UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No. 3-20171

In the Matter of

Robinhood Financial, LLC,

Respondent.

I.

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PROPOSED PLAN OF

DISTRIBUTION

OVERVIEW

1.

Purpose. This Proposed Plan of Distribution (“Plan”) has been developed

pursuant to Rule 1101 of the Commission’s Rules on Fair Fund and Disgorgement Plans

(“Commission Rules”), 17 C.F.R. § 201.1101. The Plan proposes a distribution of the civil

money penalty paid by Robinhood Financial, LLC (“Robinhood” or “Respondent”) to customers

who were harmed as a result of Robinhood’s false and misleading disclosures beginning July 1,

2016 through June 30, 2019, inclusive (“Harm Period”).

2.

Background. On December 17, 2020, the Commission issued an Order Instituting

Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act

of 1933 and Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and

Imposing Remedial Sanctions and a Cease-and-Desist Order (the “Order”)1 against Robinhood.

The Commission found material misrepresentations and omissions by Robinhood relating to its

revenue sources, specifically its receipt of payments from certain principal trading firms, for

routing Robinhood customer orders to them.

In the Order the Commission found that Robinhood launched its retail brokerage business

in 2015, and by mid-2018, it was one of the largest retail broker-dealers in the United States.

One of Robinhood’s primary selling points was that it did not charge its customers trading

commissions. In reality, however, “commission free” trading at Robinhood came with a catch:

Robinhood’s customers received inferior execution prices compared to what they would have

received from Robinhood’s competitors. For larger value orders, this price differential exceeded

the amount of commissions that Robinhood’s competitors would have charged. These inferior

prices were caused, in large part, by the unusually high fees Robinhood charged the principal

1

Securities Act Rel. No. 10906 (Dec. 17, 2020).

trading firms to which it routed its customer orders for the opportunity to obtain Robinhood’s

customer order flow. These fees are generally referred to as “payment for order flow.”2

Robinhood omitted to disclose its receipt of payment for order flow in certain of its

communications with its retail customers. Since Robinhood’s launch, payment for order flow

has been Robinhood’s single largest source of revenue. In its customer agreements and trade

confirmations, Robinhood stated it “may” receive payment for order flow, and it disclosed

certain information about those payments, as required, in its SEC-mandated Rule 606 reports.

However, in FAQs on its website describing how it made money, and in certain communications

with customers addressing the same issue, Robinhood omitted payment for order flow when it

described its revenue sources because it believed that payment for order flow might be viewed as

controversial by customers. Robinhood also instructed its customer service representatives not

to mention payment for order flow in responding to questions about Robinhood’s sources of

revenue.

As a broker-dealer that routed its customer orders for execution, Robinhood had a duty to

seek to obtain the best reasonably available terms for its customers’ orders, including price. This

duty is referred to as the duty of “best execution.” From July 2016 through June 2019, while

Robinhood was on notice that its high payment for order flow rates from principal trading firms

could result in inferior execution prices for its customers, Robinhood violated its duty of best

execution by failing to conduct adequate, regular, and rigorous reviews of the execution quality it

provided on customer orders. Robinhood did not begin comparing its execution quality to that of

its competitors until October 2018, and did not take appropriate steps during the entire period to

assess whether its high payment for order flow rates adversely affected customer execution

prices.

As a result of the conduct described in the Order, the Commission ordered Robinhood to

pay a civil penalty of $65,000,000.00. In the Order, the Commission established a fair fund,

pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the civil penalty paid can be

distributed to harmed investors (the “Fair Fund”).

Robinhood paid the $65,000,000.00 civil penalty pursuant to the Order. The Fair Fund

has been deposited in an interest-bearing account at the United States Department of the

Treasury’s Bureau of the Fiscal Service (“BFS”). Other than potential interest income from the

BFS investment, the Commission does not anticipate that the Fair Fund will receive additional

funds.

This Plan provides for the distribution of the Fair Fund, plus accrued interest and

earnings thereon, less the Reserve (defined below) and Administrative Costs (defined below)

(“Net Available Fair Fund”) to Eligible Investors, as defined in Paragraph 6.

