Form CRSSTONEHAVEN LLC CUSTOMER RELATIONSHIP SUMMARY 06-30-2020
Item 1. Introduction
Stonehaven, LLC is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. We are not a registered investment adviser. Brokerage and investment advisory services and fees differ, and it is important for you to understand these differences and how they may be applicable to you. Free and simple tools are available to research firms and financial professionals at Investor.gov/CRS, which also provides educational materials about broker-dealers, investment advisers, and investing. Additionally, free and simple tools are available to research broker-dealers and registered representatives at Brokercheck.FINRA.org.
Item 2. Relationships and Services
What investment services and advice can you provide me? Conversation starters: Given my financial situation, should I choose a brokerage service? Why or why not? How will you choose investments recommended to me? What is your relevant experience, including your licenses, education, and other qualifications? What do these qualifications mean? We engage as a registered broker-dealer in the private placement of securities on behalf of issuers. We introduce our private issuer clients to investors who are qualified to buy their respective offering, such as accredited investors. We also represent companies in corporate acquisitions, restructurings, asset sales, reorganizations and other transactions involving private placements of securities. We provide non-broker-dealer advisory services, on a select basis, in connection with these transactions. We do not facilitate transactions in any publicly listed securities. We neither carry customer accounts nor maintain any clearing arrangement with any clearing firm. We introduce our private issuer clients to qualified investors who independently consider each investment opportunity. Our clients are the private issuers that we represent. Any transactions that happen because of our introduction to you will be defined through a direct engagement between you and our private issuer client. The private issuers that we represent have sole discretion as to whether they accept capital from you. We will not monitor your account. The illustration below explains how we typically engage private issuer clients:
SELECTION & ENGAGEMENT
Sourcing & Screening Evaluation Due Diligence Contract Negotiations
Strategic Advisory Positioning & Approach Material Preparation Operational Integration Sales Training
Calls, Meetings & Roadshows Prospect Coordination Sales Progression Transaction Close-out
Pipeline Optimization Roadshow Coordination Dynamic Adjustment to Marketplace
It’s important to understand that Stonehaven’s registered representatives are independently branded capital raising agents. We refer to these agents as Affiliate Partners. Affiliate Partners hold securities licenses (such as the Series 7 and Series 63) that enable the Affiliate Partner to engage in regulated activities like selling private placement securities. On average, our Affiliate Partners have several years of experience within the financial industry, have undergraduate and in some cases post-graduate degrees, and hold industry designations such as the Chartered Financial Analyst (CFA), and Chartered Alternative Investment Analyst (CAIA). These qualifications merely demonstrate that the holder of the license and or designation met the testing standards set forth by the sponsor of the license and or the sponsor of the designation. These qualifications do not mean that any individual holder is an expert in any of the content.
Item 3. Fees, Costs, Conflicts, and Standards of Conduct
What fees will I pay? You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what commissions and expenses you will be paying. We typically get paid if you purchase a private offering that we have introduced you to on behalf of our private issuer client. We typically get paid a commission which equates to a minority percentage of the fees that the private issuer charges you. This arrangement creates a conflict of interest that you should be aware of. Only when you invest in an offering that we bring to you, do we get paid a commission. How do you financial professionals make money? Stonehaven will take a minority percentage of the commission generated by our Affiliate Partners. This arrangement creates a conflict of interest that you should be aware of. Affiliate Partners consider their fees when selecting private issuers to represent. Only when you invest in an offering, will the Affiliate Partner get paid a commission. In some cases, our Affiliate Partners will collaborate with each other and share commissions. You should understand that we will only introduce you to the private issuers who have engaged us as clients. You can find other private issuers elsewhere who might be better suited to your investment needs or goals. Conversation Starter: Help me understand how these fees and costs might affect my investments. If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me? We do not carry customer accounts, and thus we cannot accept your capital to invest. It is important to understand that most private issuers manage investment vehicles that charge fees to the investors who have invested in these vehicles – these fees are referred to as entity-level fees. Stonehaven and its Affiliate Partners typically get paid a commission which can take several forms. First, if an issuer is a private “open-ended” fund, then you will normally pay management and performance fees to the fund over the course of your investment, and typically the fund will pay us a small percentage of the entity-level fees charged to you. Second, if an issuer is a “closed-end” fund, then you will normally pay fees to the fund over the course of the investment timeline for the fund, and typically the fund will pay us a small percentage of the entity-level fees charged to you. Third, if an issuer is a private company, then we are paid a commission relating to a direct transaction. Sometimes the buyer pays this type of commission, and sometimes the seller pays it, and sometimes the buyer and the seller split it. An issuer sometimes pays us in its warrants or equity interests, rather than only in cash. An issuer sometimes pays us a monthly retainer that is an advance, forgivable by the issuer, against future commissions. Each of these arrangements creates conflicts of interest. We invite you to contact us to discuss conflicts and how they specifically apply to your scenario. What are your legal obligations to me when providing recommendations? How else does your firm make money and what conflicts of interest do you have? We are external capital raising agents acting on behalf of our clients, the private issuers. Because of this simple intermediary construct and because we will have no access to your portfolio, you must independently determine if an investment opportunity is suitable in light of your investment goals, risk tolerance, portfolio or similar considerations for sub-advised accounts for which you act as fiduciary. Conversation Starter: How might your conflicts of interest affect me, and how will you address them? We only get paid if you invest in an opportunity that we have brought to you. This arrangement creates a conflict of interest. Moreover, we are paid a transactional commission whether your investment appreciates or depreciates. We have an incentive to present certain investments because the manager or sponsor of those investments shares with us revenue it earns on those investments.
