19-11.013. FRS Investment Plan Self-Directed Brokerage Account

(1) An Investment Plan member meeting certain criteria may transfer assets from the member’s Investment Plan primary investment account to a self-directed brokerage account (“SDBA”) in order to be able to access additional investment opportunities beyond the primary investment funds offered under the Investment Plan.

(a) In order to participate in the SDBA the member must:

1. Maintain a minimum balance of $5,000 in the Investment Plan’s primary investment funds. This minimum amount may be changed at any time.

2. Make initial and subsequent transfers into the SDBA of at least $1,000. Transfer requests must be in whole dollars. Percentages are not permitted. This minimum amount is subject to change.

3. Pay all trading fees, commissions, administrative fees, and any other expenses associated with participating in the SDBA.

(b) The member must open an account with the SDBA service provider in one of two ways:

1. By accessing and completing the enrollment form online by logging on to MyFRS.com, then choosing Investment Plan>FRS Investment Plan>Open Self-Directed Brokerage Account. The enrollment form includes both a Member Service Agreement and Memorandum of Understanding which the member must acknowledge having received and read; or,

2. By printing and completing a hard copy of the enrollment form, Member Service Agreement and Memorandum of Understanding. A hard copy of the enrollment form can be printed from the Open Brokerage Account link on MyFRS.com or can be obtained from the Investment Plan Administrator. The member must return the completed enrollment form to the service provider via fax or mail. The member must acknowledge the Member Service Agreement and Memorandum of Understanding were received and read.

(c) The SDBA account will be established within two (2) days of receipt of either the online or hardcopy enrollment form. Once the account is established, the member will receive a package from the SDBA service provider containing information on how to access and use the SDBA.

(d) The SDBA account will be automatically closed if there is a zero balance for 18 consecutive months. To participate in the SDBA in the future, the member will have to open a new SDBA account as set forth above.

(e) The member is subject to the following fees, transaction changes, expenses:

1. Any and all commissions, sales charges and transaction fees applicable to transactions executed by the member through the SDBA. The member may review all SDBA commissions and fees by accessing the Investment Plan Self-Directed Brokerage Account Commission and Fee Schedule in the “Investment Funds” section on MyFRS.com.

2. Depending on the investments chosen, transaction fees, commissions or sales charges may be charged to the member’s SDBA. These fees are automatically deducted from transaction proceeds or added to the purchases as they are incurred. In addition, investment management fees, 12b-1 fees, or other fees and expenses specific to individual funds may be charged to the member’s SDBA. It is the member’s sole responsibility to be aware of and understand the commissions and fees as described in the Commission and Fee Schedule and in the prospectus of any mutual fund.

(2)(a) The investment options offered through the SDBA have not been reviewed by the State Board of Administration (SBA) for suitability for the member. The member is solely responsible for determining the appropriateness of any investments in the SDBA.

(b) The member agrees to fully indemnify and hold harmless the member’s employer, the FRS, the SBA, and any and all service providers to the FRS against any claims, damages, or other possible causes of actions resulting from the member’s decision to participate in the SDBA or from the specific SDBA investment options selected by the member.

(c) The member is exercising control over all of the assets in the member’s Investment Plan account, including the SDBA, pursuant to Section 404(c) regulations and all applicable laws governing the operation of the Investment Plan. Sections 121.4501(8)(b)2. and 121.4501(15)(b) of Florida law incorporate the Federal law concept of participant control, established by regulations of the U.S. Department of Labor under Section 404(c) of the Employee Retirement Income Security Act of 1974. No program fiduciary shall be liable for any loss to the member’s account which results from such exercise of control.

(d) Securities, including mutual funds, sold within the SDBA are not obligations of or insured by the FDIC or any other governmental agency. These investments are not endorsed or guaranteed by the SBA or any other plan fiduciary and are subject to risks, including possible loss of the principal amount invested. The value of a member’s investments may fluctuate so that when they are sold, they may be worth more or less than when they were purchased.

