGHQFHDVDZKROH3RZHUVY%D\OLQHU0DULQH&RUS                      0DUVKDOOFKDOOHQJHVWKHIDFWWKDWKLVODZ\HUFRPPXQLFDWHG
)GWK&LUKROGLQJMXU\YHUGLFWPXVWEH               WKHZDLYHUWRWKHMXGJHZLWKRXW0DUVKDOOjVFRQVHQW,WLVWUXH
H[DPLQHGLQOLJKWRIHQWLUHUHFRUGZKHQGHWHUPLQLQJZKHWKHU                  WKDW D ZDLYHU FDQQRW EH EDVHG RQ VWDWHPHQWV PDGH E\ D
LWPD\EHDOORZHGWRVWDQG                                                 GHIHQGDQWjVODZ\HUZKRKDVQRWILUVWFRQVXOWHGZLWKKLVRUKHU
                                                                             FOLHQW6HH&DUWHUY6RZGHUV)GWK&LU
  0DUVKDOOZDVFRQYLFWHGRQ&RXQWVDQGZLWKPRQH\                    m(YHQ LI GHIHQVH FRXQVHO FRXOG KDYH YDOLGO\ ZDLYHG
ODXQGHULQJLQYLRODWLRQRI86&D%L                     GHIHQGDQWjVULJKWWREHSUHVHQWIRUWKHFRQFOXVLRQRIKLVWULDO
                                                                             ZKHUH GHIHQVH FRXQVHO GLG QRW FRQVXOW ZLWK GHIHQGDQW
                                                                             FRQFHUQLQJWKHZDLYHUDQGGLGQRWREWDLQGHIHQGDQWjVFRQVHQW
                                                                             WKHZDLYHUZLOOQRWEHELQGLQJRQGHIHQGDQWl1HYHUWKHOHVV
                                                                             WKLV LV QRW WKH RQO\ ZD\ LQ ZKLFK 0DUVKDOOjV ULJKW WR EH
D IDFW ZKLFK VXSSRUWV WKH FRQFOXVLRQ 0DUVKDOOjV LQWHQW ZDV WR FRQYHUW WKH    SUHVHQWPD\KDYHEHHQZDLYHG:DLYHUPD\DOVREHLPSOLHG
mGLUW\l EDQN ODUFHQ\ SURFHHGV LQWR mFOHDQl DVVHWV WKDW FRXOG QRW EH WUDFHG   IURPWKHGHIHQGDQWjVFRQGXFW6HH)LQQH\Y5RWKJHUEHU
GLUHFWO\ WR KLV FULPH   0DUVKDOO KLPVHOI DGPLWWHG DV PXFK GXULQJ KLV        )G   WK &LU  KROGLQJ WKDW GHVSLWH WKH
WHVWLPRQ\ DW WULDO
                                                                             GHIHQGDQWjVIDLOXUHWRH[SUHVVO\ZDLYHKLVSUHVHQFHZDLYHU
     4   sXVW WKH ZLQH \RX SXUFKDVHG \RX VDLG \RX VWLOO KDYH LW"
                                                                             ZDVHIIHFWHGEHFDXVHm>L@WLVZKROO\LQFUHGLEOHWRVXJJHVWWKDW
     $   <HV , GR                                                         SHWLWLRQHU ZKR ZDV DW OLEHUW\ RQ EDLO KDG DWWHQGHG WKH
     4   'LG \RX SXUFKDVH WKDW ZLQH DV DQ LQYHVWPHQW"                       RSHQLQJVHVVLRQRIKLVWULDODQGKDGDGXW\WREHSUHVHQWDWWKH
     $   , SXUFKDVHG LW DQG WKH ZDWFKHV DV DQ LQYHVWPHQW    7KDWjV         WULDOHQWHUWDLQHGDQ\GRXEWVDERXWKLVULJKWWREHSUHVHQWDW
          FRUUHFW
                                                                             HYHU\VWDJHRIKLVWULDOlLQWHUQDOFLWDWLRQRPLWWHG
7KLV WHVWLPRQ\ FRQVWLWXWHV GLUHFW HYLGHQFH 0DUVKDOO VDZ WKH ZLQH DQG WKH
5ROH[ DV LQYHVWPHQWV 6LQFH WKH RQO\ RWKHU SXUFKDVH DW LVVXH LQYROYHG WKH
                                                                               $IWHU UHYLHZLQJ WKH UHFRUG ZH FRQFOXGH WKDW OLNH WKH
GLDPRQG WHQQLV EUDFHOHW RQH FRXOG ORJLFDOO\ SUHVXPH WKH SOXUDO mZDWFKHVl    GHIHQGDQWLQ)LQQH\0DUVKDOOjVDEVHQFHIURPWKHFRXUWURRP
LQFOXGHV WKH EUDFHOHW
    8QLWHG6WDWHVY0DUVKDOO                     1R      1R                        8QLWHG6WDWHVY0DUVKDOO         

FRQVWLWXWHG D NQRZLQJ DQG YROXQWDU\ ZDLYHU RI KLV               WKDWFRQYLFWLRQDQGKLVFRQYLFWLRQDQGVHQWHQFHXQGHU
FRQVWLWXWLRQDOULJKWWREHSUHVHQW0DUVKDOOOLNH)LQQH\ZDV       86&GIRUDUPHGUREEHU\PXVWVWDQG
IUHHRQEDLO+HKDVRIIHUHGQRH[SODQDWLRQIRUKLVDEVHQFH
GXULQJWKHFKDUJHFRQIHUHQFH(YHQPRUHSUREOHPDWLFIRUKLV         *HQWU\)GDW
FODLP0DUVKDOOGRHVQRWGLVSXWHWKDWKHZDVSUHVHQWLQWKH
FRXUWURRP ZKHQ WKH GLVWULFW FRXUW DQQRXQFHG WKH WLPH DW         ,QWKLVFDVHWKHHYLGHQFHVXEPLWWHGDWWULDOZDVVXIILFLHQWWR
ZKLFK FRXUW SURFHHGLQJV ZRXOG UHVXPH WKH QH[W GD\  :H      VXSSRUW0DUVKDOOjVFRQYLFWLRQVXQGHUERWK&RXQWVDQG
WKHUHIRUHFRQFOXGHWKDW0DUVKDOOjVULJKWWREHSUHVHQWDWKLV        7KH HYLGHQFH RQ ERWK FRXQWV LV DOVR FRQVLVWHQW LH D
WULDOZDVYROXQWDULO\ZDLYHGE\KLVFRQGXFW7KHUHLVWKXVQR       UHDVRQDEOH MXU\ FRXOG EHOLHYH ERWK WKDW 0DUVKDOO ZDV WKH
QHHG WR DGGUHVV ZKHWKHU KLV ODZ\HUjV FRPPXQLFDWLRQ RI D      EXUJODUDQGWKDWKHODWHUSRVVHVVHGRUFRQFHDOHGWKHVWROHQ
ZDLYHUWRWKHGLVWULFWFRXUWZDVYDOLGQRUGRZHQHHGWRDSSO\      IXQGV,IWKHHYLGHQFHSUHVHQWHGDWWULDOKDGEHHQPXWXDOO\
WKHSODLQHUURUDQDO\VLVDQ\IXUWKHU:HQRWHKRZHYHUWKDW         H[FOXVLYH ZLWK UHVSHFW WR WKHVH WZR FRXQWV WKDW LV LI D
HYHQLIZHKDGIRXQGHUURULQKLVKDYLQJEHHQDEVHQWGXULQJ          UHDVRQDEOHMXURUFRXOGQRWKDYHIRXQG0DUVKDOOZDVWKHWKLHI
WKHFKDUJHFRQIHUHQFH0DUVKDOOKDVSURGXFHGQRHYLGHQFH             ZLWKRXWDOVRUXOLQJRXWWKHSRVVLELOLW\KHZDVWKHVXEVHTXHQW
WKDW WKLV DEVHQFH VXEVWDQWLDOO\ DIIHFWHG KLV ULJKWV RU WKH   UHFHLYHURUSRVVHVVRUWKHQRQO\DQHZWULDOZRXOGFRUUHFWWKH
IDLUQHVVRIWKHWULDOSURFHHGLQJV                                   VXEVWDQWLYH HUURU  +HUH KRZHYHU 0DUVKDOOjV HUURQHRXV
                                                                     FRQYLFWLRQ RQ &RXQW  GRHV QRWKLQJ WR FDVW GRXEW RQ KLV
' 6XIILFLHQF\RIWKHHYLGHQFH                                       ODUFHQ\FRQYLFWLRQ&RQVHTXHQWO\WKHDSSURSULDWHUHPHG\LQ
                                                                     WKLV FDVH DFFRUGLQJ WR WKH UXOH DQQRXQFHG LQ *DGGLV DV
