Futures in Self-Directed IRA Additional Risk Disclosure
For purposes of this Additional Risk Disclosure ("Disclosure"), the words "you" and "your" mean the owner of the Individual Retirement Account ("IRA") held at and by Morgan Stanley Smith Barney LLC. The words "we," "us," "our," and the “Company” mean Morgan Stanley Smith Barney LLC (“MSSB”) ("Custodian"), as Custodian of the IRA held at the Company and, by extension E*TRADE Futures, LLC ("ETF"), as Sub-Custodian.
This Disclosure cannot, of course, disclose all of the risks and other significant aspects of trading futures contracts electronically in your IRA. Trading futures is not appropriate or suitable for every investor. You must determine whether trading futures contracts in your IRA is advisable based on your financial circumstances, your tolerance for risk, the number of years until your retirement, and other factors. You should consult a professional advisor to determine if futures trading, even on a limited basis, in your IRA is consistent with your financial goals. You should also review the Commodities Futures Trading Commission ("CFTC") risk disclosure document contained in your futures account opening forms.
In light of the risks associated with trading futures, you should initiate such transactions only if you understand the nature of the trades you are entering into and the extent of risk exposure the trades represent vis-à-vis your own risk tolerance. Finally, you should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources, and other relevant circumstances.
You understand that the trading of futures contracts is speculative in nature and subject to risks that may be greater than those of other investment vehicles in which retirement funds may be invested. You acknowledge that you have evaluated such risks and warrant that trading futures contracts in your IRA is appropriate and suitable in light of your personal financial situation.
You understand and acknowledge that your IRA must have a minimum net liquidating value of $25,000. In addition, you must have a minimum of three-years derivatives trading experience to trade futures in your IRA. All futures contracts will be held at not less than 150% of the exchange minimum margin requirement and we reserve the right to raise such margin requirements in our sole and absolute discretion. You understand that the Company, ETF, their clearing firms and agents reserve the right to raise margin requirements and/or liquidate all or a portion of the position in your account in the event that you cannot or are not able to timely deposit sufficient funds to satisfy the requirements of the account.
You understand that by using an electronic trading system(s) that you are exposed to risks associated with these systems including the failure of hardware and software. The result of any system failure could be that your order is either not executed or not executed according to your instruction. Overall market conditions (illiquidity) and/or the operation of certain market rules, for instance, suspension of trading in any contract month because of price limits (limit up or limit down) may increase the risk of loss since it may be difficult or impossible to effect transaction or liquidate/offset positions.
The Internal Revenue Code places restrictions/limits on the amount of funds that can be deposited to an IRA. Deposits to the account in excess of such limits may cause adverse tax consequences, including, but not limited to, the risk of penalties imposed by the IRA.
You understand and agree that neither the Company nor ETF provides any tax advice or investment advice regarding futures transactions and neither the Company nor ETF assume any liability in connection with such.