Exchange Act Rule 10b-10(d)(8) defines “payment for order flow” as including any monetary payment, service,

property, or other benefit that results in remuneration, compensation, or consideration to a broker-dealer in return for

the routing of customer orders.

2

2

3.

Jurisdiction and Control. The assets of the Fair Fund are subject to the

continuing jurisdiction and control of the Commission. The Plan is subject to approval by the

Commission, and the Commission retains jurisdiction over its implementation.

II.

DEFINED TERMS

4.

“Administrative Costs” means all costs of administering the Fair Fund, including

taxes, fees, and expenses of administration. All Administrative Costs shall be paid from the Fair

Fund, first from the interest earned on the funds, and if the interest is not sufficient, then from the

corpus of the Fair Fund.

5.

“Distribution Payment” means a payment made from the Fair Fund to an Eligible

Investor in accordance with the terms of this Plan.

6.

“Eligible Investor” means a person who suffered harm as a result of the

Respondent’s conduct described in the Order and who is determined by the Fund Administrator

to be eligible for a Distribution Payment from the Fair Fund.

7.

“Harm Amount” means the amount that the Commission staff has calculated that

an Eligible Investor suffered on his, her, or its orders during the Harm Period as a result of the

Respondent’s conduct.

8.

“Harm Period” means July 1, 2016 through June 30, 2019, inclusive.

9.

“Information Packet” means the written correspondence from the Fund

Administrator to Eligible Investors including, among other things, the Plan, Plan Notice, a

Substitute Form W-9, and a letter explaining what is required to receive a Distribution Payment.

10.

“Interest Amount” means the amount the Commission staff has calculated as

reasonable interest to compensate an Eligible Investor for the time value of his, her or its Harm

Amount.

11.

“Minimum Distribution Amount” is $10.00. No Eligible Investor shall receive a

distribution payment unless his, her or its Distribution Payment calculated pursuant to the

Methodology in Paragraph 19 below is equal to or greater than $10.00.

12.

“Net Available Fair Fund” means the Fair Fund, plus accrued interest and

earnings thereon, less the Reserve and Administrative Costs.

13.

“Plan” means this Proposed Distribution Plan in the form approved by the

Commission.

III.

ADMINISTRATION OF THE PLAN

14.

Reserve. A reserve will be established for future taxes and fees and expenses of

the Tax and Fund Administrators and to accommodate any unexpected expenditures or

distribution payments (the “Reserve”). After all disbursements and Administrative Costs are

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paid, any remaining amounts in the Reserve will become part of the residual described in

paragraph 31.

15.

Qualified Settlement Fund. The Fair Fund constitutes a Qualified Settlement

Fund (“QSF”) under Section 468B(g) of the Internal Revenue Code, 26 U.S.C. § 468B(g), and

related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5.

16.

Fund Administrator. The Commission has appointed JND Legal Administration

(“JND”) as the fund administrator for the Fair Fund (“Fund Administrator”) and set the

administrator’s bond equal to the amount of the Fair Fund at $65,000,000.00, in accordance with

Rules 1105(a) and 1105(c) of the Commission’s Rules , 17 C.F.R. §§ 201.1105(a) and

201.1105(c).3 All reasonable fees and expenses, including the administrator’s bond premium,

will be paid from the Fair Fund.

The Fund Administrator will, among other things, provide the following services: oversee

the administration of the Fair Fund, obtain and confirm mailing information for the Eligible

Investors, prepare a final accounting with assistance from the Tax Administrator, establish a

website, email address, and toll-free number to address inquiries from investors; cooperate with

the Tax Administrator in providing the information necessary to accomplish income tax

compliance; and distribute money from the Fair Fund in accordance with the Plan.

17.