   0DUVKDOOQH[WFKDOOHQJHVWKHVXIILFLHQF\RIWKHHYLGHQFH          LQWHUSUHWHG LQ *HQWU\ DQG 0RRUH LV YDFDWXU RI WKH VHFWLRQ
VXSSRUWLQJWKHWZRODUFHQ\FRQYLFWLRQVWKHIDOVHFXUUHQF\          FFRQYLFWLRQ&RXQWUDWKHUWKDQUHPDQGIRUDQHZ
WUDQVDFWLRQUHSRUWFRQYLFWLRQDQGWKHWKUHHD%L      WULDORQ&RXQWVDQG
PRQH\ODXQGHULQJFRQYLFWLRQV$OWKRXJK0DUVKDOOZDVDOVR
FRQYLFWHGRIYLRODWLQJ86&ZKLFKSXQLVKHVD                    ,,0DUVKDOOjV&RQYLFWLRQV8QGHU86&
SHUVRQZKRmNQRZLQJO\HQJDJHVRUDWWHPSWVWRHQJDJHLQD                                  D%L
PRQHWDU\WUDQVDFWLRQLQFULPLQDOO\GHULYHGSURSHUW\RIDYDOXH
JUHDWHU WKDQ l UHVXOWLQJ IURP KLV RSHQLQJ WKH           ,GRQRWGLVDJUHHZLWKWKHIDFWVDQGWKHODZDVVHWIRUWKLQ
EURNHUDJHDFFRXQWZLWKRIVWROHQPRQH\KHGRHVQRW          WKHSRUWLRQRIWKHPDMRULW\jVRSLQLRQGHDOLQJZLWK0DUVKDOOjV
GLUHFWO\FKDOOHQJHWKDWFRQYLFWLRQRQDSSHDO                       PRQH\ODXQGHULQJFRQYLFWLRQV:KHUH,SDUWFRPSDQ\ZLWK
                                                                     WKHPDMRULW\LVLQWKHUHODWLYHVLJQLILFDQFH,EHOLHYHVKRXOGEH
  ,Q RXU UHYLHZ RI KLV FODLP WKDW WKHUH ZDV LQVXIILFLHQW    SODFHG RQ WKH DEVHQFH RI HYLGHQFH LQGLFDWLQJ DQ LQWHQW RQ
HYLGHQFHWRVXSSRUWKLVRWKHUFRQYLFWLRQVZHPXVWGHWHUPLQH         0DUVKDOOjVSDUWWRFRQFHDOKLVLGHQWLW\DWWKHWLPHHDFKRIWKH
mZKHWKHU DIWHU YLHZLQJ WKH HYLGHQFH LQ WKH OLJKW PRVW       GLVSXWHG WUDQVDFWLRQV ZDV FRQVXPPDWHG DQG RQ ZKHWKHU
IDYRUDEOHWRWKHSURVHFXWLRQDQ\UDWLRQDOWULHURIIDFWFRXOG       WKRVHWUDQVDFWLRQVZHUHRUGLQDU\FRPPHUFLDOWUDQVDFWLRQVRU
KDYH IRXQG WKH HVVHQWLDO HOHPHQWV RI WKH FULPH EH\RQG D     LQYHVWPHQWV$OWKRXJK$SSHOODQWHPSKDVL]HVLQKLVEULHIWKH
UHDVRQDEOHGRXEWlsDFNVRQY9LUJLQLD86
 HPSKDVLV LQ RULJLQDO  $V ZH UHYLHZ 0DUVKDOOjV
FODLPVRILQVXIILFLHQWSURRIKRZHYHUZHPD\QRWmZHLJKWKH             
HYLGHQFHFRQVLGHUWKHFUHGLELOLW\RIZLWQHVVHVRUVXEVWLWXWH             $OWKRXJK WKH PDMRULW\ FKDUDFWHUL]HV 0DUVKDOOjV SXUFKDVH RI WKH
                                                                     ZLQHV D 5ROH[ DQG D GLDPRQG WHQQLV EUDFHOHW DV D mIHZ LVRODWHG SXUFKDVHV
                                                                     RI ZHDUDEOH RU FRQVXPDEOH LWHPVl , WKLQN WKH HYLGHQFH ZDV VXIILFLHQW WR
                                                                     DOORZ D MXU\ WR FRQFOXGH 0DUVKDOO PDGH HDFK SXUFKDVH DV DQ LQYHVWPHQW
    8QLWHG6WDWHVY0DUVKDOO                      1R     1R                     8QLWHG6WDWHVY0DUVKDOO        

FRQYLFWLRQDQGVHQWHQFHRQWKHSRVVHVVLRQFKDUJHDUHQRWVHW         RXUMXGJPHQWIRUWKDWRIWKHMXU\l8QLWHG6WDWHVY+LOOLDUG
DVLGHZHQRWHWKDWµ,WLVZHOOXQGHUVWRRGWKDWDPXOWLSOLFLW\RI    )GWK&LU
VHQWHQFHV LPSDLUV D SULVRQHUjV RSSRUWXQLWLHV IRU SDUGRQ RU
SDUROHjl,GFLWLQJ+LEGRQY8QLWHG6WDWHV)G            7KHODUFHQ\FRQYLFWLRQV
WK&LUDQG0DFKLEURGDY8QLWHG6WDWHV
)GWK&LU7KHHYLGHQWLDU\IRXQGDWLRQ              0DUVKDOOZDVFRQYLFWHGRIEDQNODUFHQ\LQYLRODWLRQRI
IRUWKHGHIHQGDQWjVFRQYLFWLRQVLQ*HQWU\ZDVVLPLODUWRWKDW        86&  E m:KRHYHU WDNHV DQG FDUULHV DZD\ ZLWK
SUHVHQWKHUH                                                        LQWHQWWRVWHDORUSXUORLQDQ\SURSHUW\RUPRQH\RUDQ\RWKHU
                                                                     WKLQJRIYDOXHH[FHHGLQJEHORQJLQJWRDQ\EDQN
  8SRQ WKH WULDO RI WKH FDVH WKH HYLGHQFH UHIOHFWHG PRVW    VKDOOEHILQHGXQGHUWKLVWLWOHRULPSULVRQHGQRWPRUHWKDQ
  FOHDUO\WKDWXSRQ'HFHPEHUWKHSHWLWLRQHUDQG             WHQ \HDUV RU ERWKl  +H ZDV DOVR FRQYLFWHG RI UHFHLYLQJ
  KLV FRGHIHQGDQW &OD\WRQ XVLQJ D VWROHQ DXWRPRELOH        PRQH\VWROHQIURPDEDQNLQYLRODWLRQRI86&F
  DUPHGZLWKVKRWJXQVDQGZHDULQJVNLPDVNVUREEHGDW              m:KRHYHUUHFHLYHVSRVVHVVHVFRQFHDOVVWRUHVEDUWHUVVHOOV
  JXQSRLQWDEDQNVHFXULW\RIILFHURIDVWKH            RUGLVSRVHVRIDQ\SURSHUW\RUPRQH\RURWKHUWKLQJRIYDOXH
  RIILFHUZDVLQWKHSURFHVVRIGHOLYHULQJFDVKWRWKHEDQN         ZKLFKKDVEHHQWDNHQRUVWROHQIURPDEDQNLQYLRODWLRQ
  8SRQ sDQXDU\   VHDUFK ZDUUDQWV OHG WR WKH          RIVXEVHFWLRQENQRZLQJWKHVDPHWREHSURSHUW\ZKLFKKDV
  UHFRYHU\RIRIWKHSURFHHGVRIWKHUREEHU\              EHHQVWROHQVKDOOEHVXEMHFWWRWKHSXQLVKPHQWSURYLGHGLQ
  IURP WKH SHWLWLRQHUjV KRPH DQG WKH UHFRYHU\ RI              VXEVHFWLRQEIRUWKHWDNHUl
  RIWKHSURFHHGVRIWKHUREEHU\IURPWKHKRPH
  RIWKHFRGHIHQGDQW&OD\WRQWRJHWKHUZLWKWKHZHDSRQV              7KH8QLWHG6WDWHV6XSUHPH&RXUWKDVKHOGWKDWVXFKDGXDO
  DQGRWKHUSDUDSKHUQDOLDXVHGLQWKHUREEHU\7KHMXU\             FRQYLFWLRQLVLPSURSHU,Q8QLWHG6WDWHVY*DGGLV86
  UHWXUQHGDYHUGLFWILQGLQJDOOGHIHQGDQWVJXLOW\DVFKDUJHG        WKH&RXUWFRQFOXGHGWKDWLQHQDFWLQJF
  LQHDFKRIWKHWZRFRXQWVRIWKHLQGLFWPHQW                      m&RQJUHVVZDVWU\LQJWRUHDFKDQHZJURXSRIZURQJGRHUV
                                                                     QRWWRPXOWLSO\WKHRIIHQVHRIWKHEDQNUREEHUVWKHPVHOYHVl
*HQWU\Y8QLWHG6WDWHV)6XSS('            ,G DW  FLWDWLRQV DQG LQWHUQDO TXRWDWLRQV RPLWWHG  ,W
7HQQ   7KH HYLGHQFH ZDV WKHUHIRUH VXIILFLHQW WR       GHWHUPLQHG WKDW m F UHDFKHV D GLIIHUHQW JURXS RI
HVWDEOLVKERWK*HQWU\jVSDUWLFLSDWLRQLQWKHWKHIWDVZHOODVKLV   ZURQJGRHUVLHWKRVHZKRUHFHLYHWKHORRWIURPWKHUREEHUl
VXEVHTXHQW SRVVHVVLRQ RI VWROHQ SURSHUW\  2Q DSSHDO WKH    ,GDW1RQHWKHOHVVGHVSLWHWKHUXOHRI*DGGLV0DUVKDOO
SDQHOKHOGWKHHUURUHQWLWOHGKLPWRYDFDWXURIKLVFRQYLFWLRQ       ZDVFRQYLFWHGXQGHUERWKEDQGFIRUWKH
