General Description of Advisory Firm BMO Nesbitt Burns Securities Ltd. (referred to as “NBSL,” “we,” “our,” or “us”) is a Canadian corporation
that began operations in 1997. Our principal place of business is located in Toronto, Canada. NBSL is a
direct wholly‐owned subsidiary of BMO Nesbitt Burns Inc. (“BMO NBI”), a wholly‐owned subsidiary of
the Bank of Montreal (“BMO”).
NBSL offers investment advisory, brokerage services, and financial planning. We are registered with the
U.S. Securities and Exchange Commission ("SEC") and are members of the Financial Industry Regulatory
Authority (“FINRA”). NBSL provides discretionary advisory services through investment adviser
representatives (“Investment Advisers”) located in Canada to investors that are located in the U.S. or
Canadian residents with U.S. accounts. NBSL Investment Advisers, support, and supervision staff are also
employees of BMO NBI. NBSL Operations personnel are employees of BMO. NBSL’s President is also a
registered representative and supervisor with BMO Capital Markets Corp. NBSL Compliance personnel
are employees of BMO Harris Financial Advisors, Inc. and BMO Harris Bank, N.A., both divisions of BMO
Financial Group.
NBSL had approximately $423,764,686 in discretionary assets under management as of January 29, 2019.
Description of Advisory Services NBSL provides discretionary advisory services to clients for a fee based on the individual needs of our
clients. NBSL Investment Advisers work with their clients to develop a personalized Investment Policy
Statement (“IPS”) based on data that the Investment Advisers gather through personal discussions with
our clients. During these discussions, we determine the clients’ individual goals and objectives,
investment time horizon, risk tolerance, liquidity needs and restrictions for investing in certain
securities or types of securities. The NBSL Investment Advisers then build a portfolio that meets the
needs outlined in the IPS.
NBSL uses National Financial Services (“NFS”) as its clearing firm. NBSL uses NFS to custody clients’
securities, clear trades, and provide record keeping and document delivery services.
NBSL offers financial planning services. Clients receiving investment advisory services can receive
financial planning services included in their advisory fees.
Clients grant NBSL and their Investment Advisers discretionary management over their advisory
accounts according to the IPS. NBSL and Investment Advisers use discretion to transact trading on
behalf of the client. Investment Advisers select the equities, fixed income securities, mutual funds
and/or ETFs for inclusion in the portfolio on the basis of their compatibility with the clients’ IPS.
NBSL uses investment research from its affiliates and third parties. NBSL does not pay for research.
NBSL Investment Advisers pay for third party research at their own discretion. NBSL mitigates the
conflict of using affiliate research by disclosing it here and not investing in affiliate products without
client authorization.
Wrap Fee Programs NBSL does not participate in wrap fee programs.
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Advisory Services and Fees for Specific Clients NBSL charges clients annual fees for discretionary investment advisory services based on the market value
of assets in the client’s account. The maximum annual fees range from 125 basis points to 175 basis
points depending on the strategy the client selects. The annual fees are tiered and the actual rate paid
by clients will depend on the amount invested by the client. Based on a variety of factors, NBSL has
discretion to discount the annual fees charged to clients. NBSL and the client must agree to the annual
fee charged to the client and the IPS will reflect such annual fee. However, NBSL’s fees are negotiable
and can vary. Further, previous fee schedules are still in effect for some clients. These previous fee
schedules include fees that are higher and lower than the current fee schedule.
Either the client or NBSL may terminate the account agreement at any time upon receipt of written
notice. If the client terminates the account agreement within five days of entering into the agreement,
then NBSL will not charge the client any management or administrative fees. The client will receive the
market value of their managed portfolio including any realized market gains or losses. In the event of
termination by NBSL or the client during the contract year, the management fee is refundable on a
monthly pro rata basis.
Billing and Payment of Client Fees Unless otherwise agreed to by NBSL and the client, fees are debited on the 15th business day following
the end of the applicable billing period, either monthly or quarterly depending on the agreement
between NBSL and the client.