Tax Administrator. Pursuant to the Omnibus Order Directing the Appointment of

Tax Administrator in Administrative Proceedings that Establish Distribution Funds governing

calendar years 2019-2021,4 the Commission appointed Miller Kaplan Arase LLP as the tax

administrator (“Tax Administrator”) for the Fair Fund.5

The Fund Administrator will cooperate with the Tax Administrator in providing

information necessary to accomplish the income tax compliance of the QSF and any other work

of the Tax Administrator ordered by the Commission. Further, the Fund Administrator will

cooperate with the Tax Administrator for purposes of timely and accurately fulfilling the

information reporting and withholding obligations of the Fair Fund in compliance with IRS

regulations including, but not limited to, the Foreign Account Tax Compliance Act (FATCA).

The Tax Administrator shall prepare a description of the tax information reporting and

other related tax matters, which shall be provided to the Fund Administrator for dissemination to

Eligible Investors before or contemporaneously with their Distribution Payments. The Tax

Administrator will be compensated for all reasonable costs and expenses from the Fair Fund

according to the terms of Tax Administrator’s 2019-2021 Letter Agreement with the

Commission, and tax obligations will be from the Fair Fund.

3

See Order Appointing Fund Administrator and Setting Administrator Bond Amount, Exchange Act Rel. No.

91590 (Apr. 16, 2021).

4

Exchange Act Rel. No. 85174 (Feb. 22, 2019).

5

See Order Appointing Tax Administrator, Exchange Act Rel. No. 91061 (Feb. 4, 2021).

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IV.

FAIR FUND ADMINISTRATION

18.

No Claims Process. Based on information obtained by the Commission staff

during its investigation and the review and analysis of applicable records, the Commission staff

has reasonably concluded that it has all records necessary to calculate harm amounts for each

Eligible Investor as described in Paragraph 19. As a result, the Fair Fund is not being distributed

according to a claims-made process, so procedures for making and approving claims in

accordance with Rule 1101(b)(4) of the Commission’s Rules, 17 C.F.R. § 201.1101(b)(4), are

not applicable.

19.

Methodology for Determining Distribution Payments. Using information

collected during the investigation, the Commission staff will determine the Distribution Payment

for each Eligible Investor as follows:

(a)

Calculate harm on each customer order as the industry benchmark price

improvement6 less Robinhood’s price improvement, less the industry benchmark

commission on such an order, for orders where the difference in price

improvement exceeds the industry benchmark commission. For orders where the

difference in price improvement is less than or equal to the industry benchmark

commission, harm will be zero.

(b)

Calculate reasonable interest on each customer order with non-zero harm using

the short-term Applicable Federal Rate, compounded quarterly from the end of

the calendar quarter of the Order through August 31, 2021.

(c)

Calculate the Harm Amount for each Eligible Investor as the sum of the harm

calculated in (a) above across all of his, her or its orders during the Harm Period.

(d)

Calculate the Interest Amount for each Eligible Investor as the sum of the

reasonable interest calculated in (b) above across all of his, her or its orders

during the Harm Period.

(e)

Combine each Eligible Investor’s Harm Amount and Interest Amount to

determine their Distribution Payment.

The Net Available Fair Fund exceeds the aggregate harm suffered by all Eligible

Investors, so each Eligible Investor will receive a Distribution Payment equal to his, her or its

Harm Amount plus Interest Amount subject to below.

No Eligible Investor shall receive a distribution unless the Distribution Payment is equal

to or greater than the Minimum Distribution Amount of $10.00. No Eligible Investor shall

receive a Distribution Payment in excess of his, her or its Harm Amount, plus Interest Amount.

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Price improvement is defined as the difference between the customer’s execution price and the National Best Bid

and Offer at the time of order receipt.

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In the view of the Commission staff and the Fund Administrator, this methodology

constitutes a fair and reasonable allocation of the Fair Fund to compensate an investor’s harm.

20.

Procedures for Locating and Notifying Eligible Investors and Eligible Investors’

Obligation with Respect to the Plan Notice. Within fourteen (14) calendar days of Commission

approval of the Plan, the Fund Administrator will:

(a)

Establish and maintain a website devoted solely to the Fair Fund. The Fair

Fund’s website will make available a copy of the approved Plan, include a copy

of the Plan Notice, and related materials in downloadable form, and such other

information that the Fund Administrator believes will be beneficial to Eligible

Investors.