XQGHUVHFWLRQFEXWGLGQRWMXVWLI\DQHZWULDORQERWK        VDPHLOOHJDODFW
WKHUREEHU\DQGWKHUHFHLSWDQGSRVVHVVLRQFRXQWV
                                                                        7KHJRYHUQPHQWVWDWHGDWRUDODUJXPHQWWKDWWKHLQFOXVLRQ
  :H ILQG *DGGLV FRQWUROOLQJ ZLWK UHJDUG WR *HQWU\jV          RI WKH  F FKDUJH ZDV WR VHUYH DV DQ DOWHUQDWLYH WR
  FRQWHQWLRQ WKDW KH LV HQWLWOHG WR D QHZ WULDO XQGHU       0DUVKDOOjV LQGLFWPHQW XQGHU  E EDVHG RQ WKH
  0LODQRYLFKVXSUD$VLQ*DGGLVWKHHYLGHQFHVKRZHG              SRVVLELOLW\WKDWWKHSURRIPLJKWVKRZWKDW0\HUV0DUVKDOOjV
  WKDW*HQWU\ZDVDGLUHFWSDUWLFLSDQWLQWKHEDQNUREEHU\           IRUPHUFRXULHUSDUWQHUDW3LQNHUWRQZDVDSDUWLFLSDQWLQWKH
  DQGWKHUHLVQRHYLGHQFHWKDWKHUHFHLYHGWKHSURFHHGV             ODUFHQ\1RVXFKSURRIZDVIRUWKFRPLQJ1HYHUWKHOHVVWKH
  IURP D GLIIHUHQW EDQN UREEHU  7KXV WKH HUURU RI WKH     GLVWULFWFRXUWIDLOHGWRLQVWUXFWWKHMXU\WKDWLWFRXOGQRWFRQYLFW
  GLVWULFW MXGJH LQ DOORZLQJ KLP WR EH FRQYLFWHG IRU         0DUVKDOOXQGHUERWKEDQGFEDVHGRQWKH
  YLRODWLRQRIFFDQEHIXOO\FRUUHFWHGE\YDFDWLQJ          IDFWV EHIRUH LW  7KHUHIRUH ZLWK WKH FRQVHQW RI WKH
    8QLWHG6WDWHVY0DUVKDOO                     1R       1R                      8QLWHG6WDWHVY0DUVKDOO        

JRYHUQPHQW ZH VHW DVLGH 0DUVKDOOjV FRQYLFWLRQ XQGHU         ,GDWFLWDWLRQVDQGIRRWQRWHRPLWWHG,QUHDFKLQJWKDW
86&FEHFDXVHRIWKHSODLQHUURUSUHVHQWHG                KROGLQJWKH6HYHQWK&LUFXLWGLVWLQJXLVKHG0LODQRYLFK
  7KH UHPDLQLQJ ODUFHQ\ FRQYLFWLRQ XQGHU  86&               0RRUHUHOLHVXSRQ0LODQRYLFKY8QLWHG6WDWHVVXSUDLQ
EKDVWZRNH\HOHPHQWVWKHFDUU\LQJDZD\ RI              ZKLFK WKH 6XSUHPH &RXUW GLG RUGHU D QHZ WULDO DIWHU
EDQN SURSHUW\ RU PRQH\ H[FHHGLQJ  DQG  WKH            KROGLQJWKDWUREEHU\DQGSRVVHVVLRQRIIHQVHVFRXOGQRW
VSHFLILFLQWHQWWRVWHDO7KHUHLVQRGLVSXWHDVWRWKHYDOXHRI       EHFXPXODWHG86DW6&WDW
WKHSURSHUW\VWROHQQRUWKDWWKHZDVWDNHQDQGFDUULHG         ,QKLVRSLQLRQIRUWKH&RXUWLQ8QLWHG6WDWHVY*DGGLV
DZD\5DWKHU0DUVKDOOjVDUJXPHQWLVEDVHGRQWKHODFNRI              866&W/
GLUHFWHYLGHQFHWKDWKHZDVWKHRQHZKRWRRNWKHPRQH\                (GG   WKH DXWKRU RI 0LODQRYLFK sXVWLFH
                                                                        6WHZDUWGHVFULEHGLWDVKDYLQJmYHU\XQXVXDOIDFWVlDQG
  ,W LV D[LRPDWLF WKDW m>F@LUFXPVWDQWLDO HYLGHQFH DORQH LV       GLVWLQJXLVKHGLW,QDFRQFXUULQJRSLQLRQsXVWLFH:KLWH
VXIILFLHQWWRVXVWDLQDFRQYLFWLRQDQGVXFKHYLGHQFHQHHGQRW           MRLQHGE\WKH&KLHIsXVWLFHVWDWHGWKDWKHGLGmQRWUHDG
UHPRYH HYHU\ UHDVRQDEOH K\SRWKHVLV H[FHSW WKDW RI JXLOWl        WKH &RXUWjV RSLQLRQ DV UHDIILUPLQJ LQ DGGLWLRQ WR
8QLWHG 6WDWHV Y 9DQQHUVRQ  )G   WK &LU        GHVFULELQJ WKH 0LODQRYLFK UXOH WKDW D QHZ WULDO LV
,QWKLVFDVHWKHFLUFXPVWDQWLDOHYLGHQFHVXSSRUWLQJ            UHTXLUHG ZKHQ  D MXU\ LV HUURQHRXVO\ SHUPLWWHG WR
WKHMXU\jVYHUGLFWLVVXEVWDQWLDO7KHUHZHUHQRVLJQVRIIRUFHG       FRQYLFW D GHIHQGDQW ERWK RI EDQN UREEHU\  86&
HQWU\LQWRWKH$70DIDFWVWURQJO\LPSOLFDWLQJVRPHRQHZKR             DERUGDQGRINQRZLQJSRVVHVVLRQRIWKH
KDGDFFHVVWRWKHNH\VDQGVHFXULW\FRGHVQHHGHGWRDFFHVVWKH          SURFHHGV RI WKDW UREEHU\  86&  F DQG
YDXOW0DUVKDOOZDVRQHRIDYHU\VPDOOQXPEHURISHRSOH               WKHUHLVHYLGHQFHWRVXSSRUWERWKFRQYLFWLRQVl,GDW
ZLWK WKDW NLQG RI DFFHVV DQG IXUWKHU KH NQHZ KRZ PXFK       6&WDW+HDOVRSRLQWHGRXWWKDWLIWKH
PRQH\ZDVLQWKHYDXOWJLYHQWKDWKHKDGVHUYLFHGWKHVDPH             MXU\LVHUURQHRXVO\DOORZHGWRFRQVLGHUDQGFRQYLFWRQ
$70RQO\WZRGD\VHDUOLHU+LVILQJHUSULQWVZHUHWKHRQO\              WKHSRVVHVVLRQFRXQWDIWHUKDYLQJGHFLGHGWRFRQYLFWRQ
RQHV IRXQG RQ WKH GLVFDUGHG VKULQNZUDS WKDW KDG RQFH            WKHUREEHU\FRXQWWKHFRQYLFWLRQIRUSRVVHVVLRQmFDVWV
FRQWDLQHGWKHVWROHQPRQH\)XUWKHUPRUHWKHHYLGHQFH RI              DEVROXWHO\ QR GRXEW RQ WKH YDOLGLW\ RI WKH UREEHU\
0DUVKDOOjVVXGGHQDQGXQH[SODLQHGZHDOWKLPPHGLDWHO\DIWHU              FRQYLFWLRQlDQGDQHZWULDOVKRXOGQRWEHUHTXLUHG,G
WKHWKHIWDVZHOODVKLVSRVVHVVLRQRIWZRWKRXVDQGELOOV          DW   6 &W DW   sXVWLFH 6WHZDUW GLG QRW
WKHGD\KHRSHQHGKLVEURNHUDJHDFFRXQWDOVRSRLQWVWRKLV             GLVFODLP sXVWLFH :KLWHjV LQWHUSUHWDWLRQ RI WKH PDMRULW\
JXLOW)LQDOO\ YDULRXVZLWQHVVHVWHVWLILHGDERXW0DUVKDOOjV          RSLQLRQ
HYDVLYH DQG LQFRQVLVWHQW VWDWHPHQWV ZLWK UHIHUHQFH WR WKH
EURNHUDJH DFFRXQW DW 2OGH 'LVFRXQW D IHZ GD\V DIWHU WKH      ,G
PRQH\ZDVWDNHQIURPWKH$70
                                                                         ,Q*HQWU\Y8QLWHG6WDWHV)GWK
   7KLVFLUFXPVWDQWLDOHYLGHQFHWDNHQWRJHWKHUZDVPRUHWKDQ        &LUDSDQHORIWKLV&RXUWDSSO\LQJ*DGGLVKHOGWKH
VXIILFLHQW IRU D UDWLRQDO WULHU RI IDFW WR ILQG EH\RQG D   SHWLWLRQHUjV GXDO FRQYLFWLRQV IRU ERWK EDQN UREEHU\ DQG
UHDVRQDEOHGRXEWWKDW0DUVKDOOZDVJXLOW\RIEDQNODUFHQ\           UHFHLSW RU SRVVHVVLRQ RI VWROHQ EDQN SURSHUW\ FRXOG QRW EH
$FFRUG8QLWHG6WDWHVY0XQGW)GWK              DOORZHG WR VWDQG HYHQ ZKHUH WKH GXDO FRQYLFWLRQV KDG QR
&LUDIILUPLQJDJXLOW\YHUGLFWIRUEDQNODUFHQ\EDVHG         LPSDFWDWVHQWHQFLQJEHFDXVHWKHVHQWHQFHVLPSRVHGRQHDFK
RQ HYLGHQFH WKDW WKH GHIHQGDQW KDG EHHQ H[SHULHQFLQJ           FRXQWZHUHWREHUXQFRQFXUUHQWO\m$OWKRXJK*HQWU\KDVQRW
ILQDQFLDOGLIILFXOWLHVWKDWKHKDGDFFHVVWRWKHPRQH\DQGWKH       VKRZQVSHFLILFDGYHUVHFRQVHTXHQFHVZKLFKPLJKWDULVHLIKLV
