Relationship Disclosure Information
Relationship Disclosure Information
November 11, 2024
1. PURPOSE
This document sets out important information concerning our relationship with you. It contains information about us, the services that we offer and your account(s) with us. Other important information you need to know about your relationship with us is contained in other documents and materials that are provided or made available to you as a client in connection with your use of the Platform (as defined below), such as our Terms of Service (found https://support.hibit.ca/en/archives/43）or other documentation that you complete and receive in connection with the crypto assets that you purchase or sell through the Platform, and the periodic reporting and updates about changes to information that will be provided to you from time to time.
This document will be provided to you at the time you open your account(s) with us. If there is a significant change to the information contained in this document, we will provide you with updated information in a timely manner and, if possible, before you next purchase or sell crypto assets through the Platform.
2. HIBIT TECHNOLOGY LTD.
Hibit Technology Ltd. (Hibit, we, us or our) is a private company with a head office in Richmond, British Columbia. We operate an online web-based crypto asset trading platform found at {hyperlink} (the Platform).
Hibit enables clients to enter into agreements with us (such agreements, Crypto Contracts) to buy and sell crypto assets (consisting of such crypto assets approved by us for distribution on the Platform (https://support.hibit.ca/en/archives/135 crypto assets) through the Platform, and permits clients to perform transactions on a fiat-to-crypto asset basis. Clients can fund their account(s) with fiat currencies (CAD), by way of e-transfer or electronic fund transfer (EFT), or supported crypto assets, and can use those funds to purchase the crypto assets made available through the Platform.
Hibit carries on the business of trading Crypto Contracts or other instruments for the future delivery of crypto assets. These contracts or instruments do not result in an obligation to make and take immediate delivery of the crypto assets and therefore, may be considered to be securities and/or derivatives under Canadian securities laws.
Our role under the Crypto Contracts is to buy or sell crypto assets, and to manage the custody of all purchased crypto assets with third parties. Crypto assets purchased through Hibit are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme. For information regarding the risks associated with investments in crypto assets and the purchase or sale of Crypto Contracts through the Platform, see the section below called “8. Risk of Transacting on our Platform”.
We have obtained registration in the category of restricted dealer under applicable securities legislation in all provinces and territories of Canada and an exemption from certain requirements under applicable securities legislation. Our registration is subject to certain terms and conditions related to our novel business model which are found {https://support.hibit.ca/en/archives/43} and the exemptive relief is found {https://www.bcsc.bc.ca/securities-law/law-and-policy/exemption-orders—-2002-to-present/s7sbs6sas7s1s7s7s6s3s7sds7s0} This registration and exemptive relief has been obtained on an interim, time limited basis to allow us to transition to the final regulatory framework established by applicable securities regulators for firms trading in Crypto Contracts.
3. YOUR ACCOUNT(S) WITH US
Our Relationship with You
We offer trading services to clients who purchase or sell crypto assets through the Platform. When you open an account with us to purchase or sell crypto assets, you will enter into a Crypto Contract with us that provides you with the right to buy, hold and sell crypto assets through the Platform.
Clients that purchase crypto assets through the Platform make their own investment decisions. Before opening an account for you, we will make a general assessment of whether a transaction in Crypto Contracts to purchase and sell crypto assets through the Platform is appropriate for you. As a part of this account appropriateness assessment we will, before allowing a client to transact on the Platform, collect information relating to the client’s financial resources, knowledge and experience relating to Crypto Contracts and crypto assets, objectives in transacting on the Platform and tolerance for risk, and where applicable, we will impose certain restrictions on the acquisition of crypto assets based on the client’s information.
Custody of Assets
Except as described below, it is our policy not to maintain custody of (or otherwise hold) crypto assets or cash of our clients, and instead utilize independent third-party custodians who operate customer wallets and safeguard private keys. Hibit may be considered by applicable securities regulators to hold assets of our clients in certain circumstances. The custody of client assets is dealt with in the manner described below.
Hibit maintains no less than 80% of the total value of all crypto assets held on behalf of clients in cold wallets with a custodian that meets the definition of “qualified custodian” for the purpose of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and that has completed a Systems and Organization Controls (SOC) 2 Type 2 examination. Additionally, up to 20% of the total value of crypto assets held on behalf of clients may be temporarily held in hot wallets for immediate trading and/or withdrawal. Hibit expects that the custodian will maintain insurance coverage for crypto assets, including the crypto assets owned by our clients, that are held in the custodian’s cold and hot storage system.