Item 4. Disciplinary History
Do you or financial professionals have legal or disciplinary history? Yes, we have legal and disciplinary events. Visit Investor.gov/CRS for a free and simple search tool to research our firm and our financial professionals. Conversation Starter: As a financial professional, do you have any disciplinary history? For what type of conduct?
Item 5. Additional Information
We encourage you to seek additional information. For additional information about our brokers and services, visit Investor.gov, or FINRA BrokerCheck (BrokerCheck.Finra.org). To report a problem to the SEC, visit Investor.gov or call the SEC’s toll‐free investor assistance line at (800) 732‐0330. To report a problem to FINRA, please call (301) 590-6500. If you would like receive a copy of this relationship summary or if you have any problems with any of our registered representatives or would like to contact us directly, please contact us in writing at [email protected] We do not have a general line to call into. Conversation Starter: Who is the primary contact person? Is he or she a representative of an investment adviser or a broker-dealer? Who can I talk to if I have concerns about how this person is treating me?
Form CRS Additional Disclosure Statement
Stonehaven LLC (“Stonehaven”) is providing this information to enhance transparency and provide clarification by disclosing the scope and terms of the brokerage products and services we offer and detail the material conflicts of interest that arise (may arise) in the course of our delivery of these products and services. Each investor’s circumstance is unique, as is each investor’s solution. A critical step in the process is understanding and evaluating the products and services we provide and the related fee structures. This disclosure statement explains the scope of the products and services we provide, the standard of care we observe with respect to such products and services, how we work with you to select products and services that suit your needs, and our compensation for the products and services we offer. We encourage you to review this information carefully, along with any applicable agreement(s) and disclosure documentation and other information that you may receive from us. We hope you find this disclosure statement to be informative. Kindly note that we may make periodic updates to this disclosure statement and as such, we will always provide access to the most current version. You can also view the most current version of the disclosure statement at www.stonehaven-llc.com, or you can always contact Stonehaven’s registered representatives.
Section 1: Who We Are
Stonehaven LLC (“Stonehaven”) is a registered broker–dealer with the United States Securities and Exchange Commission (“SEC”), a member of the Financial Industry Regulatory Authority (“FINRA”), and the Securities Investor Protection Corp. (“SIPC”). Additionally, Stonehaven is designated as an International Dealer operating under an exemption recognized by the Alberta Securities Commission, the British Columbia Securities Commission, the Manitoba Securities Commission, the Nova Scotia Securities Commission, the Ontario Securities Commission, Authorité Des Marchés Financier (Quebec), and the Financial and Consumer Affairs Authority of Saskatchewan. Stonehaven is also an Introducing Broker Member of the National Futures Association (“NFA”) to facilitate third-party marketing of funds that may contain commodity futures or options on commodity futures. Stonehaven is a global capital raising FinTech platform supporting a diverse community of Affiliate Partners, independent placement agents and investment bankers, in strategically connecting select investment opportunities with an extensive network of investor relationships. Stonehaven actively raises capital for pooled investment vehicles (such as hedge funds and private equity funds), direct deals (such as corporates). Stonehaven also facilitates other types of private market transactions (such as mergers & acquisitions, and pre-IPO secondaries). Stonehaven does not carry any customer accounts or hold any customer funds or securities. You will need to open accounts with other financial institutions to make investments (transact) in products introduced by us. Who We Serve Stonehaven represents private issuers and other participants engaging with investors (such as buyers and sellers) to facilitate private market transactions. How We Serve You We aim to present fair and balanced information, while disclosing any conflicts of interest, regarding any investment opportunities which we are representing in the marketplace. We have built our business by consistently striving to be a well-informed market participant to help us in presenting comprehensive information regarding the private investment opportunities that we represent to our investor relationships. As a US broker-dealer, Stonehaven is subject to a number of laws, rules, and regulations, including the Securities Act of 1933 (the “Securities Act”), Securities Exchange Act of 1934 (the “Exchange Act”), the rules of the SEC, FINRA, the NFA and state securities laws. We also have limited member rights in certain Canadian provinces. Stonehaven’s duties to you include, among others, the following Disclosure Obligations should we make a recommendation: Make full and fair disclosure to you, prior to or at the time of a recommendation, of all material facts relating to:
- The scope and terms of our relationship, specifically in acting in our capacity as a broker-dealer in introducing you to private offerings of the issuers that we represent.
