bfinance US Ltd.

Written Supervisory Procedures

March 19, 2015

Table of Contents

INTRODUCTION 13

Section 1 DESIGNATION OF SUPERVISORS AND OFFICES 14

1.1 Designation of Principals and Qualifications 14

1.2 Designation of Principals 14

1.3 Designation of Offices 16

Section 2 SUPERVISION AND COMPLIANCE 18

2.1 Role of Compliance 18

2.2 Supervision 18

2.3 Responsibility 19

2.4 Controls 19

Verification and Testing 19

Outside Auditors 20

2.5 Maintenance of Written Compliance and Supervisory Procedures 20

2.6 Chief Compliance Officer (FINRA Rule 3130) 20

2.7 Annual Compliance Report to Chief Executive Officer (“CEO”) 20

FINRA Report (FINRA Rule 3130) 21

Annual Compliance and Supervision Certification (FINRA Rule 3130) 21

2.8 Supervision of Producing Managers' Customer Account Activity (FINRA Rule 3120) 21

Reviews to be Conducted 21

Heightened Supervision 22

Limited Size and Resource Exception 22

2.9 Outsourcing Activities 23

Initial Due Diligence 23

Monitoring 24

Section 3 EMPLOYMENT, REGISTRATION AND LICENSING 25

3.1 Employment 25

Hiring Procedures 25

Registered Representative Interview Guidelines 25

Prospective RRs Require Pre-Clearance by Compliance 25

Qualification of Supervisors (FINRA Rule 3110) 25

Background Investigation (FINRA 3110) 26

Fingerprints (Exchange Act Rule 17f-2; FINRA Rule 1010, NTM 05-39) 26

Policies and Procedures 26

New Employee Questionnaire 26

Termination Procedures (FINRA By-Laws Article V, Section 3 and Regulatory Notice 10-39)) 27

Notification to Compliance 27

Retrieval of bfinance Property 27

Reassignment of Accounts 27

Responding To Customer Inquiries 27

Form U5 27

3.2 Registration and Licensing (FINRA Rule 1122) 27

CRD Electronic Filings (FINRA Rule 1010) 27

Registration Requirement 28

Requests for Waivers 28

State Registrations 28

Parking Registrations 28

Form U4 (FINRA Rules 1010 and FINRA Rule 2263) 28

Series 79 28

Series 99 29

Amendments to Forms U4 or U5 30

Assignment of RR Numbers 30

3.3 Statutorily Disqualified Persons (Exchange Act Sec. 3(a)(39)  Rule 19h-1; FINRA By-Laws Art. III, Sections 3 and 4) 31