    8QLWHG6WDWHVY0DUVKDOO                    1R      1R                      8QLWHG6WDWHVY0DUVKDOO        

&RXQWVDQG+HVKRXOGRQO\KDYHEHHQFRQYLFWHGRIRQH          RSSRUWXQLW\WRVWHDODQGWKDWKLVZHDOWKVXGGHQO\LQFUHDVHG
RUWKHRWKHU                                                       LPPHGLDWHO\ DIWHU WKH ODUFHQ\  $FFRUGLQJO\ DOWKRXJK KLV
                                                                    FRQYLFWLRQIRUYLRODWLQJ86&FLVVHWDVLGHZH
  7KH *DGGLV &RXUW IXUWKHU KHOG ZKHUH WKH HYLGHQFH          DIILUP 0DUVKDOOjV FRQYLFWLRQ IRU YLRODWLQJ  86&
LQWURGXFHG DW WULDO ZDV FOHDUO\ LQVXIILFLHQW WR VXSSRUW D   E
FRQYLFWLRQ XQGHU VHFWLRQ F EXW ZDV DGHTXDWH ZLWK
UHJDUG WR WKH WKHIW FRQYLFWLRQ WKH DSSURSULDWH UHPHG\ RQ        7KHFRQYLFWLRQIRUILOLQJDIDOVHFXUUHQF\WUDQVDFWLRQ
DSSHDOZDVVLPSOHYDFDWXURIWKHVHFWLRQFFRQYLFWLRQ               UHSRUW
7KHWKHIWFRQYLFWLRQFRXOGEHDOORZHGWRVWDQG,GDW
*DGGLVGLGQRWKRZHYHURYHUUXOH0LODQRYLFKY8QLWHG           )HGHUDOODZUHTXLUHVDEDQNWRILOHDFXUUHQF\WUDQVDFWLRQ
6WDWHV86LQZKLFKWKH6XSUHPH&RXUWKHOG        UHSRUW ZLWK WKH 6HFUHWDU\ RI &RPPHUFH IRU HYHU\ FDVK
ERWK WKH WKHIW FRQYLFWLRQ DQG WKH UHFHLSW RU SRVVHVVLRQ     WUDQVDFWLRQ RI PRUH WKDQ  LQ ZKLFK WKDW ILQDQFLDO
FRQYLFWLRQVKRXOGEHYDFDWHGZKHUHWKHHYLGHQFHZRXOGRQO\          LQVWLWXWLRQSDUWLFLSDWHV6HH86&UHTXLULQJWKH
VXSSRUWDFRQYLFWLRQRQRQHFRXQWRUWKHRWKHUEXWQRWERWK       ILOLQJRIDFXUUHQF\WUDQVDFWLRQUHSRUWIRUDWUDQVDFWLRQLQDQ
,GDW6&W                                         DPRXQWJUHDWHUWKDQZKDWHYHUILJXUHLVVHWE\WKH6HFUHWDU\RI
                                                                    WKH 7UHDVXU\  &)5   VHWWLQJ WKDW DPRXQW DW
  ,Q8QLWHG6WDWHVY0RRUH)GWK&LU         ,WLVDFULPHWRFDXVHDILQDQFLDOLQVWLWXWLRQWRPDNH
WKH8QLWHG6WDWHV&RXUWRI$SSHDOVIRUWKH6HYHQWK&LUFXLW          PDWHULDO PLVVWDWHPHQWV RU RPLVVLRQV RQ DQ\ FXUUHQF\
SURYLGHGDKHOSIXOFODULILFDWLRQRI*DGGLVLQGLFDWLQJ*DGGLV      WUDQVDFWLRQUHSRUWPDGHSXUVXDQWWRWKHVHSURYLVLRQV6HH
UDWKHUWKDQ0LODQRYLFKZRXOGSURYLGHWKHDSSURSULDWHUHPHG\        86&DVHHDOVR86&FFRGLI\LQJ
LQPRVWFDVHVSUHVHQWLQJWKLVLVVXH,Q0RRUHWKH6HYHQWK         WKHSHQDOW\IRUYLRODWLQJWKLVVHFWLRQ
&LUFXLWZDVIDFHGZLWKDVLWXDWLRQZKHUHmWKHHYLGHQFHZDV
DPSOHWRVXVWDLQDFRQYLFWLRQ RQERWKFRXQWVlRIWKHIWDQG            0DUVKDOOjVFRQYLFWLRQXQGHUDQGDZDV
SRVVHVVLRQRI8QLWHG6WDWHV3RVWDO6HUYLFHIXQGV,GDW     EDVHGRQWKHIDOVHLQIRUPDWLRQKHJDYHWRRIILFLDOVDW%DQN
7KH6HYHQWK&LUFXLWGLGQRWKRZHYHUWKLQNDQHZWULDOZDV         2QHZKHUHKHSURFXUHGDFDVKLHUjVFKHFNLQH[FKDQJHIRUWKH
ZDUUDQWHGXQGHUWKHFLUFXPVWDQFHV                                   LQ VWROHQ FDVK  7KH IRUP ILOHG E\ WKH EDQN OLVWHG
                                                                    :HVWRQDVWKHRZQHURIWKHFDVKZLWK0DUVKDOODVDFRXULHU
  7KHUH LV QR UHDVRQ WR UHTXLUH D QHZ WULDO XQGHU WKH     LQ WKH HPSOR\ RI :HVWRQ  7KHUH LV QR GLVSXWH WKDW WKLV
  FLUFXPVWDQFHVSUHVHQWLQWKLVFDVH%\LWVYHUGLFWWKHMXU\       LQIRUPDWLRQ ZDV D PDWHULDO PLVVWDWHPHQW RI WKH IDFWV
  IRXQG RQ WKH EDVLV RI DGHTXDWH HYLGHQFH WKDW 0RRUH        $OGULGJH WKH %DQN 2QH VXSHUYLVRU ZKR KDQGOHG WKLV
  UREEHGWKHSRVWDOHPSOR\HHDQGODWHUKDGSLHFHVRIPDLO           WUDQVDFWLRQWHVWLILHGDWWULDOWKDWmLI\RXORRNRQWKHIRUP,
  IURPWKHUREEHU\LQKLVSRVVHVVLRQ7KHVHILQGLQJVDUHRI        EHOLHYH,FKHFNHGRIIWKDWKHZDVWKHFRXULHUDQGKLVQDPH
  FRXUVHSHUIHFWO\FRQVLVWHQWZLWKRQHDQRWKHU7KHUHDVRQ         ZRXOGKDYHEHHQLQERWKSODFHVLIKHZDVWKHRZQHURIWKH
  WKH\ZLOOQRWVXSSRUWFRQYLFWLRQVIRUERWKUREEHU\DQG            FDVKl6KHDOVRVDLGWKDW0DUVKDOOWROGKHUWKDWm>K@HZDVQRW
  SRVVHVVLRQLVDOHJDORQHZHZLOOQRWLPSXWHWR&RQJUHVV         WKHRZQHURIWKLVFXUUHQF\DQGWKDWKHZDVPHUHO\GURSSLQJ
  DQLQWHQWLRQWRSXQLVKWKHWKLHIWZLFH7KLVREYLRXVO\LV      WKHPRQH\RIIIRUWKLVRWKHUFXVWRPHUsRKQ:HVWRQDQGLW
  DUHDVRQIRUYDFDWLQJWKHFRQYLFWLRQIRUWKHSRVVHVVLRQ           ZDVQRWKLVPRQH\l
  WKDW LQHYLWDEO\ IROORZV WKH UREEHU\ EXW HTXDOO\
  REYLRXVO\QRWIRUUHTXLULQJDQHZWULDO                            0DUVKDOOjVFODLPRIHUURUEDVHGRQWKLVHYLGHQFHLVVLPSO\
                                                                    DFKDOOHQJHWRWKHZHLJKWWKDWWKHMXU\DVVLJQHGWR$OGULGJHjV
                                                                    WHVWLPRQ\  +H GHQLHV WKDW KH HYHU VDLG WKHVH WKLQJV WR WKH
     8QLWHG6WDWHVY0DUVKDOO                    1R       1R                    8QLWHG6WDWHVY0DUVKDOO       

%DQN 2QH RIILFLDO RU WKDW KH FRPPXQLFDWHG DQ\                   BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
PLVLQIRUPDWLRQ ZKHQ SURFXULQJ WKH FDVKLHUjV FKHFN  7KLV
FODLPRIHUURULVQRWWKHUHIRUHDFKDOOHQJHWRWKHVXIILFLHQF\        &21&855,1*,13$57',66(17,1*,13$57
RI WKH HYLGHQFH  5DWKHU 0DUVKDOO LV FKDOOHQJLQJ WKH           BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
GHWHUPLQDWLRQRIWKHMXU\WREHOLHYH$OGULGJH
                                                                         &857,6/&2//,(5'LVWULFWsXGJHFRQFXUULQJLQSDUW
  $ FUHGLELOLW\ GHWHUPLQDWLRQ PDGH E\ WKH ILQGHU RI IDFW     DQGGLVVHQWLQJLQSDUW,FRQFXULQSDUWV,,$,,%,,&DQG
KRZHYHULVUDUHO\UHYHUVLEOHHUURU6HH%XHQRY0DWWQHU       ,,' RI WKH PDMRULW\jV ZHOOUHDVRQHG DQG ZHOOZULWWHQ
)G   WK &LU   m>:@KHUH WKHUH DUH WZR    GHFLVLRQ,ZULWHVHSDUDWHO\WRH[SODLQPRUHFRPSOHWHO\P\