NBSL calculates the fees using the account average daily balance. The account average daily balance is
the average daily market value of assets held in the account as of the close of each business day. NBSL
bills fees monthly or quarterly based upon client selection and bills the fee on the 15th business day of
the month following the end of the billing month or billing quarter.
Additional Client Expenses and Fees All clients will incur charges from custodians and other third parties, such as mutual fund level charges,
odd‐lot differentials, transfer taxes, wire transfer and electronic funds fees, and other fees and taxes on
brokerage accounts and securities transactions. All fees paid to NBSL for investment advisory services are
separate and distinct from the fees and expenses charged by ETFs or mutual funds to their shareholders.
Each ETF or mutual fund describes its fees and expenses in the ETF's or fund’s prospectus. These fees
will generally include a management fee, other fund expenses, and a possible distribution fee (for
mutual funds, often referred to as a Rule 12b‐1 fee). As a result, clients who engage NBSL to provide
advisory services for a fee, and who have a portion of their assets invested in ETFs or mutual funds are
paying two management fees. NBSL charges the first fee directly for the management of the client’s
portfolio, and the ETF(s) or mutual fund(s) charge the second fee for the management of the ETF's or
mutual fund’s assets. Such charges, fees, and commissions are exclusive of and in addition to our fees.
NBSL receives a portion of the 12b‐1 fees you pay to the fund company. The receipt of 12b‐1 fees is a
conflict to your interests because NBSL is incentivized to include funds where NBSL receives a 12b‐1 fee.
We mitigate this conflict by requiring our Investment Advisers to act in their clients’ best interest and
disclosing the conflict in this brochure.
Advisory Fees in General: Clients should note that similar advisory services may (or may not) be available from other registered
(or unregistered) investment advisers for similar or lower fees.
Additional Compensation and Conflicts of Interest At present there are no additional compensation arrangements or payments for referral services to
NBSL.
As employees of BMO NBI, NBSL Investment Advisers also provide brokerage, insurance, and investment
advisory services (“Canadian Services”) to Canadian investors and will receive compensation for the
following Canadian Services:
commissions from the sales of insurance products
fee based or transaction based revenue from the sales of brokerage products
fee based or transaction based revenue from the sales of advisory services
performance based awards
referral fees for banking and trust services
Certain NBSL Investment Advisers also provide brokerage services to US investors and will receive
commissions from the sales of those brokerage investments.
Certain NBSL Investment Advisers conduct outside business activities. Such outside business activities
can create conflicts of interest for an Investment Adviser or NBSL. NBSL mitigates this conflict by
requiring Investment Advisers to seek prior approval of any outside business activity from NBSL
management, so that management can properly address any potential conflicts of interest. NBSL
management periodically monitors the outside business activities of Investment Advisers to verify that
any potential conflicts of interest continue to be properly addressed.
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NBSL provides advisory services to individuals, trusts, entities, and retirement accounts. The minimum
account size is $500,000. However, at NBSL’s discretion, it may reduce the account minimum if the
client meets certain criteria (
i.e., anticipated future assets, dollar amount of assets under management,
related accounts, etc.)
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LOSS NBSL Investment Advisers select investments for their clients from a broad spectrum of products based
on the client’s investment objectives and risk tolerance. NBSL Investment Advisers will offer their clients
equities, fixed income, mutual funds, and ETFs depending on client need and preference. NBSL
Investment Advisers attempt to select investment strategies that are appropriate for the needs of
their clients and consistent with the clients’ investment objectives, risk tolerance, and time horizons,
among other considerations.
Investing involves risk, including possible loss of the client’s principal investment. The client should be
prepared to bear these risks. Investments are not deposits or obligations of, or endorsed or guaranteed
by NBSL, BMO Nesbitt Burns, Inc., BMO, BMO Harris Bank N.A., or any other NBSL affiliate. Investments
are not insured or guaranteed by the FDIC, the Federal Reserve Board or the U.S. government or any U.S.
government agency. As in all securities investments, past performance does not guarantee future
results. An Investment Adviser who has been successful in the past may not be able to replicate that
success in the future.