Hiring a Statutorily Disqualified Person 31

Regulatory Filings 31

Supervision 31

Reporting Statutory Disqualifications 31

3.4 Broker-Dealer Registration 31

Form BD 31

Change in Ownership, Control, Or Business Operations 31

Executive Representative (FINRA By-Laws Article IV, Section 3) 32

3.5 Heightened Supervision 32

Identifying RRs for Heightened Supervision 32

Criteria for Identifying Candidates for Heightened Supervision 32

Heightened Supervision Memorandum 32

Scope of Potential Heightened Supervision 32

Certification by RR's Supervisor 33

3.6 Taping Rule 33

Section 4 TRAINING AND EDUCATION 35

4.1 Annual Compliance Meeting 35

4.2 Continuing Education 35

4.3 Regulatory Element 35

Who is Subject to the Requirements 35

When Requirements must be Completed 35

Regulatory Element Contact Person 35

CRD Notices and Appointments for Training Sessions 35

Registered Persons Who Fail To Complete Requirements 35

Tracking 36

4.4 Firm Element 36

Who Is Subject To the Requirements 36

Firm Requirements 36

Annual Needs Analysis 37

Evaluating the Firm Element Program 37

Training Medium and Tracking 37

Section 5 EMPLOYEE SUPERVISION 38

5.1 Standards of Conduct 38

5.2 Outside Business Activities (FINRA Rule 3270) 38

5.3 Private Securities Transactions 38

5.4 Employee and Employee Related Accounts 39

Employee and Employee Related Accounts Defined 39

Outside Accounts Permitted 39

Review of Transactions 39

Sharing In Accounts (NTM 03-21) 39

Prohibition On Purchases Of Initial Public Offerings (IPOs) (FINRA Rule 5130) 39

Restrictions on Purchase and Sale of IPOs Equity Securities (FINRA Rule 5130) 40

Restricted Persons 40

5.5 Gifts and Business Entertainment 41

Gifts to Others 42

Acceptance of Gifts 42

Entertainment 42

De Minimis and Promotional Items 43

Supervision 43

5.6 Cash and Non-Cash Compensation Policy (NTM 99-55) 43

5.7 Media Contact is Limited to Certain Authorized Employees 44

5.8 Requests for Information from Outside Sources 44

5.9 Employee Obligation to Notify bfinance and bfinance’s Obligation to Report (FINRA Rule 4530) 44

5.10 Reports of Crimes and Suspected Crimes 45

5.11 Prohibited Activities 45

Use of Firm Name 45

Providing Tax Advice not Permitted 45

Sharing Commissions or Fees with Non-Registered Persons 45

Borrowing From and Lending to Customers (NTM 04-14) 45

Personal Funds Deposited In Customer Accounts 46

Prohibition against Guarantees (FINRA Rule 2150) 46

Fees and Other Charges 46

Customer Signatures 46

Rumors 46

Misrepresentations 46

Bribes 47

The Foreign Corrupt Practices Act (“FCPA”) - (United States Code, Title 15, Chapter 2B) 47

Acting Without Registration 49

5.12 Computer Records, Equipment and Software 49

5.13 Use of Titles 49

5.14 Annual Certification 49

5.15 Employees Acting as Trustees, Executors, or Other Fiduciary Capacities 49

Section 6 CUSTOMER COMPLAINTS 51

6.1 Written Complaints 51

6.2 Oral Complaints 51

6.3 Records of Complaints 51

6.4 Office Records of Complaints 52

6.5 Notice to Customers 52

6.6 Disclosure Events 52

6.7 Other Required Filings 53

6.8 Complaint Reporting FINRA Rule 4530 53

6.9 Procedure for Investigation 54

6.10 FINRA’s BrokerCheck Complaint Disclosure (Regulatory Notice 10-34) 55

Section 7 COMMUNICATIONS WITH THE PUBLIC 56

7.1 Advertising and Sales Literature (NTM 03-38) 56

Advertising and Sales Literature Defined 56

General Guidelines 56

Required Information 56

Approval Prior to Publication 56

Disclosure of Prices For Recommended Corporate Securities 57

Use of Outside Advertising or Sales Literature 57

SIPC Membership (Securities Investor Protection Act of 1970, U.S. Code Title 15, Chapter 2B-1) 57

Telemarketing Scripts 57

Special Filing or Approval Requirements 57

Institutional Sales Material 58

Records of Advertising and Sales Literature 59

Advertisements Involving Non-Branch Locations 59

7.2 Outgoing Correspondence (NTM 98-11) 59

Correspondence Defined 59

Prohibition against Sending Correspondence from Personal Computers and Other Non-Firm Facilities 59

Review and Approval - Outgoing Written Correspondence 59

Independently Prepared Reprints 60

Content Guidelines 60

Form Letters and Group Emails 61

Letters and Notes 61

Facsimiles 61

7.3 Incoming Correspondence 61

Review of Incoming Correspondence 61

Personal Mail 61

7.4 Legends And Footnotes 62

7.5 Internal-Use Only Information 62

7.6 Investment Analysis Tools (NTM 04-86) 62

7.7 Recorded Phone Solicitations 62

7.8 Cold Calling Restrictions 62

Introduction 62

Requirements and Restrictions 62

Prohibited Activities 63

Do Not Call Lists 63

Established Business Relationship 63

National Do-Not-Call Registry 64

State Restrictions 64

Internal Do Not Call List 64

7.9 Cold Callers (NTM 95-54) 64

Cold Caller Requirements 64

Permissible Cold Caller Activities 64

Prohibited Cold Caller Activities 65

Telemarketing Restrictions 65

Scripts 65

7.10 Public Speaking 65

General Guidelines 65

Approval 65

Radio, TV, and Other Extemporaneous Presentations 66

Securities Sold by Prospectus 66

7.11 Electronic Communications (NTM 01-23 and 98-11) 67

Electronic Mail 67

Commercial Email Procedures (CAN-SPAM Act of 2003) 67

Review and Approval 67

Information Required On Outgoing Electronic Mail 67

Designated Reviewer 68

Branch/Department Supervisor's Responsibilities 68

Monitoring Procedures 68

Email Policy Violations 69

Record Retention 69

Education and Training 69

Special Reviews 70

Bulletin Boards, Web Sites and Other Electronic Communication Systems 70

bfinance Web Site 70

RR Web Sites 70

7.12 Identification Of Sources 70

7.13 Electronic Communications Policy 70

Introduction 70

Summary of Policy 70

Electronic Communications Defined 71

Social Networking Sites (Regulatory Notice 10-06) 71

Instant Messaging (NTM 03-33) 71

Guidelines for Proper Use 72

Electronic Communications are not Private 72

Communications Must Conform to Appropriate Business Standards and The Law 72

Electronic Communications are Business Communications and Should be Treated as Such 72