(b)

Establish and maintain a toll-free telephone number for Eligible Investors to call

and speak to a live representative of the Fund Administrator during its regular

business hours or, outside of such hours, to hear pre-recorded information about

the Fair Fund.

(c)

The Fund Administrator will also establish and maintain a traditional mailing

address and an email address which will be listed on all correspondence from the

Fund Administrator to Eligible Investors as well as on the Fair Fund’s website.

(d)

Send to each Eligible Investor’s last known email address (if known) and/or

mailing address an Information Packet which shall include: (i) a letter which

includes a statement characterizing the distribution, a link to the approved Plan

posted on the Commission’s website and instructions for requesting a copy of the

Plan; (ii) a notice (the “Plan Notice”) regarding the Commission’s approval of the

Plan; (iii) specification of any information needed from the Eligible Investor,

including confirmation of their contact information sufficient to issue a

Distribution Payment and a Substitute Form W-9 to be completed by the Eligible

Investor; (iv) a calculation of the Distribution Amount; (v) a description of the tax

information reporting and other related tax matters; (vi) the procedure for the

distribution as set forth in the Plan; and (vii) the name and contact information for

the Fund Administrator in order to provide any requested information or to

contact with questions regarding the distribution.

The Commission staff retains the right to review and approve any material posted on the

Fair Fund’s website and any scripts used in connection with communications with investors.

Prior to any mailing under the Plan, the Fund Administrator will run a National Change

of Address search on any domestic address to retrieve updated U.S. addresses, and make best

efforts to confirm updated addresses for foreign records, thereby ensuring updated mailing

information.

21.

Failure to Respond. If an Eligible Investor fails to provide the information

requested in the Information Packet within fourteen (14) days of the postmarked dated of the

Information Packet, the Fund Administrator will make no fewer than two (2) attempts to contact

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the Eligible Investor by telephone or email. The second attempt will in no event take place more

than thirty (30) days from the mailing of the Information Packet. If an Eligible Investor fails to

respond to the Fund Administrator’s contact attempts as described in this paragraph, the Fund

Administrator, in its discretion, may remove such Eligible Investor from the distribution, and the

allocated Distribution Payment will remain in the Fair Fund as part of the Residual.

22.

Undeliverable Mail. If an Information Packet and/or Distribution Payment is/are

returned as undeliverable, the Fund Administrator will make best practicable efforts to ascertain

an Eligible Investor’s correct address. If another address is obtained, the Fund Administrator

will then resend the Information Packet and/or Distribution Payment to the Eligible Investor’s

new address as expeditiously as possible. If the Information Packet and/or Distribution Payment

is returned again, and the Fund Administrator, despite best practicable efforts, is unable to find

an Eligible Investor’s correct address, the Fund Administrator, in its discretion, may remove such

Eligible Investor from the distribution and the Eligible Investor’s Distribution Payment will be

added to the Residual.

Any Eligible Investor who relocates or otherwise changes contact information after

receipt of the Information Packet must promptly communicate any change in address or contact

information to the Fund Administrator.

23.

Distribution Timing. The Fund Administrator will use its best efforts to start the

distribution within fourteen (14) days after the issuance of the Commission’s Order approving

the Plan (the “Deadline”), but no later than September 30, 2021.

The Fund Administrator will provide the Commission with a list of each Eligible Investor

who timely returned the information requested in the Information Packet, including a Substitute

Form W-9 (“Payee List”) within fourteen (14) days of the Deadline. If Eligible Investors return

the requested information after the Deadline but before a final cut-off date determined by the

Fund Administrator, in conjunction with the Commission staff, the Fund Administrator will

prepare and provide to the Commission staff further Payee Lists and the staff will seek an

order(s) for disbursement of those funds to the Eligible Investors.