Custody of crypto assets
We have appointed Tetra Trust Company(the Custodian) to act as a third party custodian of the crypto assets that we purchase in relation to the Crypto Contracts we enter with clients.
The Custodian holds up to 80% of the total value of all crypto assets, in trust, for the benefit of clients in cold storage in a segregated omnibus account in the name of Hibit. The crypto assets in this account are held in this manner to ensure that they are separate and distinct from the assets of Hibit, Hibit’s affiliates or the crypto assets of any of the Custodian’s other clients. With cold storage, crypto assets are stored on a platform that is not connected to the internet. This protects the wallet and the crypto assets from hacks, unauthorized access and other vulnerabilities. Private keys associated with those crypto assets are generated in offline systems, and they are kept offline by the Custodian. The signing process of the transactions involving cold storage is also made in offline systems under the instruction given by authorized person from Hibit.
Additionally, Hibit holds up to 20% of the total value of crypto assets held on behalf of clients in an online multi-party computation (MPC) wallet services system (i.e., hot wallets) secured by Fireblocks Inc. (Fireblocks). Hot wallets are connected to the internet and used for lower amount of day-to-day transaction. A hot wallet is required for trading and liquidity purposes and provides ability to withdraw your Crypto Assets without delay. Additionally, Hibit has licensed software from Digital Assets Services Limited (trading as Coincover) to provide additional security for keys to Crypto Assets held by the Hibit using Fireblocks.
We have authority access to the crypto assets held by the Custodian in cold storage for the purposes of settling transactions for our clients.
The Custodian is a licensed Alberta trust company regulated by the Alberta Treasury Board and Finance, and is a “qualified custodian” for purposes of National Instrument 31-103. The Custodian has completed a SOC 2 Type 2 examination, and the Custodian’s security technology provider has completed a SOC 3 examination. Additionally, Fireblocks has obtained a SOC report under the SOC 2 Type 2 examination. Hibit has reviewed a copy of the SOC 2 Type 2 audit report prepared by the auditors of each of the Custodian and Fireblocks, and has not identified any material concerns.
Custody of cash
When you purchase crypto assets through the Platform, the purchase funds must be sent by way of e-transfer, electronic fund transfer (EFT) or other approved method, and the cash received will be held in a designated trust account with the Custodian, in the name of Hibit in trust for the benefit of clients. The cash received will be held separately from our assets with the Custodian. We have authority over and access to the cash held in this account for the purposes of settling transactions for our clients and collecting transaction fees payable to us.
Access to Client Assets
Although client assets are generally held by other parties and not by us, Hibit will have access to client assets in the following circumstances:
- When you purchase crypto assets through the Platform, cash received will be held in a designated trust account with the Custodian, in our name on behalf of clients. We have authority over and access to the cash held in this account for the purposes of settling transactions for our clients and collecting transaction fees payable to us.
- The Custodian also serves as a third party custodian of at least 80% of the total value of the crypto assets that we purchase in relation to the Crypto Contracts we enter with clients. We have authority access to the crypto assets held by the Custodian for the purposes of settling transactions for our clients.
In these circumstances, the client has provided access to their assets to facilitate certain transactions. Providing Hibit access to client assets, exposes the client assets to risk of loss in the case of fraud, wilful or reckless misconduct, negligence or error of Hibit or its personnel or third parties. We may be required or elect to insure against the additional risk of loss which arises due to our access to client assets but there is no guarantee that any such insurance will be adequate to protect against any such loss.
Client Reporting
Transaction confirmations, account statements and other information
Clients will receive electronic transaction confirmations and monthly statements setting out the details of the transaction history in their account with us.
Clients will have access through the Platform to detailed information relating to the transactions conducted through the Platform and their accounts with us, including a list of all positions in crypto assets (including the value of the crypto assets), details of all transactions conducted, the amount of all currency deposited into their accounts, the value of all crypto asset deposits to their account as at the time of deposit, and fees paid per transaction.
Clients will, on a monthly basis, receive an electronic communication that indicates that information relating to their accounts is available through the Platform.
Investment performance reports
We will provide investment performance reports to you about your account(s) every 12 months, except that the first performance report(s) that we provide you in respect of your account(s) may be sent within 24 months after we first make a trade for you. Each investment performance report that we provide to you will contain information about:
(a) the market value of cash and securities in your account at the beginning and end of the period covered by the report;
(b) the changes in the market value of cash and securities in your account over the period covered by the report and since your account was opened, and
(c) the annualized total percentage return for your account over one, three, five and ten years periods and since your account was opened. Total percentage return represents gains and losses of an investment over a specified period of time, including realized and unrealized capital gains and losses plus income, expressed as a percentage.