Encryption 73

Special Requirements/Restrictions 73

Record Retention Requirements 73

Required Pre-Use Review and Approval 73

Monitoring, Audit and Control 74

Email 74

System Maintenance 74

Attachments 74

Restrictions on Unsolicited Emails (CAN-SPAM Act of 2003) 74

Internet 75

Chat Rooms 75

Failure to Comply 75

Consent To Policy 76

7.14 Advertising and Publishing Activities 76

Section 8 PROTECTION OF CUSTOMER INFORMATION 77

8.1 Customer Privacy Policies and Procedures (SEC Regulation S-P) 77

Introduction 77

"Public" vs. "Nonpublic" Personal Information about Customers 77

Sharing Nonpublic Financial Information 77

Annual Notification 77

Protection of Customer Information And Records (SEC Regulation S-P, Rule 30(a) and SEC Release No. 34-50781; Fair and Accurate Credit Transactions Act of 2003, Section 216) 78

Disposal of Consumer Report Information and Records (SEC Regulation S-P, Rule 30(b) and SEC Release No. 34-50781; Fair and Accurate Credit Transactions Act of 2003, Section 216) 78

8.2 Identity Theft Program (Fair and Accurate Credit Transactions Act of 2003, Section 114 and 315) 78

8.3 SEC Regulation S-AM 79

Introduction 79

Opt Out Provision 79

Supervision 79

8.4 Holding Customer Mail 80

8.5 Encryption Requirement When Sending Documents to FINRA 80

Section 9 ANTI-MONEY LAUNDERING (FINRA Rule 3310; Bank Secrecy Act) 81

9.1 Introduction 81

9.2 AML Compliance Officer 81

9.3 Definitions 81

9.4 Independent AML Program Testing 81

9.5 Employee AML Program Education 81

9.6 Customer Identity Verification 81

Required Customer Information 82

Customer ID Verification for Accounts for Individuals 83

Customer Identification Third Party Accounts 83

Omnibus and Sub-Accounts (SEC Q&A Regarding the Broker-Dealer Customer Identification Program Rule, October 1, 2003) 84

Accounts for Non-Individuals 84

Additional Identifying Information for Non-Individuals 84

Non-Documentary Methods of Verifying Customer Identification 85

Additional Verification For Certain Customers 85

Lack of Acceptable Customer ID Verification 85

Customer Notice 86

9.7 OFAC List and Blocked Property (Dept. of Treasury, various statutes) 86

Prohibited Transactions 86

Blocking Requirements 86

Monitoring Procedures 87

Other Requests to Monitor Accounts 87

Blocking Property 87

Reporting Blocked Property and Legal Actions 87

Legal Actions involving Blocked Property 88

Blocking Disbursements 88

Monitoring Procedures 88

Other Requests to Monitor Accounts 88

Role of Operations Personnel 88

9.8 Acceptance of Cash Deposits 89

Cash Equivalents 89

Reporting Requirements (Exchange Act Rule 17a-8) 89

Transactions Involving Currency over $10,000 89

Transactions involving Currency or Bearer Instruments over $10,000 Transferred into or Outside the U.S. 90

State Reporting Requirements 90

Foreign Financial Accounts 90

Recordkeeping Requirements 90

Funds Transfers 90

National Security Letters 91

9.9 Detecting Potential Money Laundering 91

9.10 Information Sharing Between Financial Institutions (USA PATRIOT Act Sec. 314) 91

9.11 Suspicious Activity Reports (“SARs”) (USA PATRIOT Act Sec. 356; NTM 02-47) 92

Identification of Potential Suspicious Activity 92

SAR Filing Requirement 94

Filing Deadlines 95

Retention of Records 95

Prohibition against Disclosure 95

SAR Sharing with Foreign or Domestic Parent Entities 95

9.12 Requests and Written Notices from Enforcement Agencies 95

Compliance with Federal Banking Agency Information Requests - 120-Hour Rule (USA PATRIOT Act Sec. 319(b)) 96