24.

Escrow Account and Reissues. Prior to disbursement of the Fair Fund, the Fund

Administrator will establish an escrow account at a U.S. commercial bank (“Bank”), not

unacceptable to Commission staff. The Escrow Account shall be established pursuant to an

escrow agreement (the “Escrow Agreement”) to be provided by the Commission staff, in the

name of and bearing the Employer Identification Number (“EIN”) of the QSF (the “Escrow

Account”). The Fund Administrator shall also establish with the Bank a separate deposit account

(the “Deposit Account”) (e.g., controlled distribution account, managed distribution account,

linked checking and investment account) for the purpose of funding the Distribution Payments to

be distributed to Eligible Investors by the Fund Administrator pursuant to the Distribution Plan.

The name of each account shall be in the following form: Robinhood Financial Fair Fund (EIN

XX-XXXXXXX), as custodian for the benefit of investors allocated a distribution pursuant to

the Distribution Plan In the Matter of Robinhood Financial, LLC, Administrative Proceeding File

No. 3-20171.

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During the term of the Escrow Agreement, if invested, the Escrow Account shall be

invested and reinvested in short-term United States Treasury securities backed by the full faith

and credit of the United States Government or an agency thereof, of a type and term necessary to

meet the cash liquidity requirements for payments to Eligible Investors, tax obligations and

administration costs, including investment or reinvestment in a bank account insured by the

Federal Deposit Insurance Corporation (“FDIC”) up to the guaranteed FDIC limit, or in money

market mutual funds registered under the Investment Company Act of 1940 that invest 100% of

their assets in direct obligations of the United States Government.

The Fund Administrator shall provide duplicate original bank and/or investment

statements on any accounts established by the Fund Administrator to the Tax Administrator on a

monthly basis and shall assist the Tax Administrator in obtaining mid-cycle statements, as

necessary.

The Fund Administrator shall deposit or invest funds in the Escrow and Deposit

Accounts so as to result in the maximum reasonable net return, taking into account the safety of

such deposits or investments. In consultation with Commission staff, the Fund Administrator

shall work with the Bank on an ongoing basis to determine an allocation of funds between the

Escrow and the Deposit Accounts that will preserve earnings, if possible, while providing

maximum protection for the Fair Fund. All interest earned will accrue for the benefit of the Fair

Fund and all costs associated with the Escrow Account and Deposit Accounts will be paid from

the Fair Fund.

Upon transfer from the Commission, the assets of the Fair Fund will be held in the

Escrow Account, separate from Bank assets, until the presentation of checks. All Fair Fund

checks presented for payment or electronic transfers will be subject to “positive pay” controls

before being honored by the Bank, and all such checks issued to Eligible Investors by the Fund

Administrator shall bear a stale date of ninety (90) days. The “positive pay” system provides

protection against fraud arising from counterfeit or altered checks. The “positive pay” system

will require, at a minimum, confirmation by the Bank that all checks presented for payment

match the identifiers and amounts on the Payee List prior to honoring such checks.

Checks that are not negotiated within this 90-day period shall be voided and the issuing

financial institution shall be instructed to stop payment on those checks. Such Eligible Investor’s

claim is extinguished as of the stale date and the funds will remain in the Fair Fund. If a check

reissue has been requested before the stale date, such request will be honored and the check

reissue will bear a stale date of sixty (60) days. Accordingly, checks that are not negotiated

within this 60-day period shall be voided and the issuing financial institution shall be instructed

to stop payment on those checks. Such Eligible Investor’s claim is extinguished as of the stale

date and the funds will be added to the Residual. A check reissue request should be submitted

before the stale date of the original check has passed. For any electronic payment, the exact

amount necessary to make a payment shall be transferred from the Escrow Account directly to

the payee bank account in accordance with written instruction provided to the Bank by the Fund

Administrator.

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25.