(e) The member is responsible for reviewing and understanding the trading restrictions that may apply to the SDBA investment options purchased. It is the member’s responsibility to review the fund prospectus and will be subject to a mutual fund’s excessive trading policy and to any redemption fees, restrictions or penalties that may apply.

(f) Investment options available within the SDBA include the following:

1. Stocks listed on a Securities Exchange Commission (SEC) regulated national exchange.

2. Exchange-Traded Funds (except for leveraged Exchange-Traded Funds).

3. Mutual funds (except for any of the Investment Plan’s primary investment funds).

4. Fixed income products.

(g) Investment options not permitted within the SDBA include the following:

1. Illiquid investments.

2. Over-the-Counter (OTC) Bulletin Board securities.

3. Pink Sheet® (PS) securities.

4. Leveraged Exchange-Traded Funds.

5. Direct Ownership of Foreign Securities.

6. Derivatives, including, but not limited to, futures and options contracts on securities, market indexes, and commodities.

7. Limited Partnerships.

8. Master Limited Partnerships (MLPs).

9. Commodity ETFs (subject to UBIT).

10. Private Placements.

11. Buying or Trading on Margin.

12. Investment Plan primary investment funds.

13. Any investment that would jeopardize the Investment Plan’s tax-qualified status.

(3)(a) The member can transfer funds from the member’s primary investment funds to the SDBA by logging in to MyFRS.com or by calling the Investment Plan Administrator at 1(866)446-9377, Option 4, and asking to speak to an SDBA specialist.

1. The SDBA will not accept direct contributions.

2. Transfer requests must be in whole dollars. Percentages are not permitted.

3. Transfers must be in amounts at least equal to $1,000.

4. Transfers into the SDBA requested by 4:00 p.m. (ET) on regular business days are processed the same day. If a transfer is processed after 4:00 p.m. (ET), it will be processed the next business day.

(b) To transfer assets from the SDBA back to the Investment Plan primary funds, the member must first liquidate investments in the SDBA and wait for the trades to settle. This process can take up to five business days to complete depending on the settlement period of the liquidated investments. Once the funds are available, the member is responsible for processing the request to transfer the funds to the member’s Investment Plan primary funds.

(4)(a) The Investment Plan Administrator will include in the member’s Investment Plan primary investment funds quarterly account statements the aggregate total amount invested by the member in the SDBA.

(b) The SDBA provider will provide to the member:

1. A separate quarterly statement that will itemize the brokerage transactions and show individual holdings balances as well as the total SDBA balance.

2. If the member has any activity in the SDBA, a separate monthly statement will be provided.

3. If the member has no activity in the quarter, a separate quarterly statement will be provided.

4. If the member provides the SDBA provider with an email address, the member will receive electronic statements, SDBA trade confirmations and other SDBA communications, unless the member affirmatively elects a paper format.

5. The member may opt out of electronic delivery at any time by logging onto MyFRS.com and accessing the SDBA account or by calling 1(866)446-9377, Option 4, and speaking to an SDBA specialist.

(5)(a) Distributions cannot be made directly from the SDBA. A member must first transfer money in the SDBA back to the member’s Investment Plan primary investment account.

(b) If the member is subject to a Required Minimum Distribution (RMD), and has insufficient funds in the member’s primary account, the member will be subject to an automatic liquidation of assets by the Investment Plan Administrator from the SDBA of an amount sufficient to cover the RMD requirements and maintain the required account balance in the primary investment funds.

(c)1. If the member is subject to qualified domestic relations orders (QDROs) by a court of competent jurisdiction, income deduction orders as provided in section 61.1301, F.S., or a federal income tax levy, the member’s SDBA balance may be subject to a partial or full liquidation to comply with the court or federally mandated levy and to ensure that at least a $5,000 account balance in the Investment Plan primary funds is maintained.

2. In the event the member’s SDBA account is subject to a lien or levy, the directions of the appropriate levying authority will be followed unless some form of release from the levying authority, or a court order staying or quashing the lien or levy is provided.