We will provide a separate investment performance report to you containing this information for each of your accounts with us. However, we can provide a single report to you, consolidating this information for each of your accounts, provided that you give us consent in writing to do this.
If you are a “permitted client” within the meaning of applicable securities laws that is not an individual, we are not required to provide this report but may do so in our discretion.
Reports on Charges and Other Compensation
We will provide you with reports on the charges and other compensation that we receive in respect of your account(s) every 12 months, except that the first report(s) that we provide to you in respect of your account(s) may be for a period of less than 12 months. Each report will provide information about applicable operating charges and transaction charges and certain compensation we may have received from third parties. For example, the report will set out any trailing commissions we received during the period in respect of investments held in your account. We will only send you this report if there are charges or compensation to report.
If there are charges or compensation to report, we will provide you with a separate report for each of your accounts with us. However, we can provide a single report to you, consolidating this information for each of your accounts, provided that you give us consent in writing to do this.
If you are a “permitted client” within the meaning of applicable securities laws that is not an individual, we are not required to provide this report but may do so in our discretion.
Information Required to Comply with “Know-Your-Client” Obligations
When you open your account(s) with us, we are generally required by securities laws to take reasonable steps to: (1) establish your identity, (2) establish whether you are an insider of any reporting issuer or issuer whose securities are publicly traded, and (3) ensure that we have sufficient information regarding your financial assets and income, experience and knowledge in investing in crypto assets and risk tolerance, to enable us to evaluate whether entering into a Crypto Contract with Hibit through the Platform is appropriate for you. In addition, in certain circumstances, we may also be required to make enquiries as to your reputation. These requirements do not apply to clients who are registered firms, Canadian financial institutions or Schedule III banks, or to clients who qualify as “permitted clients” under applicable securities laws and have waived these requirements. Anti-money laundering laws also require us to take reasonable steps to determine whether you are a “politically exposed person” within the meaning of those laws. When required, we will request this information from you at the time you open your account and we will request updated information from you periodically.
Providing a Trusted Contact Person
To properly serve you and to help prevent financial exploitation or address circumstances involving potential diminished mental capacity, Canadian securities laws require us to take reasonable steps to obtain (and keep current) from each client the name and contact information of a trusted contact person, and written consent from each client for us to contact the trusted contact person in certain circumstances. This information is obtained from each client as part of the know-your-client information that you complete and provide us. By providing us with a trusted contact person, you are authorizing us to contact this person and to release confidential information about you or your account(s) to the trusted contact person if, at any time, we believe that financial exploitation of you has occurred, is occurring, has been attempted or will be attempted, or we have concerns about your mental capacity as it relates to your ability to make decisions involving financial matters.
We will rely on the trusted contact person you provide us unless you advise us in writing that you have revoked your consent and provide us with the name and contact information of a new trusted contact person.
If you do not consent to us releasing confidential information about you and your account(s) to your trusted contact person, or if you do not appoint a new trusted contact person (if a revocation of a previous trusted contact person has occurred), we may suspend your account(s) until we have received such consent or details of the new trusted contact person.
What is a trusted contact? – A trusted contact person is an individual who you trust, is mature, has your best interests in mind, and has the ability to communicate and engage in potentially difficult conversations with us about your personal situation, including about your health, mental capacity and financial circumstances, in circumstances where financial exploitation is suspected or if we have concerns about your decision-making capacity. We expect a trusted contact person to be kept informed about your medical and financial status and to be able to report signs of your diminished capacity. Your trusted contact person is intended to be a resource for us to assist in protecting your financial interests or assets when responding to possible circumstances of financial exploitation or concerns about your mental capacity.
A trusted contact person is not granted power of attorney over your account(s), unless specifically granted such authority by you (and we receive documentation to evidence such a power of attorney). No instructions related to your account(s) will be accepted from the trusted contact person unless your trusted contact also has a valid, continuing power of attorney or other authority.
When will we contact a trusted contact? – We will only contact a trusted contact person if financial exploitation is suspected or we have concerns or reason to believe that you have diminished or loss of mental capacity. It is up to our discretion whether or not a trusted contact person is contacted.
What happens if a client is incapable of making financial decisions? – Only a valid, continuing power of attorney can provide the authority to give instructions on your behalf if you are incapable of making financial decisions. Absent such an authority, the court will have to appoint someone to manage your affairs. We recommend that you talk to your legal advisor about having a power of attorney document prepared.