Risks Associated with Investing
Asset Allocation Risk: Rather than focusing primarily on securities selection, we attempt to identify an
appropriate ratio of investment types, industries, and/or market sectors based on the client’s investment
goals and risk tolerance. However, a risk of asset allocation is that the client may not participate in sharp
increases in a particular security, industry or market sector. Another risk is that the ratio of investments
will change over time due to market movements and, if not rebalanced, will no longer be appropriate for
the client’s goals.
Management and Strategy Risks: An advisory account may not achieve its investment objective. The
ability of a portfolio to meet its investment objective directly relates to the investment strategy for the
portfolio. The investment strategy used could fail to achieve the investment objective and cause
investments to lose value.
Data Risk: Our securities analysis methods rely on the assumption that the companies whose securities
we purchase and sell, the rating agencies that review these securities, and other publicly available
sources of information about these securities, are providing accurate and unbiased data. While we try to
be alert to indications that data may be incorrect, there is always a risk that inaccurate, incomplete or
misleading information may compromise our analysis.
Liquidity Risks: Liquidity risk refers to the possibility that an account may not be able to buy or sell a
security at a favorable price or time. Consequently, the account may have to accept a lower price to sell
a security, sell other securities to raise cash, or give up an investment opportunity, any of which could
have a negative effect on the account’s performance. Infrequent trading of securities also may lead to an
increase in their price volatility.
Mutual Funds Risks: Mutual funds are subject to investment advisory, transactional, operating, and
other expenses. Each mutual fund is subject to specific risks, depending on its investments. The value of
mutual funds’ underlying investments and the net asset value of mutual funds’ shares will fluctuate in
response to changes in market and economic conditions, as well as the financial condition and prospects
of companies and other investments in which the funds invest. NBSL does not control the underlying
investments in mutual funds. The performance of each fund will depend on whether the fund’s portfolio
manager is successful in pursuing the fund’s investment strategy. For a complete description of risks
associated with the individual mutual funds, clients should refer to the prospectuses and statements of
additional information. In addition, as we do not control the underlying investments in a fund. Managers
of different funds held by the client may purchase the same security, increasing the risk to the client if
that security were to fall in value. There is also a risk that a manager of the fund may deviate from the
stated mandate or strategy of that fund, which could make the holding(s) less appropriate for the client’s
portfolio.
Risks Associated with Equities
Equity Security Risks: Client accounts with all or a portion of the underlying assets invested in equity‐
based mutual funds and separately managed accounts (SMAs), made up of individual equity securities,
are subject to the following risks:
Stock Market Risks: Investments in equity securities are subject to fluctuations in the stock market,
which has periods of increasing and decreasing values. Stocks are historically more volatile than debt
securities.
Growth Style Risks: A growth stock is one whose revenues and earnings are expected to increase at a
faster rate than the average company within the same industry. Due to their relatively high valuations,
growth stocks are typically more volatile than value stocks. Further, growth stocks may pay lower
dividends than value stocks or may not pay dividends period. This means they depend more on price
changes for returns and may be more adversely affected in a down market compared to value stocks
that pay higher dividends.
Value Style Risks: Value stocks are generally priced lower than stocks of similar companies in the same
industry and may be undervalued. Investments in value stocks are subject to the risk that their intrinsic
values may never be realized by the market, or that a stock judged to be undervalued may actually be
appropriately priced, or that their prices may decline, even though in theory they are already
undervalued. Value stocks can react differently to issuer, political, market and economic developments
than the market, as a whole, and other types of stocks (e.g., growth stocks).