SHUPLVVLEOH YLHZV RI WKH HYLGHQFH WKH IDFW ILQGHUjV FKRLFH   FRQFXUUHQFHLQSDUW,,'DQGEHFDXVH,PXVWUHVSHFWIXOO\
EHWZHHQWKHPFDQQRWEHFOHDUO\HUURQHRXVlFLWDWLRQVDQG            GLVVHQWIURPWKHPDMRULW\jVKROGLQJLQSDUW,,'ZLWKUHVSHFW
LQWHUQDOTXRWDWLRQVRPLWWHG$FFRUGLQJO\ZHILQGQRHUURU          WR WKH PRQH\ ODXQGHULQJ FRXQWV XQGHU  86&
LQ 0DUVKDOOjV FRQYLFWLRQ IRU FDXVLQJ %DQN 2QH WR ILOH D      D%L,DJUHHZLWKWKHIDFWVDQGWKHODZDVVHW
FXUUHQF\WUDQVDFWLRQ UHSRUW FRQWDLQLQJ PDWHULDO                    IRUWKLQWKHPDMRULW\jVRSLQLRQKRZHYHU,GLVDJUHHZLWKWKHLU
PLVVWDWHPHQWV                                                        FRQFOXVLRQmQRUDWLRQDOWULHURIIDFWFRXOGFRQYLFW0DUVKDOORI
                                                                      YLRODWLQJ  D%Ll RQ WKH EDVLV RI WKH HYLGHQFH
      7KHD%LPRQH\ODXQGHULQJFRQYLFWLRQV           SUHVHQWHGDWWULDO
  0DUVKDOO ZDV FRQYLFWHG RQ WKUHH FRXQWV RI PRQH\                  ,0DUVKDOOjV&RQYLFWLRQ8QGHU86&F
ODXQGHULQJLQYLRODWLRQRI86&D%LEDVHG
RQ KLV SXUFKDVHV RI D 5ROH[ ZDWFK D WHQQLV EUDFHOHW DQG      , FRQFXU ZLWK WKH PDMRULW\jV FRQFOXVLRQ WKDW 0DUVKDOOjV
H[SHQVLYH ZLQH  ,Q KLV FKDOOHQJH WR WKHVH FRQYLFWLRQV       FRQYLFWLRQ SXUVXDQW WR VHFWLRQ F IRU UHFHLYLQJ RU
0DUVKDOODVVHUWVWKDW WKHJRYHUQPHQWSURIIHUHGLQVXIILFLHQW          SRVVHVVLQJVWROHQJRRGVVKRXOGEHYDFDWHGDQGUHPDQGHGIRU
HYLGHQFHWRVXSSRUWWKHMXU\jVYHUGLFWDJDLQVWKLP                   GLVPLVVDOE\WKHGLVWULFWFRXUW,EHOLHYHKRZHYHUWKDWIXUWKHU
                                                                      H[SODQDWLRQ RI WKH UHDVRQLQJ EHKLQG WKLV UHVXOW ZLOO SURYH
  7KHVWDWXWHXQGHUZKLFK0DUVKDOOZDVFRQYLFWHGSURYLGHV             KHOSIXOLQWKHIXWXUHWRFRXUWVDGGUHVVLQJWKLVTXHVWLRQ$V
DVIROORZV                                                           VWDWHGHDUOLHUE\WKHPDMRULW\LQ8QLWHG6WDWHVY*DGGLV
                                                                      86WKH8QLWHG6WDWHV6XSUHPH&RXUWKHOGm>$@
  D:KRHYHUNQRZLQJWKDWWKHSURSHUW\LQYROYHGLQD             SHUVRQFRQYLFWHGRIUREELQJDEDQNLQYLRODWLRQRI86&
  ILQDQFLDO WUDQVDFWLRQ UHSUHVHQWV WKH SURFHHGV RI VRPH         DEDQGGFDQQRWDOVREHFRQYLFWHGRIUHFHLYLQJ
  IRUP RI XQODZIXO DFWLYLW\ FRQGXFWV RU DWWHPSWV WR           RUSRVVHVVLQJWKHSURFHHGVRIWKDWUREEHU\LQYLRODWLRQRI
  FRQGXFW VXFK D ILQDQFLDO WUDQVDFWLRQ ZKLFK LQ IDFW           86&Fl,GDW6&WDWm5HFHLSWRU
  LQYROYHVWKHSURFHHGVRIVSHFLILHGXQODZIXODFWLYLW\oo            SRVVHVVLRQRIWKHSURFHHGVRIDEDQNUREEHU\LQYLRODWLRQRI
                                                              FLVVLPSO\QRWDOHVVHULQFOXGHGRIIHQVHZLWKLQWKH
  D% NQRZLQJ WKDW WKH WUDQVDFWLRQ LV GHVLJQHG LQ        WRWDOIUDPHZRUNRIWKHEDQNUREEHU\SURYLVLRQVRI
  ZKROHRULQSDUWLWRFRQFHDORUGLVJXLVHWKHQDWXUHWKH         5DWKHUFUHDFKHVDµGLIIHUHQWJURXSRIZURQJGRHUVj
  ORFDWLRQWKHVRXUFHWKHRZQHUVKLSRUWKHFRQWURORIWKH          LHµWKRVHZKRUHFHLYHWKHORRWIURPWKHUREEHUjl,G
  SURFHHGVRIVSHFLILHGXQODZIXODFWLYLW\                      7KHUXOHHQXQFLDWHGLQ*DGGLVZKHQDSSOLHGWRWKHIDFWVRI
                                                               WKLV FDVH WKXV SUHFOXGHV 0DUVKDOOjV FRQYLFWLRQ RQ ERWK
      VKDOOEHVHQWHQFHGWRDILQHRIQRWPRUHWKDQ
  RU WZLFH WKH YDOXH RI WKH SURSHUW\ LQYROYHG LQ WKH
    8QLWHG6WDWHVY0DUVKDOO                     1R      1R                     8QLWHG6WDWHVY0DUVKDOO       

GLVSRVLWLRQ ZLOO QRW DIIHFW WKH RYHUDOO WLPH RI 0DUVKDOOjV     WUDQVDFWLRQZKLFKHYHULVJUHDWHURULPSULVRQPHQWIRUQRW
LQFDUFHUDWLRQ                                                         PRUHWKDQWZHQW\\HDUVRUERWK
                                                                     86&$YLRODWLRQRID%LWKHQ
                                                                     FRQVLVWVRIWKHIROORZLQJWKUHHHOHPHQWVmXVHRIIXQGVWKDW
                                                                     DUH SURFHHGV RI XQODZIXO DFWLYLW\  NQRZOHGJH WKDW WKH
                                                                     IXQGVDUHSURFHHGVRIXQODZIXODFWLYLW\DQGFRQGXFWRU
                                                                     DWWHPSWWRFRQGXFWDILQDQFLDOWUDQVDFWLRQNQRZLQJWKDWWKH
                                                                     WUDQVDFWLRQLVGHVLJQHGLQZKROHRULQSDUWWRGLVJXLVHWKH
                                                                     VRXUFHRZQHUVKLSRUFRQWURORIWKHSURFHHGVl8QLWHG6WDWHV
                                                                     Y3ULQFH)GWK&LU$WLVVXHLQWKLV
                                                                     DSSHDOLVWKHWKLUGHOHPHQWWKHLQWHQWWRGLVJXLVHWKHIXQGV
                                                                     WKDW0DUVKDOOVWROHIURP6RFLHW\%DQN
                                                                        ,Q8QLWHG6WDWHVY6DQGHUV)GWK&LU
                                                                     WKH7HQWK&LUFXLWDGGUHVVHGWKHTXHVWLRQRIKRZPXFKDQG
                                                                     ZKDW NLQG RI HYLGHQFH LV VXIILFLHQW WR VXSSRUW D PRQH\
                                                                     ODXQGHULQJ FRQYLFWLRQ XQGHU  D%L  6DQGHUV
                                                                     LQYROYHGWKHGHIHQGDQWjVSXUFKDVHRIWZRFDUVXVLQJLOOHJDOO\
