THE RR RECEIVED VERBAL COMPLAINTS FROM TWO CLIENTS REGARDING A MORGAN GUARANTY ISSUED, JPMSI SOLD (ON AN AGENCY BASIS) DERIVATIVE TRANSACTION CALLED THE REBOUND STRATEGY. THIS STRATEGY CONTAINED A LONG EQUITY LEG PLUS AN OTC CONTRACT THAT CONSISTING OF A LONG OTC EQUITY OPTION LEG AND TWO OTC SHORT EQUITY OPTION LEGS. IT WAS TARGETED AT CLIENTS WITH EXISTING LONG EQUITY POSITIONS THAT THEY INTENDED TO HOLD LONG TERM AND WHICH HAD BEEN HURT BY A LARGE REDUCTION IN VALUE DUE TO THE MARKET DOWNTURN. THE STRATEGY ATTEMPTED TO INCREASE THE UPSIDE WITHIN A CAPPED RANGE WHEN AND IF THE STOCK VALUE INCREASED OR REBOUNDED. ONE MONTH INTO THE LIFE OF THE ONE YEAR STRATEGY, THE CLIENTS ATTEMPTED TO UNWIND THE TRANSACTIONS, AT WHICH TIME THEY WERE INFORMED THAT THEY COULD ONLY DO SO AT A LOSS OR THAT THEY WOULD HAVE TO SELL THE SHARES AS PART OF THE STRATEGY TO COVER THE LOSS. THE CLIENTS, WHO WERE ACQUITANCES OF EACH OTHER, COMPLAINED AND ALLEGED THAT THEY DID NOT UNDERSTAND THE TRANSACTION AND THAT THEY NEVER INTENDED TO SELL THE SHARES. DESPITE THE FACT THAT THE CLIENTS APPEARED TO BE SUITABLE AND APPROPRIATE, EACH HAD PREVIOUS DERIVATIVES EXPERIENCE; THAT A TERM SHEET HAD BEEN PREPARED FOR THE TRANSACTIONS AND THAT THE RR HAD INCLUDED THE DERIVATIVES PRODUCT SPECIALIST ON SEVERAL CONFERENCE CALLS THE FIRM DECIDED TO SETTLE WITH THE CLIENTS TO AVOID THE COST OF LITIGATION. THE FIRM ALLOWED THEM TO UNWIND THE TRADES AND RETURNED THEM TO THEIR STARTING POINT AS IF THE TRANSACTION HAD NOT OCCURRED. THE CLIENT'S NAMES AND ACCOUNT NUMBERS ARE AS FOLLOWS: CUSTOMER - ACCOUNT # INITIAL AMOUNT OF THE NOTIONAL $1,781,000 TRUST - ACCOUNT # INITIAL AMOUNT OF THE NOTIONAL $1,865,000

$2,300,000.00

$2,300,000.00

THE RR RECEIVED VERBAL COMPLAINTS FROM TWO CLIENTS REGARDING A MORGAN GUARANTY ISSUED, JPMSI SOLD (ON AN AGENCY BASIS) DERIVATIVE TRANSACTION CALLED THE REBOUND STRATEGY. THIS STRATEGY CONTAINED A LONG EQUITY LEG PLUS AN OTC CONTRACT THAT CONSISTING OF A LONG OTC EQUITY OPTION LEG AND TWO OTC SHORT EQUITY OPTION LEGS. IT WAS TARGETED AT CLIENTS WITH EXISTING LONG EQUITY POSITIONS THAT THEY INTENDED TO HOLD LONG TERM AND WHICH HAD BEEN HURT BY A LARGE REDUCTION IN VALUE DUE TO THE MARKET DOWNTURN. THE STRATEGY ATTEMPTED TO INCREASE THE UPSIDE WITHIN A CAPPED RANGE WHEN AND IF THE STOCK VALUE INCREASED OR REBOUNDED. ONE MONTH INTO THE LIFE OF THE ONE YEAR STRATEGY, THE CLIENTS ATTEMPTED TO UNWIND THE TRANSACTIONS, AT WHICH TIME THEY WERE INFORMED THAT THEY COULD ONLY DO SO AT A LOSS OR THAT THEY WOULD HAVE TO SELL THE SHARES AS PART OF THE STRATEGY TO COVER THE LOSS. THE CLIENTS, WHO WERE ACQUITANCES OF EACH OTHER, COMPLAINED AND ALLEGED THAT THEY DID NOT UNDERSTAND THE TRANSACTION AND THAT THEY NEVER INTENDED TO SELL THE SHARES. DESPITE THE FACT THAT THE CLIENTS APPEARED TO BE SUITABLE AND APPROPRIATE, EACH HAD PREVIOUS DERIVATIVES EXPERIENCE; THAT A TERM SHEET HAD BEEN PREPARED FOR THE TRANSACTIONS AND THAT THE RR HAD INCLUDED THE DERIVATIVES PRODUCT SPECIALIST ON SEVERAL CONFERENCE CALLS THE FIRM DECIDED TO SETTLE WITH THE CLIENTS TO AVOID THE COST OF LITIGATION. THE FIRM ALLOWED THEM TO UNWIND THE TRADES AND RETURNED THEM TO THEIR STARTING POINT AS IF THE TRANSACTION HAD NOT OCCURRED. THE CLIENT'S NAMES AND ACCOUNT NUMBERS ARE AS FOLLOWS: THIRD PARTY - ACCOUNT # INITIAL AMOUNT OF THE NOTIONAL $1,781,000 CUSTOMER - ACCOUNT # INITIAL AMOUNT OF THE NOTIONAL $1,865,000

$2,300,000.00

$2,300,000.00