Temporary Holds
We may place a temporary hold on the purchase or sale of crypto assets through the Platform or on the withdrawal or transfer of cash or crypto assets from your account(s) where we reasonably believe that financial exploitation of you has occurred, is occurring, has been attempted or will be attempted, or that you do not have the mental capacity to make decisions involving financial matters. If we impose a temporary hold, we will provide you with notice of the temporary hold and the reasons for the temporary hold as soon as possible after placing the temporary hold.
Performance Benchmarks
An investment performance benchmark is a standard against which the performance of an investment can be compared. Some firms use performance benchmarks so that clients can assess the performance of investments held through the firm with the performance of the benchmark. We do not currently use investment performance benchmarks.
4. OPERATING CHARGES ASSOCIATED WITH YOUR ACCOUNT(S)
We do not currently charge clients any amounts in respect of the operation, transfer or termination of their account(s) with us. These types of charges are referred to as “operating charges”. If we decide to impose any operating charges, we will advise you at the time you open your account(s). After your account is opened, we will provide you with at least 60 days written notice before we impose any new or increased operating charges.
5. TRANSACTION CHARGES
Except as described below, we do not currently charge clients commissions or other amounts in connection with the purchase or sale of crypto assets through the Platform. These types of charges are referred to as “transaction charges”. If we decide to impose other transaction charges, the charges will be disclosed to clients prior to the completion of each transaction.
We earn fees for transactions conducted by clients on the Platform. All transaction fees are disclosed to clients prior to the completion of each transaction and on our website (found {Insert hyperlink}). Currently, transaction fee is 50 basis points for any purchase or sale of crypto assets based on fiat-to-crypto asset transactions.
6. COMPENSATION PAID TO US BY OTHER PARTIES
We do not currently receive any compensation from any third party in relation to the crypto assets that you purchase through the Platform. If this changes, we will provide you with a description of any such compensation that we may receive.
7. IMPACT OF FEES, CHARGES AND OTHER EXPENSES ON YOUR RETURNS
The fees, charges and other expenses described above under the headings “Operating Charges Associated with Your Account(s)”, “Transaction Charges” and “Compensation Paid to Us by Other Parties” will affect the returns on the investments in your account(s) by reducing the returns in proportion to the fees, charges and expenses. When considering the fees, charges and other expenses applicable to your account(s) and the investments you hold, you should understand that a fee, charge or other expense charged to your account(s) or the investments you hold will compound over time as a deduction to the overall value of your account(s) and/or the investments. Every dollar used to cover fees, charges and other expenses is one less dollar left to invest to compound and grow over time.
8. RISKS OF TRANSACTING ON OUR PLATFORM
Securities laws require us to provide all clients with a description of risks that you should consider when making an investment decision. Information about the specific risks associated with investments in crypto assets and the purchase or sale of Crypto Contracts through the Platform are described in the Risk Statement (see {https://support.hibit.ca/en/archives/129}) and in the Crypto Asset Statements (see {https://support.hibit.ca/en/archives/135}).
You should carefully consider whether trading in Crypto Contracts through the Platform is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. You should understand the nature of the investment and the extent of your exposure to risk.
9. USING BORROWED MONEY TO PURCHASE CRYPTO ASSETS
When you use borrowed money to purchase crypto assets that investment is subject to certain additional risks. You may purchase crypto assets using available cash, or a combination of available cash and borrowed money. If you use available cash to pay for the crypto assets in full, the percentage gain or loss will equal the percentage increase or decrease in the value of the crypto assets. Using borrowed money to purchase crypto assets can magnify the gain or loss on the cash invested. The effect of this is called “leveraging”.
If you are considering borrowing money to purchase crypto assets, you should be aware that a leveraged purchase involves greater risk than a purchase using available cash resources only. To what extent a leveraged purchase involves undue risk is a decision that needs to be made by you and will vary depending on your personal circumstances. In particular, you should be aware of the terms of any loan that is secured by the crypto assets. The lender may require that the amount outstanding on the loan does not rise above an agreed percentage of the market value of the crypto assets. Should this occur, you may be required to pay down the loan or sell the crypto assets so as to return the loan to the agreed percentage relationship. Money is also required to pay interest on the loan. Under these circumstances, investors who leverage their investments are advised to have adequate financial resources available both to pay interest and also to reduce the loan if borrowing arrangements require such a payment.
Hibit does not extend margin or otherwise offer leverage to clients.