                                                                     REWDLQHGPRQH\7KHGHIHQGDQWZDVSHUVRQDOO\LQYROYHGLQ
                                                                     ERWK WUDQVDFWLRQV DQG ZDV UHDGLO\ LGHQWLILDEOH WR WKH VDOHV
                                                                     UHSUHVHQWDWLYHV$OWKRXJKWKHGHIHQGDQWSXWWKHWLWOHRIWKH
                                                                     VHFRQG FDU LQ KLV GDXJKWHUjV QDPH WKH IDFW WKDW VKH ZDV
                                                                     SUHVHQW DW WKH VDOH VKDUHG WKH VDPH ODVW QDPH DV WKH
                                                                     GHIHQGDQWDQGWKDWWKHGHIHQGDQWXVHGWKHFDUFRQVSLFXRXVO\
                                                                     DIWHULWZDVSXUFKDVHGDOOmXQGHUPLQH>G@WKHJRYHUQPHQWjV
                                                                     DUJXPHQWWKDWWKH/LQFROQSXUFKDVHLQYROYHGWKHUHTXLVLWH
                                                                     GHVLJQRIFRQFHDOPHQWl6DQGHUV)GDW7KHFRXUW
                                                                     FRQFOXGHG WKDW &RQJUHVV GLG QRW LQWHQG IRU WKLV ODZ WR EH
                                                                     WUHDWHGDVDmPRQH\VSHQGLQJVWDWXWHl,GVHHDOVRLGDW
                                                                     Q TXRWLQJ VHOHFWHG SRUWLRQV RI WKH VWDWXWHjV OHJLVODWLYH
                                                                     KLVWRU\ WKDW VXJJHVW WKDW &RQJUHVV GLG QRW LQWHQG WR
                                                                     FULPLQDOL]HHYHU\WUDQVDFWLRQXVLQJLOOHJDOO\REWDLQHGPRQH\
                                                                     7KHUHIRUHXQGHU6DQGHUVWKHJRYHUQPHQWPXVWSURGXFHPRUH
                                                                     HYLGHQFH WKDQ WKH VLPSOH IDFW RI D UHWDLO SXUFKDVH XVLQJ
                                                                     LOOHJDOO\ REWDLQHG PRQH\ LQ RUGHU WR SURYH WKH mLQWHQW WR
                                                                     GLVJXLVHlHOHPHQWRID%L
                                                                        7KHmPRVWREYLRXVW\SHlRIHYLGHQFHWKDWZRXOGVXSSRUWD
                                                                     ILQGLQJRILQWHQWWRGLVJXLVHWKHSURFHHGVRIXQODZIXODFWLYLW\
    8QLWHG6WDWHVY0DUVKDOO                        1R       1R                      8QLWHG6WDWHVY0DUVKDOO         

LV mWKDW RI HPSOR\LQJ D WKLUG SDUW\ LQ RUGHU WR FRQFHDO WKH   FLUFXPVWDQFHV SUHVHQW WKLV VLQJOH PLVUHSUHVHQWDWLRQ FDQ
GHIHQGDQWjVLGHQWLW\IURPRWKHUVl8QLWHG6WDWHVY/RYHWW             DPRXQW WR VXEVWDQWLDO HYLGHQFH WKDW WKH WUDQVDFWLRQ ZDV
 )G   Q WK &LU  DFFRUG 8QLWHG         GHVLJQHGWRFRQFHDOLOOHJDOIXQGVl,G,QFRQWUDVWWKH7HQWK
6WDWHV Y %HGGRZ  )G   WK &LU            &LUFXLWKHOGLQDODWHUFDVHWKDWZKHUHDGHIHQGDQWLVHQJDJHG
KROGLQJWKDWWKHGHIHQGDQWLQWHQGHGWRGLVJXLVHWKHVRXUFHRI           LQ D VHULHV RI FRPSOH[ WUDQVDFWLRQV LQ RUGHU WR SXUFKDVH D
WKHSURFHHGVEDVHGLQSDUWRQHYLGHQFHWKDWKHXVHGmIURQW              KRXVHZLWKLOOHJDOO\REWDLQHGPRQH\PXOWLSOHPLVVWDWHPHQWV
PHQl WR SXUFKDVH WKH LWHPV DW LVVXH  7KH IDFW WKDW D        DERXWWKHVRXUFHRIWKHPRQH\WREDQNRIILFHUVUHVSRQVLEOHIRU
GHIHQGDQWSHUVRQDOO\HQJDJHVLQDWUDQVDFWLRQZLWKRXWWU\LQJ             WKHWUDQVDFWLRQVLQTXHVWLRQGLGFRQVWLWXWHVXIILFLHQWHYLGHQFH
WRGLVJXLVHKLVRUKHULGHQWLW\KRZHYHUGRHVQRWQHJDWHWKH            RIDQLQWHQWWRGLVJXLVHWKHVRXUFHRIWKHPRQH\6HH8QLWHG
HIIHFWRIRWKHUHYLGHQFHSRLQWLQJWRDQLQWHQWWRFRQFHDO6HH          6WDWHVY/RYHWW)GWK&LU
/RYHWW)GDWQ8QLWHG6WDWHVY1RUPDQ
)G   WK &LU  KROGLQJ WKDW WKHUH ZDV              8QOLNH /RYHWW DQG VLPLODU WR *DUFLD(PDQXHO 0DUVKDOO
VXIILFLHQWHYLGHQFHWRVXSSRUWDILQGLQJRILQWHQWWRGLVJXLVH           PDGH RQO\ RQH PLVVWDWHPHQW UHJDUGLQJ WKH ZDWFK
WKHSURFHHGVHYHQWKRXJKWKHGHIHQGDQWXVHGKLVRZQQDPH                )XUWKHUPRUHLQFRQWUDVWWRWKHVLWXDWLRQLQERWK/RYHWWDQG
DQGZDVUHDGLO\LGHQWLILDEOHWRWKHVDOHVSHUVRQ                       *DUFLD(PDQXHO0DUVKDOOOLHGWRDQLQGLYLGXDOFRPSOHWHO\
                                                                         XQUHODWHGWRWKHSXUFKDVHLQTXHVWLRQDQGHYHQWKLVZDVDIWHU
   1HYHUWKHOHVVLIDGHIHQGDQWLVUHDGLO\LGHQWLILDEOHWRWKH           WKHIDFW  $OWKRXJK VXFK D PLVVWDWHPHQW PLJKW VXSSRUW D
VDOHVSHUVRQDQGGRHVQRWXVHDWKLUGSDUW\WRGLVJXLVHKLVRU            ILQGLQJRILQWHQWWRFRQFHDOZKHQFRPELQHGZLWKDGGLWLRQDO
KHU LGHQWLW\ WKHUH PXVW EH RWKHU HYLGHQFH WR VXSSRUW WKLV      HYLGHQFHWKLVRQHOLHLVLQVXIILFLHQWVWDQGLQJDORQHWRVXSSRUW
HOHPHQWRIPRQH\ODXQGHULQJ6HH8QLWHG6WDWHVY*DUFLD               D UDWLRQDO WULHU RI IDFWjV FRQFOXVLRQ WKDW 0DUVKDOO YLRODWHG
(PDQXHO  )G  WK &LU  DSSO\LQJ WKH             D%LZKHQKHSXUFKDVHGWKH5ROH[ZDWFK:H
6DQGHUV UXOH WR YDULRXV WUDQVDFWLRQV WKDW WKH JRYHUQPHQW          WKHUHIRUH VHW DVLGH 0DUVKDOOjV FRQYLFWLRQ IRU PRQH\
DOOHJHGZHUHHQJDJHGLQE\WKHGHIHQGDQWZLWKWKHLQWHQWWR              ODXQGHULQJEDVHGRQWKH5ROH[ZDWFKWUDQVDFWLRQIRUWKHVDPH
GLVJXLVH WKH QDWXUH RI KLV LOOJRWWHQ JDLQV  ,Q *DUFLD       UHDVRQVZHGRVRLQUHODWLRQWRWKHWHQQLVEUDFHOHWDQGZLQH