Compliance with FinCEN Information Requests (USA PATRIOT Act Sec. 314) 96

9.13 Foreign Bank Correspondent Accounts (USA PATRIOT Act Sec. 313; Bank Secrecy Act 103.185) 96

9.14 Customer Identification Program (“CIP”) (USA PATRIOT Act Sec. 326; NTM 03-34) 96

Responsibilities 96

AMLCO Approval Requirements for New Accounts 97

Minimum Identifying Information 98

Accounts for Non-Individuals 98

Additional Identifying Information for Non-Individuals 98

CIP Records 99

Comparison with Government Lists 99

Customer Notice 99

9.15 Correspondent Accounts (USA PATRIOT Act Secs. 312 and 313) 99

Special Due Diligence for Private Banking Accounts (USA PATRIOT Act Sec. 312) 99

Accounts for Senior Foreign Political Figures 100

Enhanced Scrutiny 100

Section 10 INSIDER TRADING (Insider Trading and Securities Fraud Enforcement Act of 1988, Rule 10b-5 under the Securities Exchange Act of 1934, NTM 89-5) 101

10.1 Confidential Information 101

Responsibility for Implementation 101

Questions and Additional Information 101

Confidential Information and Trading Restrictions 103

Preservation of Confidentiality 104

Protecting Confidential Information 104

Access to Office Areas and Physical Separation of Business Units 104

Access to Documents and Technology – Confidential Information 104

10.2 Material Inside Information 105

10.3 The Civil and Criminal Consequences of Misusing material Inside Information 106

10.4 bfinance’s Chinese Wall Policies and Procedures 107

Document and Information Control 107

Control of Sensitive Areas 108

Policies and Procedures 109

Private Side of the Wall 109

Restrictions on Communications 109

Individuals “Above the Wall” 110

Information Barriers between Investment Banking and Public Side Employees 110

Wall-Crossings 110

Effects and Limitations on the Wall-Crosser 110

Wall-Crossing Procedures 111

Inadvertent Wall-Crossings 111

Role of the Compliance Department 111

10.5 The Watch/Restricted List 112

Adding Securities to the List 113

The Grey List and Restricted List 113

Watch/Restricted List Maintenance 114

Watch/Restricted List Access and Confidentiality 114

The Restricted List 114

Restrictions on Listed Issuers or Securities 115

Restricted List Maintenance 116

Exception Policy 116

10.6 Designated Principal Responsibilities Regarding Insider Trading 116

Section 11 FINANCIAL and OPERATIONS ACTIVITIES 118

11.1 Books and Records (Exchange Act Rules 17a-3 and 17a-4) 118

RN 11-19 Books and Records (Effective Dec 5, 2011) 119

Electronic Storage of Records (Exchange Act Rule 17a-4(f)) 120

Notification to Examining Authority (Exchange Act Rules 17(d) and 17a-4(f)(2)(i)) 120

Electronic Storage Media Requirements (Exchange Act Rule 17a-4(f)(2)(ii)) 120

Ability to Retrieve And Reproduce (Exchange Act Rule 17a-4(f)(3)) 121

Electronic Audit System 121

Confidentiality of Electronic Records 121

Availability of Records in Offices 121

11.2 Net Capital Calculation and Reporting (Rules 15c3-1 under the Exchange Act; NTMs 92-72, 93-30, and 99-44) 121

11.3 Reconciliations 123

11.4 Other FINOP Responsibilities 123

Notification Provision for Broker Dealers 123

Financial Deficiency Responsibility 124

Fund and Liquidity (FINRA Regulatory Notice 10-57) 124

Disclosure of Financial Condition to Customers (FINRA Rule 2261) 124

11.5 Fees And Service Charge Disclosures (FINRA Rule 2121) 125

11.6 Fidelity Bonding (FINRA Rule 4360) 125

11.7 RN 11-21 Fidelity Bond (January 2012) 125

11.8 New Accounts 125

11.9 Customer Payments for Purchases 126

Inadvertent Receipt of Customer Funds or Securities 126

Guaranteed Accounts 126

11.10 Disbursements of Funds 126

Disbursements of Funds To Third Parties 126

Letters of Authorization 126

LOA Instructions 127

Issuing Checks to Customers 127

11.11 Safekeeping of Customer Funds and Securities (Exchange Act Rules 8c-1, 15c2-1, 15c3-3  17a-13; NTM 99-44) 127