- The costs that apply to any transaction that you may be evaluating based on our introduction.
- If a recommendation, any limitations included by your registered representative(s).
- If a recommendation, any conflicts of interest associated with the transaction, such as those related to compensation
When Stonehaven acts as a broker-dealer, Stonehaven also has Care Obligations requiring us to exercise reasonable care and skill to:
- Understand the potential risks, rewards, and costs associated with a recommendation, and have a reasonable basis to believe that when a recommendation is made, it is in the best interest of our investor relationships generally, even if it may not necessarily be appropriate for you in
- Have a reasonable basis to believe that when a recommendation is made, it is suitable for you based on your investment profile and that the potential risks, rewards and costs associated with the transaction are clear and presented in a fair and balanced manner. Your investment profile includes many data points including but not limited to your risk tolerance, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, and any other information that you may disclose to the registered representative in connection with the transaction. In other words, the more information about your investment profile that you disclose to the registered representative in the connection with the proposed transaction, the more you assist the registered representative in servicing you with a higher degree of precision.
- Have a reasonable basis to believe that, when a series of recommended transactions are made, even if in your best interest when viewed in isolation, are not excessive, are in your best interest when taken together in light of your investment profile, and do not place Stonehaven’s interest ahead of yours.
When Stonehaven acts as a broker-dealer we have the following Conflict of Interest Obligation, requiring Stonehaven to establish, maintain, and enforce written policies and procedures designed to: Identify, disclose, and when possible minimize conflicts of interest associated with recommendations. Identify and disclose any material limitations that apply to the product or service being recommended, such as what investments your registered representative is licensed to recommend, and prevent those limitations from causing the registered representative to suggest an investment that places their interest or Stonehaven’s ahead of yours. Identify and eliminate any sales contests or quotas that create a conflict and put Stonehaven’s interests ahead of yours.
Section 2: Investment Services Different Types of Investment Services
Stonehaven offers limited investment products and services. It acts as a broker-dealer and not an investment adviser. There are important differences between the two; including the types of services provided, the costs, and how they are regulated. Stonehaven does not carry any customer accounts or hold any customer funds or securities. Once you have competed a transaction and Stonehaven earns its commission, our involvement generally ends. We do not, and will not provide any on-going or periodic review, follow-up, or monitoring of an account, or make any recommendation to you on whether to hold, add to, or dispose of your investments. We encourage you to speak with your registered representative if you have any questions. Private Offering Referrals Stonehaven conducts due diligence on the private investment opportunities we represent, but investors should always conduct their own independent due diligence on any investment opportunity they may be considering. It is important to note here that the private issuers that Stonehaven represents will independently vet you prior to accepting any investment dollars. Stonehaven enters into fee arrangements with a select group of private issuers for successful referrals. A portion of fee proceeds collected by private issuers from investors we refer are paid by the private issuers directly to Stonehaven. Because of this, we may be influenced to guide investors to private issuers with which we have fee arrangements that have higher fee structures over others, which is an apparent conflict of interest. Transaction-Based Fees The components of how we compensate our registered representatives is discussed in more detail below in Section 4 below.