(PDQXHOWKHFRXUWGHFODUHG
                                                                                               ,,,&21&/86,21
  >$@YDULHW\RIW\SHVRIHYLGHQFHKDYHEHHQFLWHGE\WKLV
  DQGRWKHUFLUFXLWVDVVXSSRUWLYHRIHYLGHQFHRILQWHQWWR                 )RU DOO RI WKH UHDVRQV VHW IRUWK DERYH ZH 9$&$7(
  GLVJXLVH RU FRQFHDO 7KH\ LQFOXGH DPRQJ RWKHUV                 0DUVKDOOjV86&FFRQYLFWLRQIRUSRVVHVVLRQRI
  VWDWHPHQWVE\DGHIHQGDQWSUREDWLYHRILQWHQWWRFRQFHDO              VWROHQPRQH\DQGDOOWKUHHRIKLVD%LPRQH\
  XQXVXDOVHFUHF\VXUURXQGLQJWKHWUDQVDFWLRQVWUXFWXULQJ               ODXQGHULQJFRQYLFWLRQVDQG5(0$1'ZLWKLQVWUXFWLRQVIRU
  WKH WUDQVDFWLRQ LQ D ZD\ WR DYRLG DWWHQWLRQ GHSRVLWLQJ        WKH GLVWULFW FRXUW WR HQWHU D MXGJPHQW RI DFTXLWWDO RQ WKHVH
  LOOHJDO SURILWV LQ WKH EDQN DFFRXQW RI D OHJLWLPDWH            FRXQWVRIWKHLQGLFWPHQW:H$)),50WKHUHPDLQLQJWKUHH
  EXVLQHVV KLJKO\ LUUHJXODU IHDWXUHV RI WKH WUDQVDFWLRQ          FRQYLFWLRQV IRU EDQN ODUFHQ\ XQGHU  86&  E
  XVLQJWKLUGSDUWLHVWRFRQFHDOWKHUHDORZQHUDVHULHVRI             HQJDJLQJLQDQXQODZIXOPRQH\WUDQVDFWLRQXQGHU86&
  XQXVXDOILQDQFLDOPRYHVFXPXODWLQJLQWKHWUDQVDFWLRQRU                DQG FDXVLQJ D EDQN WR ILOH D IDOVH VWDWHPHQW RQ D
  H[SHUWWHVWLPRQ\RQSUDFWLFHVRIFULPLQDOV                            FXUUHQF\WUDQVDFWLRQ UHSRUW XQGHU  86&   DQG
                                                                         D%HFDXVHDOOVHYHQRIKLVFRQYLFWLRQVUHVXOWHGLQ
,GDWFLWDWLRQVRPLWWHG$FFRUGLQJO\EHFDXVHZH             VHQWHQFHVRIWKHVDPHOHQJWKWREHVHUYHGFRQFXUUHQWO\WKLV
EHOLHYH WKDW WKH DQDO\VLV LQ 6DQGHUV DQG *DUFLD(PDQXHO
    8QLWHG6WDWHVY0DUVKDOO                       1R       1R                      8QLWHG6WDWHVY0DUVKDOO        

DFFRPSDQLHGWKH6HQDWHYHUVLRQRIWKHELOOHYHQWXDOO\FRGLILHG          UHIOHFWV WKH SURSHU VWDWXWRU\ LQWHUSUHWDWLRQ RI
LQ                                                             D%LZHDGRSWWKHKROGLQJVRIWKRVHFDVHVDVWKH
                                                                        DSSURSULDWHUXOHWRDSSO\WRWKHLQWHQWHOHPHQWRIDPRQH\
   $OWKRXJKWKHGLVVHQWFKDUDFWHUL]HV0DUVKDOOjVSXUFKDVHRI            ODXQGHULQJFRQYLFWLRQ
EHWZHHQDQGZRUWKRIZLQHDVDmFROOHFWLEOHl
WUDQVDFWLRQ ZH ILQG QRWKLQJ LQ WKH UHFRUG WR LQGLFDWH WKDW       7KH JRYHUQPHQWjV RQO\ GLUHFW HYLGHQFH LQ VXSSRUW RI LWV
0DUVKDOO LQWHQGHG WR KROG WKHVH ERWWOHV RI ZLQH DV DQ          DOOHJDWLRQWKDW0DUVKDOOSXUFKDVHGWKHZDWFKEUDFHOHWDQG
LQYHVWPHQW IRU WKH SXUSRVHV RI DSSO\LQJ    2QH FDQ      ZLQHZLWKWKHLQWHQWWRGLVJXLVHWKHVWROHQPRQH\ZDVWKDW
ORRVHO\VD\WKDWHYHU\SXUFKDVHQRWLPPHGLDWHO\FRQVXPDEOH              0DUVKDOO OLHG WR :HVWRQ ZKHQ KH VDLG WKDW 0LOOHU KDG
LVDQLQYHVWPHQWEXWWKHDFTXLVLWLRQRIDFRQVXPHULWHPVXFK           SXUFKDVHGWKH5ROH[ZDWFKIRUKLPDVDJLIW1HYHUWKHOHVV
DV ZLQH SURYLGHV QR LQGLFDWLRQ RI DQ LQWHQW WR FRQFHDO WKH    WKHJRYHUQPHQWFODLPVWKDWWKHUHLVVXIILFLHQWFLUFXPVWDQWLDO
VRXUFHRIWKHIXQGV7KHZLQHSXUFKDVHGE\0DUVKDOOZDV                HYLGHQFH WR VXSSRUW 0DUVKDOOjV FRQYLFWLRQV XQGHU
LQGHHG H[SHQVLYH DQG SXUFKDVHG LQ D VRPHZKDW JUHDWHU             D%LIRUDOOWKUHHSXUFKDVHV
TXDQWLW\WKDQLQKLVSDVWGHDOLQJVZLWKWKLVVDPHPHUFKDQWEXW
WKHUH ZDV QR HYLGHQFH EH\RQG WKLV IDFW WR LQGLFDWH DQ\            7KHJRYHUQPHQWDUJXHVWKDWWKHSXUFKDVHRILWHPVKDYLQJ
PRWLYDWLRQEH\RQGSHUVRQDOFRQVXPSWLRQ0DUVKDOOjVRIIKDQG             YDOXH DV DQ LQYHVWPHQW LV VXIILFLHQW LQ LWVHOI WR VXSSRUW D
DIILUPDWLYHUHVSRQVHWRDTXHVWLRQDVNHGE\WKHJRYHUQPHQW              ILQGLQJRILQWHQWWRGLVJXLVHWKHSURFHHGVRIWKHODUFHQ\,Q
RQUHFURVVH[DPLQDWLRQDVWRZKHWKHUKHSXUFKDVHGWKHZLQH              RWKHUZRUGVWKHJRYHUQPHQWDVNVXVWRLQIHU0DUVKDOOjVLQWHQW
DVDQLQYHVWPHQWLVQRWDQLQGLFDWLRQWKDWKHGLGQRWLQWHQGWR         WRGLVJXLVHEDVHGVLPSO\RQWKHQDWXUHRIWKHLWHPVSXUFKDVHG
FRQVXPHLW$GHIHQGDQWjVDFNQRZOHGJPHQWWKDWDSXUFKDVH               7KLV DUJXPHQW KRZHYHU ZRXOG FRQIOLFW ZLWK WKH LQWHQW RI
LVDQLQYHVWPHQWFRXOGEHHTXDOO\DSSOLHGWRDQ\DFTXLVLWLRQ            &RQJUHVVWRSHQDOL]HRQO\WKRVHSXUFKDVHVmGHVLJQHGLQZKROH
QRW LPPHGLDWHO\ FRQVXPHG  $FFRUGLQJO\ ZH VHW DVLGH             RU LQ SDUWl WR KLGH LOOHJDOO\ REWDLQHG SURSHUW\  6HH
0DUVKDOOjV FRQYLFWLRQV IRU PRQH\ ODXQGHULQJ WLHG WR WKH          D%L8QLWHG6WDWHVY6DQGHUV)G
SXUFKDVHVRIWKHWHQQLVEUDFHOHWDQGWKHZLQHRQWKHEDVLVWKDW         WK&LU
QRUDWLRQDOWULHURIIDFWFRXOGFRQYLFW0DUVKDOORIYLRODWLQJ
D%LXQGHUWKHVHFLUFXPVWDQFHV                             ,Q8QLWHG6WDWHVY*DUFLD(PDQXHO)GWK
                                                                        &LUWKH7HQWK&LUFXLWDFNQRZOHGJHGWKHFRPSHWLQJ
  0DUVKDOOjVFRQYLFWLRQIRUPRQH\ODXQGHULQJEDVHGRQWKH               FRQVLGHUDWLRQVLQYROYLQJVXFKSXUFKDVHV
SXUFKDVHRIWKH5ROH[ZDWFKSUHVHQWVDVRPHZKDWFORVHUFDVH
5HJDUGLQJWKHZDWFK0DUVKDOOOLHGWR:HVWRQZKHQKHVDLG                 ,QUHYLHZLQJ WKHVXIILFLHQF\RIWKHHYLGHQFHWKHPRVW
WKDW0LOOHUKDGSXUFKDVHGLWDVDJLIWIRU0DUVKDOO7KLVGRHV           GLIILFXOWFDVHVDUHWKRVHLQZKLFKWKHGHIHQGDQWDFTXLUHV
SURYLGHVRPHHYLGHQFHRI0DUVKDOOjVLQWHQWWRGLVJXLVHWKH                DQDVVHWZKLFKERWKEULQJVDSUHVHQWSHUVRQDOEHQHILWDQG
SXUORLQHGPRQH\,Q8QLWHG6WDWHVY*DUFLD(PDQXHO                  KDVVXEVWDQWLDOUHVDOHYDOXHDQGWKXVLVDSRWHQWLDOWRRO