Company Size Risks: Generally, a company with smaller market capitalization has fewer shares traded
daily, making the stock less liquid and its price more volatile. Companies with smaller market
capitalizations also tend to have unproven track records, a limited product or service base, and a limited
access to capital. These factors increase the risk that these companies are historically more likely to fail
than companies with larger market capitalizations.
Foreign Investing Risks: Investments in foreign companies and markets carry a number of economic,
financial, and political considerations that are not associated with U.S. companies and markets, which
could unfavorably affect account performance. The potential risks are greater price volatility, weak
supervision and regulation of securities exchanges, brokers and issuers, higher brokerage costs,
fluctuation in foreign currency exchange rates and related conversion costs, adverse tax consequences,
and settlement delays.
Risks Associated with Fixed Income Securities Client accounts with all or a portion of the assets and/or
mutual funds whose underlying assets are invested in fixed income are subject to the following risks:
Interest Rate Risks: Prices of fixed income securities rise and fall in response to changes in the interest
rate paid by similar securities. Generally, when interest rates rise, prices of fixed income securities fall.
Fixed income securities with longer maturities are generally more affected by interest rate changes.
Credit Risks: Credit risk is the possibility that an issuer or counterparty will default on a security or
repurchase agreement by failing to pay interest or principal when it is due. If an issuer defaults, an
account or mutual fund holding securities of that issuer may lose money. Fixed income securities with
higher credit risk typically have lower credit ratings, and at a certain rating level are considered
speculative. Bonds that are rated BBB or Baa or lower, by Standard & Poor’s and Moody’s, respectively,
have speculative characteristics.
Call Risks: Fixed income securities with a call date (“callable bonds”) may be redeemed (“called”) by the
issuer before maturity. An account or mutual fund that invests in callable bonds that are called may have
to reinvest the proceeds in securities that pay a lower interest rate, which may decrease the portfolio’s
overall yield. This is generally likely to happen when interest rates are declining.
Asset‐Backed/Mortgage‐Backed Securities Risks: Asset‐backed and mortgage‐backed securities are
subject to risks of prepayment. An account’s or fund’s yield will be reduced if cash from prepaid
securities is reinvested in securities with lower interest rates. The risk of prepayment also may decrease
the value of mortgage‐backed securities. Asset‐backed securities may have a higher level of default and
recovery risk than mortgage‐backed securities. Both of these types of securities may decline in value
because of mortgage foreclosures or defaults on the underlying obligations. Credit risk is greater for
mortgage‐backed securities that are subordinate to another security.
U.S. Government Obligations Risks: The United States government is not legally obligated to provide
financial support to United States government‐sponsored agencies or instrumentalities. As a result, there
is risk that these entities will default on a financial obligation.
High Yield Securities Risks: Low rated/high yield securities tend to be more sensitive to economic
conditions than higher‐rated securities and generally involve more credit risk than securities in the
higher‐rated categories. The risk of loss due to default by an issuer of low rated/high yield securities is
significantly greater than issuers of higher‐rated securities because such securities are generally
unsecured and are often subordinated to other creditors. Low rated/high yield securities may also have
liquidity risk. An account or fund may have difficulty disposing of certain low rated/high yield securities
because there may be a thin trading market for such securities.
U.S. Municipal Securities Risks: U.S. municipal bonds are subject to risks, including economic and
regulatory developments, changes or proposed changes in the federal and state tax structure,
deregulation, court rulings and other factors. The value of U.S. municipal securities may be more
affected by liquidity risk or credit risk than by market interest rate risk. Repayment of U.S. municipal
securities depends on the ability of the issuer or project backing such securities to generate taxes or
revenues. There is a risk that the interest on an otherwise tax‐exempt U.S. municipal security may be
subject to federal income tax.
U.S. Municipal Sector Risks: An account or fund may invest in a U.S. municipal securities sector that
finances specific projects, such as those relating to education, health care, transportation and utilities. To
the extent an account or fund is invested in a particular sector, the account’s or fund’s performance may
be more susceptible to any economic, business or other developments that generally affect that sector.
