Brokerage Practices

Paragon does not maintain custody of clients’ assets; although we may be deemed to have custody of a client’s assets if our client gives us the authority to withdraw assets from their account. Our clients’ assets must be maintained in an account at a “qualified custodian,” generally a broker-dealer or bank. We recommend that our clients’ use Charles Schwab & Co., Inc. (Schwab), a registered broker-dealer, member SPIC, as the qualified custodian. We are independently owned and operated and are not affiliated with Schwab. Schwab will hold our clients’ assets in a brokerage account and buy and sell securities when we or our client instructs them to do so. While we recommend that clients use Schwab as a custodian/broker, our client will decide whether to do so. Our client will open the account at Schwab by entering into an account agreement directly with Schwab. We do not open the account for our client, but we may assist the client in doing so. Even though our clients’ accounts are maintained at Schwab, we can still use other brokers to execute trades for our clients’ accounts.

For client accounts that Schwab maintains, Schwab generally does not charge our clients separately for custody services but is compensated by charging our clients commissions or other fees on trades that it executes or that settle in the clients’ Schwab account. In addition to commissions and other fees, Schwab charges our client a flat dollar amount as a “prime broker” or “trade away” fee for each trade that we have executed by a different broker-dealer but where the securities are deposited (settled) into the clients’ Schwab account. These fees are in addition to the commissions or other compensation our clients pay the executing broker-dealer. Because of this, in order to minimize your trading costs, we have Schwab execute most trades in our clients’ accounts. We have determined that having Schwab execute most trades is consistent with our duty to seek “best execution” of our clients’ trades.  Best execution means the most favorable terms for a transaction based on all relevant factors, including those listed above.

For more information concerning brokerage practices, please refer to our ADV Part 2A, Section 12.

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