10. CONFLICTS OF INTEREST
As a restricted dealer, the firm and our registered representatives have an obligation to take reasonable steps to identify and address all existing and reasonably foreseeable material conflicts of interest in the best interest of our clients. In addition, we are also required to disclose all material conflicts of interest we identify to a client whose interests are affected by the conflicts if a reasonable client would expect to be informed of those conflicts. This section contains important information about how we identify and address material conflicts of interests in the best interests of our clients.
What is a Conflict of Interest?
A conflict of interest may arise in circumstances where (i) our interests or those of our representatives and your interests as our client may be inconsistent or different, (ii) we or our representatives may be influenced to put our or their interests ahead of yours, or (iii) monetary or non-monetary benefits available to us, or potential negative consequences for us, may compromise the trust that you have in us.
How do we address Conflicts of Interest?
We and our representatives always seek to resolve all material conflicts of interest in your best interest. Where it is determined that we cannot address a material conflict of interest in your best interest, we and our representatives will avoid that conflict.
We have adopted policies and procedures to assist us in identifying and controlling any conflicts of interest that we and our representatives may face.
Material Conflicts of Interest
A description of the material conflicts of interest that we have identified in relation to our activities as an restricted dealer, the potential impact and risk that each conflict of interest could pose, and how each conflict of interest has been or will be addressed, is set out below.
Outside activities
At times, individuals acting on our behalf may participate in activities outside of their employment with the firm, such as serving on a board of directors, participating in community events or pursuing personal outside business interests, whether paid or unpaid. A potential conflict can arise from such an individual engaging in such activities as a result of compensation received, the time commitment required or the position held by the representative in respect of these outside activities. The potential impact and risk to you are that these outside activities may call into question the representative’s ability to carry out their responsibilities to you or properly service you, there may be confusion which entity(ies) the representative is acting for when providing you with services and/or if the outside activity places the representative in a position of power or influence over you.
Complaint handling
Addressing a complaint by a client can create a potential conflict if we have a choice between addressing the complaint in a manner that is beneficial to us or addressing the complaint in the best interests of the client. The potential risk to you is that we act in our own business interests. To control this potential conflict, we have adopted policies and procedures for the handling of client complaints. These policies and procedures are described below under “Dispute Resolution Services”.
Changes
This conflicts of interest disclosure may change from time to time, for example, if we later consider we have another material conflict that we have not previously disclosed to you or we change how we address a conflict in your best interest. Any changes to this document will be communicated to you from time to time.
11. DISPUTE RESOLUTION SERVICES
If we receive a complaint from you relating to trading or advising activities provided by us or a representative of our firm, we will provide you with a written acknowledgement of the complaint containing the following information:
(a) a description of our obligation, if any, under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to make an independent dispute resolution or mediation service available to you;
(b) the steps that you are required to take in order for an independent dispute resolution or mediation service to be made available to you; and
(c) the name of the independent dispute resolution or mediation service that will be made available to you and contact information for the service.
In addition, if we decide to reject a complaint or to make an offer to resolve a complaint, we will provide you with written notice of that decision.
We will make an independent dispute resolution or mediation service available to you at our expense if:
(a) after 90 days of our receipt of the complaint, we have not given you written notice of our decision in respect of the complaint and you have notified the independent dispute resolution or mediation service specified by us that you wish to have the complaint considered by the service; or
(b) within 180 days of your receipt of written notice of our decision in respect of the complaint, you have notified the independent dispute resolution or mediation service specified by us that you wish to have the complaint considered by the service.
There are limitations on your ability to have a complaint resolved at our expense by an independent dispute resolution or mediation service. We are only required to follow this procedure if the complaint is received by us within six years of the day when you first knew or reasonably ought to have known of an act or omission that is a cause of or contributed to the complaint. Also, you must agree that, for the purpose of the independent service’s consideration of the complaint, the amount claimed (if any) will be no greater than C$350,000.
We may follow other procedures in relation to a complaint made by a “permitted client” within the meaning of applicable securities laws that is not an individual.
Further information regarding these matters, is found {https://support.hibit.ca/en/archives/116}.
12. YOUR RELATIONSHIP WITH US
It is important that you actively participate in our relationship. In particular, we encourage you to:
● Keep us fully and accurately informed regarding your personal circumstances, and promptly advise us of any change to information that could reasonably result in a change to the types of investments appropriate for you, such as a change to your income, investment objectives, risk tolerance, time horizon or net worth.
● Review the documentation and other information available to you on the Platform regarding your account(s), holdings, performance and transactions conducted in your account(s).
● Ask questions of and request information from us to address any questions you have about your account(s), transactions conducted on your behalf or the holdings in your portfolio, or your relationship with us or anyone acting on our behalf.