Please note NBSL currently does not permit the purchase of individual municipal securities, but does
allow mutual funds that invest in U.S. municipal securities.
Risks Associated with Exchange Traded Funds (“ETFs”) ETFs are investment funds that can track an index, commodity, currency, or sector and are traded like
common stock on a stock exchange. They experience price changes throughout the day as they are
bought and sold. ETFs try to replicate the performance of their corresponding index, not outperform it.
ETF Risks: In addition, as we do not control the underlying investments in an ETF, managers of different
ETFs held by the client may purchase the same security, increasing the risk to the client if that security
were to fall in value. There is also a risk that a manager of the ETF may deviate from the stated mandate
or strategy of that ETF, which could make the holding(s) less suitable for the client’s portfolio.
In general, investing in securities involves risk of loss to clients due to general market fluctuations and
securities that underperform. NBSL uses the above strategies to mitigate these and other risks, but the
client should be prepared for market volatility and potential loss of investment capital.
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Investment Advisers are required to disclose any legal or disciplinary events that would be material to a
client's or a prospective client's evaluation of NBSL or the Investment Adviser or the integrity of NBSL's
or the Investment Adviser’s management of client accounts. There has been one disciplinary event
relating to NBSL in the past 10 years:
Without admitting or denying the findings, NBSL consented to a finding that between May 2015 and
May 2016, NBSL incorrectly calculated its net capital causing NBSL to not continuously maintain its
required level of net capital. As a result, during the relevant period, the Firm also filed inaccurate
Financial Operational Combined Uniform Single reports and maintained inaccurate books and records.
NBSL consented to the described sanction to the entry of findings and was censured and fined $75,000.
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NBSL is a registered broker‐dealer and a member of FINRA. Certain of NBSL's Investment Advisers are
registered representatives of NBSL in its capacity as a broker‐dealer. These individuals, in their
separate capacity as registered representatives of a broker‐dealer, can effect securities transactions for
which they will receive separate, yet customary compensation.
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TRANSACTIONS AND PERSONAL TRADING NBSL’s code of ethics (the “Code of Ethics”) sets forth standards of business conduct that NBSL requires
of its Investment Advisers, including compliance with applicable federal securities laws. NBSL and its
personnel owe a duty of loyalty and care to its clients, and have an obligation to NBSL’s Code of Ethics.
While NBSL does not believe that it has any particular access to non‐public information, the Code of
Ethics reminds NBSL personnel that such information may not be used in a personal or professional
capacity.
Clients and prospective clients may request a copy of the Code of Ethics by sending an email to
[email protected] or calling (855) 328‐1136.
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Factors Considered in Selecting or Recommending Broker‐Dealers for Client Transactions
NBSL has complete discretion, without obtaining specific Client consent, to: (i) buy or sell securities, (ii)
determine the amount of the securities to be bought or sold and (iii) determine the broker or dealer to be
used in such purchase or sale. NBSL will effect transactions with brokers that (with respect to U.S.
securities) are registered with the SEC and are members of FINRA.
Best Execution NBSL will select brokers on the basis of their ability to provide best execution, including the security
selection, trade price, and prompt, reliable execution.
NBSL will process all trades on a “best execution” basis to the extent permitted by law. The majority of
our trades are placed through NFS. NBSL reviews NFS’s policies and best execution through our due
diligence process. From time to time, NBSL may process trades away from NFS and will utilize BMO NBI
if they believe it is in the best interest of their clients. NBSL may also submit trades by allocating the
trades in a manner that is equitable and within fiduciary responsibility for all clients. Block trades are
executed and allocated to the clients based on the average price for the aggregate order.
Research and Other Soft Dollar Benefits NBSL does not receive research or other benefits through a soft dollar arrangement.