Payment to Eligible Investors. The Fund Administrator will compile the Payee

List and prepare a payment file in a Commission-approved format along with a reasonable

assurances letter for submission to Commission staff. Pursuant to Rule 1101(b)(6) of the

Commission’s Rules, Commission staff will seek to obtain an order from the Commission to

disburse the Fair Fund to the Escrow Account. All disbursements will be made pursuant to a

Commission order. Upon issuance of the Commission’s order authorizing distribution of the

Fair Fund in accordance with the Plan, the Fund Administrator will distribute by check to each

Eligible Investor his, her, its, or their Distribution Payment, as reported to the Commission on

the Payee List, at the most recent address reported by the Eligible Investor.7 Any dispute

regarding a check must be received by the Fund Administrator prior to the expiration of the

check.

Distribution checks and/or accompanying communications will clearly indicate: (a) that

the money is being distributed from a Fair Fund established to compensate investors for harm

suffered as a result of securities law violations; (b) that the tax treatment of the distribution is the

responsibility of each Eligible Investor and that the Eligible Investor should consult its tax

advisor for advice regarding the tax treatment of the distribution; (c) the contact information for

the Fund Administrator for questions regarding the distribution payment; and (d) that checks will

be void after ninety (90) days and cannot be reissued after one hundred fifty (150) days from the

date of the original check.

The Fund Administrator will work with the Bank and maintain information about

uncashed checks, any returned items due to non-delivery, insufficient addresses, and/or other

deficiencies. The Fund Administrator is responsible for researching and reconciling errors and

reissuing payments when possible. The Fund Administrator is also responsible for accounting

for all payments. The amount of all uncashed payments will continue to be held in the Fair

Fund.

26. Outreach Efforts. The Fund Administrator will make reasonable efforts to contact

Eligible Investors to follow-up on the status of uncashed distribution checks over $1,000 (other

than those returned as “undeliverable”) and take appropriate action to follow-up on the status of

uncashed checks at the request of Commission staff. The Fund Administrator may reissue such

checks, subject to the time limits detailed herein.

27.

Accountings. Pursuant to Rule 1105(f) of the Commission’s Rules, 17 C.F.R.

§ 201.1105(f), the Fund Administrator will file an accounting with the Commission during the

first ten (10) days after the end of each calendar quarter on a standardized form provided by the

Commission staff. The Fund Administrator will file an accounting of all monies earned or

received and all monies spent in connection with the administration of the Plan. Once all

payments are disbursed to Eligible Investors pursuant to the procedures described above, and all

Administrative Costs have been paid, the Fund Administrator will submit a final accounting for

approval by the Commission, on a standardized form provided by the Commission staff, prior to

the discharge of the Fund Administrator and cancellation of the Fund Administrator’s bond.

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Under certain circumstances, the Fund Administrator may disburse a Distribution Payment to an Eligible Investor

utilizing a payment method other than check, if agreed to by the Fund Administrator and the Commission staff.

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28.

Amendments and Procedural Deadline Extensions. The Fund Administrator shall

take reasonable and appropriate steps to distribute the Net Available Fair Fund in accordance

with the general purposes of this Plan. The Fund Administrator will inform Commission staff of

any changes needed to the Plan. If upon consultation with Commission staff, a change is

determined to be material, Commission approval is required prior to implementation by

amending the Plan. Immaterial changes may be made by the Fund Administrator with approval

of the Commission staff. For good cause shown, and in consultation with the Commission staff,

the Fund Administrator may extend any of the procedural deadlines set forth in this Plan.

29. Procedures to Request Plan Notice. Any person or entity who does not receive a

Plan Notice, as described in Paragraph 20, but who is aware of this Plan (e.g., through other

Eligible Investors or on www.sec.gov) and believes he/she/it should be included as an Eligible

Investor should contact the Fund Administrator within thirty (30) days of the publication of the

Plan for notice and comment to establish eligibility to receive a Distribution Payment. The

Fund Administrator will send a Plan Notice within fourteen (14) days of receiving

documentation of eligibility, if the Fund Administrator determines that the person or entity

should have received a Plan Notice, as provided in Paragraph 20.

30.

