In general, because of the unique relationship between independent advisors and their clients, many clients request and expect to be able to turn to their financial advisor for additional services such as insurance, accounting, or other financial-related expertise that are outside the scope of the financial advisor’s license with Redhawk Wealth Advisors. Often, OBAs can provide clients with the convenience of receiving related services from one professional whom they trust and who also has sophisticated knowledge of their entire financial situation.

OBAs include many non-securities business activities which are conducted outside the scope of your relationship with Redhawk Wealth Advisors, Inc. (“Redhawk”). These activities can include fixed insurance sales, life insurance, tax preparation, accounting support, bookkeeping, or legal advice. An activity does not need to result in compensation to qualify as an OBA. OBAs can include non-compensated leadership positions you hold such as being a president, treasurer, trustee, managing member of an LLC, or other position of a non-profit board of trustees.

Redhawk will always err on the side of disclosure for an OBA. This applies whether you are considering a role, for example, on your home association’s board; the board of a public or private company, the board of an athletic association, for profit or not-for-profit entity, charitable organization; or even your club or community. Redhawk needs to consider objectively whether there is a real, perceived or potential conflict, before approval is granted. This is regardless of whether the position is unpaid or paid, a one-time event, or ongoing.

OBA’s can be confusing and we have put together a list to help you understand and avoid inadvertent missteps that can lead to disciplinary action:

1. 1. Take the word “business” out. Just because the rule refers to an outside “business” activity, it does not have to be a business activity, per se. Even volunteer work must be disclosed in advance to Redhawk.
2. 2. Think outside the box. Some OBAs might not be that obvious. There are some notable examples, including:
   1. a. investing in a family member’s business to help with some short-term cash flow; or
   2. b. helping a client with their taxes, even though you did not charge them.
3. 3. Do not do indirectly what you might need to disclose otherwise. For example, you know that you would have to disclose any compensation that is made directly to you. Yet, you might think that if you arrange for no payment directly to you or your spouse, or an exchange of favors, you could avoid disclosure. However, you cannot avoid disclosure by redirecting payment.
4. 4. Take the annual questionnaire seriously. When completing Redhawk’s annual questionnaire, do not be vague; be detailed and comprehensive; do not leave anything out, even if you must write a separate letter.
5. 5. Do not wait for the questionnaire. If there is an opportunity for any OBA during the year, you cannot just wait to disclose it in the annual questionnaire. You need to promptly seek permission in advance; so, do not wait for the questionnaire to report, complete the “Disclosure of Business Activity” form and send an email to disclose and seek permission. Remember, this information MUST be current at all times.
6. 6. Seek permission for changes. If there was an approval granted for an OBA and there is a change to your role, you need to disclose details of the change. For example, instead of just being on the board of directors, you are now asked to chair the board; instead of investing in a cottage property with your client/best friend, you have decided to develop the property for rentals. Again, complete the “Disclosure of Business Activity” form and send an email to disclose and seek permission.

You may not be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of your relationship with Redhawk, unless you have provided prior written notice to Redhawk. All OBAs must be approved in writing by Redhawk’s compliance department before you can participate with an OBA in any manner. All OBAs must be disclosed on your U4. Redhawk will audit all OBA’s as part of its annual exam. If you fail to disclose an OBA, it may result in disciplinary actions and/or termination.

OBAs include, but are not limited to, the following:

1. • Employee of an unaffiliated company.
   • Owner (full or partial) of an unrelated business.
   • Acting as a finder for an unaffiliated investment.
   • Receiving referral fees from a third party.
   • Acting as an independent contractor or consultant to an outside party.
   • Receiving direct or indirect compensation from another person or company.
   • Lack of compensation does not negate disclosure of an OBA.

On an ongoing basis, you must provide Redhawk’s compliance department prompt notification any time a previously approved OBA undergoes a change, such as:

1. • More time committed to or anticipated to be required by the activity.
   • Greater percentage of total income derived from the activity.
   • Increase or decrease in ownership interest.
   • Change in the role, status, or title regarding the activity.

Redhawk, upon receipt of a written notice from you, will consider whether the proposed activity will:

1. 1. Interfere with or otherwise compromise your responsibilities to Redhawk and/or to clients.
2. 2. Be viewed by clients or the public as part of Redhawk’s business based upon, among other factors, the nature of the proposed activity and the way it will be offered.

Redhawk will also consider other factors in its decision-making process and may include:

1. • Will the OBA confuse the client?
   • Will the OBA be confused with Redhawk’s business?
   • Where will the OBA take place?
   • Will the OBA be covered under Redhawk’s E&O insurance?
   • How often will Redhawk have to review this activity?
   • What sort of due diligence will Redhawk have to take in order to monitor potential changes in the activity?
   • Even if the role is an unpaid volunteer role, are the facts and circumstances such that Redhawk should be concerned about the activity?
   • Even if there is no compensation, does the expectation of compensation exist or might it exist in the future?
   • Does the role, whether paid or unpaid, involve access to funds (for example, a treasurer role)?
   • How might the OBA change over time? For example, could it evolve into a paying position or could it begin to require a larger time commitment?
   • Could the OBA be confused as being offered through Redhawk?

Based on Redhawk’s review of such factors, Redhawk will evaluate the OBA activity and decide if the activity should be allowed or not allowed. Redhawk may impose specific conditions or limitations on the activity as well. Redhawk will provide you a written response acknowledging the request and approving, limiting, or denying your involvement with the activity. Although Redhawk does not have any specific supervisory requirements over OBAs, Redhawk does have the responsibility to appropriately and reasonably monitor those activities based on the level of risk associated with the activity.