Order Aggregation NBSL manages its client accounts independently, taking into consideration each client's investment
objectives and guidelines. Transactions for each client account may be completed independently and not
aggregated. NBSL may, however, purchase or sell the same securities or instruments for a number of
client accounts at the same time (i.e., aggregate trades). When possible, clients' orders for the same
security may be combined or "batched" to facilitate best execution. To the extent the Investment
Adviser effects batched transactions for client accounts, it will do so in a manner designed to ensure that
no participating client is favored over any other client. Specifically, each client that participates in a
batched transaction will participate at the average share price for all of the transactions in that batched
order. Securities purchased or sold in a batched transaction will be allocated pro‐rata, when possible, to
the participating clients' accounts in proportion to the size of the order placed for each account. NBSL
may, however, increase or decrease the amount allocated to each account if necessary to avoid holding
odd‐lot or small numbers of shares for particular clients. Additionally, if the Investment Adviser is unable
to fully execute a batched transaction and the Investment Adviser determines that it would be
impractical to allocate a small number of securities among the accounts participating in the transaction
on a pro‐rata basis, the Investment Adviser may allocate such securities in a manner determined in good
faith to be a fair allocation.
NBSL may decide to exclude an account(s) from a batched order if the inclusion of the account(s) would
be detrimental to the client(s) (e.g., adverse tax consequences, etc.). NBSL may also determine that it is
not feasible to combine or batch transactions into a single order, and may effect transactions on an
account by account basis. This will generally occur when the Investment Adviser is purchasing and selling
securities in response to client cash flows. Since cash flow transactions are generally not predictable, the
Investment Adviser may purchase or sell the same security several times during the course of the day,
which may result in the Investment Advisers’ clients not receiving the same or an average share price for
trades placed in the same security on the same business day.
Brokerage for Client Referrals
NBSL does not consider receipt of client referrals from a broker‐dealer or third party in its selection of
broker‐dealers.
Directed Brokerage
NBSL does not permit a client to direct the Investment Adviser to execute transactions through a
specified broker‐dealer.
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At least annually, each Investment Adviser attempts to meet with their clients to perform account
reviews to ensure the accounts remain in line with the clients’ financial plans and to make any applicable
updates or changes. Changes in a client's personal or financial situation may require adjustments to their
financial plan. Clients may schedule an appointment with their Investment Adviser at any time to discuss
account performance and changes to their financial plan. Material market events or changes in the
client’s personal situation may cause more frequent reviews.
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NBSL does not receive economic benefits from non‐clients for providing investment advice and other
advisory services. NBSL does not compensate for client referrals.
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NBSL does not have custody of client securities, but is deemed to have custody of client funds because
clients authorize NBSL to deduct management fees directly from client accounts. All client assets are
held at NFS, an unaffiliated qualified custodian.
Each client will receive account statements directly from NFS every calendar quarter (March, June,
September, and December), at a minimum, and for any month in which there is activity in their account.
Clients should carefully review all account statements to ensure accuracy.
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Clients grant their Investment Adviser discretionary authority when they sign a managed account
agreement. NBSL exercises discretionary authority in the management of client assets and can place
trades in a client's account without contacting the client prior to each trade to obtain the client's
permission. NBSL's discretionary authority includes the ability to do the following without contacting the
client:
determine the security to buy or sell
determine the amount of the security to buy or sell
determine when to buy or sell a particular security
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Clients delegate proxy voting of the securities held in their advisory accounts to their Investment
Adviser. NBSL’s proxy voting policies and procedures require Investment Advisers to vote proxies in the
best interest of its clients. Clients may obtain information about how their securities were voted or
request a copy of NBSL’s proxy voting policies and procedures free of charge by written request to
[email protected] or (855) 328‐1136.
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NBSL is not required to include a balance sheet for its most recent financial year, is not aware of any
financial condition reasonably likely to impair its ability to meet contractual commitments to Clients, and
has not been the subject of a bankruptcy petition at any time during the past ten years.
Under no circumstances does NBSL require or solicit payment of fees in excess of $1,200 per client more
than six months in advance of services rendered.
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