)G   WK &LU  WKH FRXUW DGGUHVVHG D          IRUPRQH\ODXQGHULQJ2QWKHRQHKDQGFDVHVLQYROYLQJ
VLPLODUVLWXDWLRQLQZKLFKWKHGHIHQGDQWSXUFKDVHGDKRUVHDQG            LQYHVWPHQWVPDGHZLWKLOOHJDOSURFHHGVDUHFORVHWRWKH
PLVUHSUHVHQWHG WR WKH VHOOHU WKH VRXUFH RI WKH FDVK WKDW KH     FRUHRIWKHVWDWXWHjVSXUSRVHRIFULPLQDOL]LQJFKDQJLQJ
ZRXOG XVH WR FRPSOHWH WKH WUDQVDFWLRQ  7KH FRXUW KHOG          FDVKLQWRDQRVWHQVLEO\OHJLWLPDWHIRUPVXFKDVEXVLQHVV
KRZHYHUWKDWm>Z@KLOHLWLVWUXHWKDWWKLVPLVUHSUHVHQWDWLRQ             SURILWV RU ORDQV EHIRUH XVLQJ WKRVH IXQGV IRU SHUVRQDO
EULQJVDQHOHPHQWRIFRQFHDOPHQWLQWRWKHWUDQVDFWLRQZHGR              EHQHILW  2Q WKH RWKHU KDQG ZKHQ WKH GHIHQGDQW KDV
QRW EHOLHYH WKDW VWDQGLQJ DORQH DQG LQ WKH IDFH RI RWKHU       PHUHO\DFTXLUHGDQDVVHWWKDWEULQJVDVLJQLILFDQWSUHVHQW
    8QLWHG6WDWHVY0DUVKDOO                      1R       1R                     8QLWHG6WDWHVY0DUVKDOO        

  SHUVRQDOEHQHILWWRKLPVHOIRUKLVIDPLO\WKHLQIHUHQFH             ZLQHFRQVWLWXWHGDVHSDUDWHYLRODWLRQXQGHUKDVQR
  EHFRPHVPRUHGLIILFXOWWRGUDZ                                      EHDULQJRQZKHWKHUWKHODWWHUSXUFKDVHVVDWLVILHG WKHLQWHQW
                                                                       SURQJ RI  D%L  6HH 8QLWHG 6WDWHV Y *DUFLD
,GDW$FFRUGLQJO\DOWKRXJKmDMXU\FRXOGUHDVRQDEO\           (PDQXHO)GWK&LUm>7@KHPHUH
VXVSHFWWKDWRQVRPHOHYHO>WKHGHIHQGDQW@LVPRWLYDWHGE\D           IDFW WKDW D GHIHQGDQW ZDV FRQYLFWHG RI PRQH\ ODXQGHULQJ
GHVLUHWRFRQYHUWKLVFDVKLQWRDPRUHOHJLWLPDWHIRUPlWKH           DULVLQJRXWRIVRPHWUDQVDFWLRQVLVQRWVXIILFLHQWWRVXVWDLQD
7HQWK &LUFXLW KHOG WKDW HYHQ LQ WKHVH GLIILFXOW FDVHV WKH    PRQH\ODXQGHULQJFRQYLFWLRQLQYROYLQJRWKHUWUDQVDFWLRQVl
JRYHUQPHQWPXVWSURGXFHPRUHHYLGHQFHWKDQWKHLQYHVWPHQW              :HWKXVFRQFOXGHWKDW0DUVKDOOjVFRQYLFWLRQSXUVXDQWWR
YDOXH RI WKH LWHP SXUFKDVHG LQ RUGHU WR VXSSRUW D MXU\jV     86&   IRU WKH EURNHUDJHDFFRXQW WUDQVDFWLRQ LV DQ
FRQFOXVLRQWKDWWKHLQWHQWHOHPHQWZDVVDWLVILHG,GDW        LQVXIILFLHQWEDVLVRQZKLFKWRVXSSRUWDILQGLQJRILQWHQWWR
:HDJUHH                                                         IXUWKHU FRQFHDO WKDW PRQH\ ZKHQ KH XVHG D SRUWLRQ RI WKH
                                                                       IXQGVWRSXUFKDVHWKHLWHPVLQTXHVWLRQ
   7KHJRYHUQPHQWjVRWKHUDUJXPHQWLQVXSSRUWRILWVFODLP
WKDWWKHUHZDVVXIILFLHQWHYLGHQFHWRVXSSRUWWKHMXU\jVYHUGLFW          :LWKRXW WKHVH WZR LQIHUHQFHV LQYHVWPHQW YDOXH DQG
UHJDUGLQJWKHWKUHHSXUFKDVHVLQTXHVWLRQZDVWKDWWKHIXQGV           GHULYDWLRQIURPDQRWKHULOOHJDOWUDQVDFWLRQWKHJRYHUQPHQW
XVHG WR DFTXLUH WKHVH LWHPV DOO FDPH IURP WKH  RI     KDV SURGXFHG DEVROXWHO\ QR RWKHU HYLGHQFH WR VXSSRUW WKH
VWROHQ FDVK WKDW 0DUVKDOO SODFHG LQWR WKH 2OGH 'LVFRXQW        MXU\jVFRQFOXVLRQWKDW0DUVKDOOSXUFKDVHGWKHWHQQLVEUDFHOHW
EURNHUDJHDFFRXQW7KLVEURNHUDJHDFFRXQWZDVWKHEDVLVIRU           DQG WKH ZLQH ZLWK WKH LQWHQW WR FRQFHDO WKH PRQH\ WKDW KH
DVHSDUDWHXQODZIXOPRQHWDU\WUDQVDFWLRQFRQYLFWLRQXQGHU           VWROH IURP 6RFLHW\ %DQN  %RWK SXUFKDVHV ZHUH PDGH E\
86&DFRQYLFWLRQZKLFK0DUVKDOOLVQRWGLUHFWO\             0DUVKDOOLQSHUVRQXVLQJYDOLGFUHGLWFDUGVLQKLVRZQQDPH
FKDOOHQJLQJLQWKLVDSSHDO$FFRUGLQJWRWKHJRYHUQPHQW             DQGKLVLGHQWLW\ZDVUHDGLO\DSSDUHQWWRHDFKVDOHVSHUVRQ,Q
WKHQLIDSRRORIPRQH\LVFUHDWHGLQYLRODWLRQRIWKHPRQH\         IDFW0DUVKDOOKDGPDGHSUHYLRXVSXUFKDVHVIURPWKHVDPH
ODXQGHULQJVWDWXWHVHYHU\VXEVHTXHQWSXUFKDVHWKDWLVPDGH            ZLQHPHUFKDQW$OWKRXJKWKHIDFWWKDW0DUVKDOOGLGQRWXVH
ZLWKWKRVHODXQGHUHGIXQGVFRQVWLWXWHVVXIILFLHQWHYLGHQFHSHU         DWKLUGSDUW\WRPDNHWKHSXUFKDVHVRURWKHUZLVHDWWHPSWWR
VH RI DQ LQWHQW WR FRQFHDO WKH VRXUFH RI WKH PRQH\  $     GLVJXLVHKLPVHOIZRXOGQRWQHJDWHFRXQWHUEDODQFLQJHYLGHQFH
GHIHQGDQW ZRXOG WKXV EH H[SRVHG WR FULPLQDO OLDELOLW\ IRU      RIDQLQWHQWWRFRQFHDOWKHUHZDVQRVXFKDGGLWLRQDOHYLGHQFH
HYHU\ GHULYDWLYH WUDQVDFWLRQ UHJDUGOHVV RI KLV RU KHU DFWXDO   LQWKHSUHVHQWFDVH
LQWHQW7KLVDUJXPHQWPXFKOLNHWKHILUVWFDQQRWEHVTXDUHG
ZLWKWKHLQWHQWRI                                              :HDUHDOVRRIWKHRSLQLRQWKDWDIHZLVRODWHGSXUFKDVHVRI
                                                                       ZHDUDEOHRUFRQVXPDEOHLWHPVGLUHFWO\E\WKHZURQJGRHULV
   6HFWLRQGRHVQRWPDNHPRQH\ODXQGHULQJDFRQWLQXLQJ            QRWWKHW\SHRIPRQH\ODXQGHULQJWUDQVDFWLRQWKDW&RQJUHVV
RIIHQVH6HH8QLWHG6WDWHVY.UDPHU)G           KDGLQPLQGZKHQLWHQDFWHGD%LHVSHFLDOO\
WK &LU  KROGLQJ WKDW PXOWLSOH WUDQVIHUV PXVW EH      ZKHUHWKHYDOXHRIWKHLWHPVLVUHODWLYHO\VPDOOLQUHODWLRQWR
DQDO\]HGLQGLYLGXDOO\IRUDYLRODWLRQRID7KH           WKHDPRXQWVWROHQE\WKHGHIHQGDQW6HH6DQGHUV)GDW
VDPHLVWUXHIRUWKHWUDQVIHURILOOHJDOO\REWDLQHGIXQGVXQGHU         Q m7KLV VHFWLRQ  DSSOL>HV@ LWV FRYHUDJH WR WKRVH
D%L6HH8QLWHG6WDWHVY3ULQFH)G        WUDQVDFWLRQVWKDWFDQEHVDLGWRFRQVWLWXWHWKHFRUHRIPRQH\
 WK &LU  DSSO\LQJ WKH GHILQLWLRQ RI              ODXQGHULQJoWUDQVDFWLRQVGHVLJQHGWRFRQFHDORUGLVJXLVHWKH
mWUDQVDFWLRQlIURPFWRHDFKWUDQVIHURIPRQH\ZLWKLQ          QDWXUH ORFDWLRQ VRXUFH RZQHUVKLS RU FRQWURO RI FULPLQDO
DQHODERUDWHZLUHIUDXGVFKHPH$FFRUGLQJO\WKHIDFWWKDW           SURFHHGV RU WR HYDGH )HGHUDO RU 6WDWH FDVK UHSRUWLQJ
WKHVRXUFHRIWKHPRQH\XVHGWREX\WKHZDWFKEUDFHOHWDQG           UHTXLUHPHQWVlTXRWLQJ6HQDWH5HSRUW1RZKLFK