Section 3: Investment Opportunities Available
Description We raise money for asset management firms which include Real Estate, Private Equity, Private Credit, Venture Capital, Infrastructure, Hedge Funds, Long-Only Strategies, Direct Private Placements, and other assets. We also facilitate mergers and acquisitions, as well as secondary transactions for funds and private companies. Risks and other relevant information: There is a broad spectrum of risk regarding private investment opportunities which must be evaluated very carefully by investors and their respective tax, legal, and investment advisors. Investors should note that private investment opportunities are not subject to the same regulatory requirements as publicly traded investments which, in general, provide investors with certain periodic and standardized pricing and valuation information. Investors should note that private investment opportunities are speculative and involve a high degree of risk which could result in a total or substantial loss of the original investment amount. Interests in private investment opportunities may be illiquid and significant restrictions may apply to transfer. Private investment opportunities may be leveraged and performance may be subject to significant volatility. In general, private investment opportunities may contain significant fees and expenses which will decrease the net return to the investor. Investors should note that private investment opportunities may involve complex tax structures and or strategies that that may cause delays in important and time sensitive tax information being sent to investors. The risk items listed in this section are not a complete list of the risks and other important disclosures which may be associated with private investment opportunities, and investors should carefully review a more complete discussion of risks relating to the private investment opportunities which should be contained in the relevant offering and or transactional documentation for each private investment opportunity that you may be evaluating. We can assist you in finding this information.
Section 4: Compensation and Potential Conflicts
Stonehaven and its registered representatives earn compensation in various ways of which you should be aware so you can better evaluate the services received from your registered representative and Stonehaven. We earn revenue from the private issuers that we represent in the form of transaction-based commission and rebates based on transactions closed with our introduced investors. Registered representative Compensation Our selling registered representatives are independent contractors who are paid purely as a percentage of the gross commissions they produce, while taking into consideration a variety of different factors including annual production per selling representative, collaboration with other selling representatives, jurisdictions, types of activities, origination of the opportunity, as well as other registered broker-dealers involved in the transaction. Stonehaven’s system plays a significant role in our ability to attract, retain and motivate the highest quality registered representatives. Compensation creates incentives for registered representatives to, among other things, offer certain product and services, and generate business. Stonehaven policies and procedures exist to mitigate conflicts of interest, where possible. See below for a description of the components of our compensation plan, detailing ways in which different conflicts of interests manifest themselves. Compensation A Stonehaven registered representative is compensated when an introduced investor allocates capital to a private issuer that the registered representative represents. The compensation paid in connection with the products and services chosen by investors varies based on certain factors. Total compensation includes commissions on the products we offer. The commission paid to your registered representative varies and is subject to change but generally increases as total revenue attributable to your registered representative increases. Registered representatives may receive certain equity-linked compensation under limited circumstances. Stonehaven has implemented policies and procedures intended to ensure that its registered representatives avoid actual or perceived conflicts of interest when giving or receiving equity linked compensation from relevant parties, and comply with all applicable federal and state laws, rules and regulations. To that end, Stonehaven generally prohibits the acceptance of gifts or other non–monetary compensation in connection with the services we provide, or in return for any business of the firm. Exceptions may be made for certain nominal non–cash gifts to employees below relevant thresholds and meeting certain criteria if applicable. Meals, refreshments, and entertainment, in the course of a host–attended business–related meeting or other occasion, may also be permitted in limited circumstances. Stonehaven’s policies set conditions for each of these types of payments, and do not permit any gifts or entertainment unless it is clear that the gift–giving person is not trying to influence or reward the employee inappropriately in connection with any business decision or transaction and the gift is unsolicited. Stonehaven LLC’s Conflicts of Interest and Other Disclosures A conflict of interest can be defined as an interest that might incline a broker–dealer or its registered representative to consciously or unconsciously make a recommendation that is not disinterested. Stonehaven has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate conflicts of interest that may arise between Stonehaven, its registered representatives, and Stonehaven affiliates and their respective customers.
Section 5: Protection of Client Information
Firm policy mandates that transactional information, be safeguarded from misuse, misappropriation, and improper dissemination. Stonehaven maintains policies and procedures designed to protect sensitive transactional information in accordance with applicable laws, rules and regulations and this Firm’s mandate, including training our employees and Registered representatives, minimizing potential breaches of confidentiality, and applying effective technology controls. More specifically, transactional information is made available only to persons who have a need to know such information in connection with the duties they carry out or the services they perform. Additionally, we regularly train our employees and registered representatives on, and hold them accountable for, the appropriate handling of transactional information. Systems holding transactional information are secured against, and continually monitored for, potential external threats, and actual or suspected incidents are promptly escalated and remediated. Finally, the use of transactional information by affiliates and service providers is carried out in strict accordance with federal, state, and other financial privacy laws. At Stonehaven, we appreciate your giving us the opportunity to work with you and thank you for your kind time and consideration. For additional information on any Stonehaven service, please visit our website: www.stonehaven-llc.com.