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Margin Disclosure Statement

NAFA Capital Markets, LLC ("NAFA") is furnishing this document to you pursuant to NASD Notice to Members 01-31 and NASD Rule 2341 to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review the margin agreement provided by us, and our clearing firm, Penson Financial Services, Inc., ("PFSI"), the margin lender. Consult your account executive regarding any questions or concerns you may have with your margin accounts.

When you purchase certain securities, you may pay for the securities in full or you may borrow part of the purchase price from PFSI. If you choose to borrow funds from PFSI, you will establish a margin account with NAFA and PFSI. The securities purchased are PFSI’s collateral for the loan to you. If the securities in your margin account decline in value, so does the value of the collateral supporting your loan, and, as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with PFSI, in order to maintain the required equity in your account.

It is important that you fully understand the risks involved in trading securities on margin. These risks include the following:

• You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to NAFA and PFSI to avoid the forced sale of those securities or other securities or assets in your account(s).

• NAFA and/or PFSI can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements, or PFSI’s higher "house" requirements, PFSI can sell the securities or other assets in any of your accounts held at PFSI to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale.

• NAFA and/or PFSI can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms, including PFSI, will attempt to notify our customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities or other assets without notice to you.

• You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. Because all of the securities in a margin account are collateral for the margin loan, NAFA and/or PFSI have the right to decide which security to sell in order to protect its interests.

• NAFA and/or PFSI can increase its "house" maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. YOUR FAILURE TO SATISFY THE CALL MAY CAUSE US AND/OR PFSI TO LIQUIDATE OR SELL SECURITIES IN YOUR ACCOUNT(S).

• You are not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension.

Please be certain that when you open a margin account and purchase securities on margin, that you fully understand and can bear the financial risks associated with the purchase of securities on margin that may decline in value. If taking such risks is not consistent with your investment objectives, please notify your account executive that you do not desire to maintain a margin account.