(d) A member participating in the SDBA cannot take a distribution from the member’s primary account that would make the member’s primary account balance fall below $5,000. In such instance for a distribution to occur, the member first would need to liquidate sufficient SDBA funds and return the funds to the member’s primary account. If such a member’s primary account balance were to fall below $5,000 due to market losses, no additional transfers into the SDBA will be allowed, and no additional distributions would be processed until the primary account balance is greater than $5,000.

(e) A member participating in the SDBA who has requested distributions to be made on an installment basis may request to have installments established based on the total of the funds in both the member’s primary account and in the member’s SDBA. If a point is reached at which an additional distribution would cause the member’s primary account balance to fall below $5,000, the installments will be stopped and the member will be notified that no additional installments can be processed until the member liquidates sufficient SDBA funds to cover future distributions and maintain a $5,000 minimum balance in the member’s primary account.

(f) If the member terminates FRS-covered employment prior to meeting the vesting requirements of the Investment Plan and has enrolled in the SDBA, the member will be required to liquidate all investments in the SDBA prior to requesting a distribution of any vested account balance. If the member requests a distribution of any portion of the vested account balance, the member will forfeit any unvested account balance and will be considered retired from the FRS. The member can reinvest in the SDBA with vested money so long as a $5,000 minimum balance is maintained in the primary account and a minimum of $1,000 is available to transfer to the SDBA.

(g) If the member terminates employment with an FRS-participating employer and has unvested money in the Investment Plan and has enrolled in the SDBA, the member’s SDBA account is subject to liquidation by the Investment Plan Administrator within four (4) calendar months of termination and any unvested money will be moved to the Investment Plan’s suspense account. The member can reinvest in the SDBA with vested money so long as a $5,000 minimum balance is maintained in the primary account and a minimum of $1,000 is available to transfer to the SDBA account. If the member returns to FRS-covered employment and has not taken a distribution from the Investment Plan primary account the money held in suspense will be returned to the member’s primary account.

(6)(a)1. Any Investment Plan member who has a complaint regarding the SDBA should call the Investment Plan Administrator at 1(866)446-9377, Option 4, and ask to speak to an SDBA specialist. If the SDBA specialist cannot resolve the complaint over the telephone, the member will be provided with instructions on how to submit a written complaint. If a written complaint is received by the SDBA provider, the SDBA provider will handle the written complaint regarding the SDBA in accordance with the Financial Industry Regulatory Authority (“FINRA”) Rule 4530.

2. The Compliance Officer of the SDBA provider will conduct an investigation and will prepare and send the member a letter within 10 business days of receipt of the written complaint detailing the findings, any proposed resolution, and information on any next steps in resolving the complaint. Copies of the complaint and responses thereto will be provided to the SBA.

3. If a complaint is received by the SBA regarding an SDBA issue, the complaint will be forwarded to the Compliance Officer of the SDBA provider for a response.

4. The complaint process provided in rule 19-11.005, F.A.C., is not applicable to any complaint regarding the SDBA.

(b) If the SDBA provider and the member cannot come to a resolution regarding the complaint the member can request arbitration as detailed in the SDBA Plan Member Agreement.

(c)1. If SDBA provider receives a written complaint that is unrelated to the SDBA, it will be sent to the Investment Plan Administrator and to the SBA. The SDBA provider will acknowledge receipt of the complaint to the member advising the member that the complaint has been forwarded to the appropriate party.

2. Upon receipt of the complaint unrelated to the SDBA referenced in subparagraph (c)1., above, the SBA will handle the complaint in accordance with rule 19-11.005, F.A.C.

Rulemaking Authority 121.4501(8), (5)(e) FS. Law Implemented 121.4501(8), (9), (10), (11), (12), (13), (14), (15) FS. History–New 6-5-14, 12-30-15, 4-12-17, 2-12-18, 5-11-22.