Procedures for Disputing Amounts Received. Disputes will be limited to

calculation of the Distribution Payment to Eligible Investors. Within thirty (30) days of receipt

of the Plan Notice, the Fund Administrator must receive a written communication detailing the

dispute along with any supporting documentation. The Fund Administrator will investigate the

dispute, and such investigation will include a review of the written dispute, as well as, any

supporting documentation. Within ninety (90) days of receipt of the written dispute, the Fund

Administrator will notify the investor of its resolution of the dispute, which shall be final.

31. Residual Funds and Disposition of Undistributed Funds. A residual within the

Fair Fund will be established for any amounts remaining after distribution of the Net Available

Fair Fund to Eligible Investors has occurred (the “Residual”). The Residual may include,

among other things, funds reserved for future taxes and related expenses, annual bond fee

premiums, administrative expenses, distributions from checks that have not been cashed,

undelivered checks, and tax refunds for overpayment or for waiver of IRS penalties. All funds

remaining in the Residual after all expenses of administration and taxes have been satisfied will

be returned to the Commission for further disposition as approved by the Commission. Upon

approval of the distribution final accounting by the Commission, any amounts remaining that

are infeasible to return to investors, and any amounts returned to the Commission in the future

that are infeasible to return to investors, may be transferred to the general fund of the U.S.

Treasury, subject to Section 21F(g)(3) of the Exchange Act.

32. Miscellaneous. The Fund Administrator is authorized to enter into agreements

with financial institutions, (“Institutions”) as may be appropriate or necessary in the

administration of the Fair Fund, provided such Institutions are not excluded pursuant to other

provisions of this Plan. In connection with such agreements, the Institutions shall be deemed to

be agents of the Fund Administrator under this Plan.

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The Fund Administrator, and/or each of its designees, agents and assistants, shall be

entitled to rely on all outstanding rules of law; and any orders issued by the Commission, the

Secretary by delegated authority or an Administrative Law Judge; and/or any investor

information provided by Commission staff.

33.

Document Retention. The Fund Administrator will retain all documents in paper

and electronic form for a period of six (6) years after approval of the final accounting and

thereafter will transfer the documents to the Commission, pursuant to Commission staff

direction. In addition, the Fund Administrator will shut down the Fair Fund’s website

established specifically for the administration of the Fair Fund six (6) months after the closing of

the Escrow and Deposit Accounts, or at such earlier time as the Fund Administrator determines

with concurrence of the Commission staff.

34.

Termination of Fair Fund, and Discharge of the Fund Administrator. The Fair

Fund will be eligible for termination and the Fund Administrator will be eligible for discharge

after all of the following have occurred: a) a final accounting, in a standard accounting format

provided by Commission staff, has been submitted by the Fund Administrator, and has been

approved by the Commission; b) all Administrative Costs have been paid from the Fair Fund;

and c) any amount remaining in the Fair Fund has been received by the Commission. When the

Commission has approved the final accounting, the Commission staff shall seek an order from

the Commission authorizing: (a) the disposition of the Residual, and any amounts returned to the

Fair Fund in the future; (b) termination of the Fair Fund; (c) discharge of the Fund

Administrator; and (d) cancellation of the Fund Administrator’s bond.

35.

Notice of Proposed Plan and Opportunity for Comment. The Notice of the

Proposed Plan of Distribution and Opportunity for Comment (the “Notice”) shall be published

on the Commission’s website at http://www.sec.gov/litigation/fairfundlist.htm. Any person

wishing to comment on the Plan must do so in writing by submitting their comments within

thirty (30) days of the date of the Notice: (a) to the Office of the Secretary, United States

Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090; (b) by

using the Commission’s Internet comment form (http://www.sec.gov/litigation/admin.shtml); or

(c) by sending an email to rule-comments@sec.gov. Comments submitted by email or via the

Commission’s website should include “Administrative Proceeding File No. 3-20171” in the

subject line. Comments received will be publicly available. Persons should only submit

comments that they wish to make publicly available.

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