F.A.Q.

1. Why did I receive this check?

You received a check because your account was impacted by the allegations noted in the SEC Order ("Order") Instituting Administrative Proceedings dated January 14, 2011. Access the SEC Order: http://www.sec.gov/litigation/admin/2011/34-63724.pdf

2. What was the settlement about?

The settlement is intended to compensate you for harm to your investment(s) due to Respondents' failure to meet the duty of best execution in certain cross trades ("Identified Conduct") during the period spanning from approximately November 1999 through March 31, 2008 (the "Relevant Period"). Access the Summary page: http://bnymfairfund.com/summary.asp

3. What were the monetary terms of the settlement agreed upon with the SEC?

In total, the SEC Orders require Respondents to pay disgorgement, prejudgment interest and civil money penalties totaling of approximately $24.4 million. More detail can be found in the SEC Order.

4. What were the allegations against Mellon Securities?

According to the SEC Order, from November 1999 through March 2008, Mellon Securities failed reasonably to supervise the institutional order desk manager and traders under his supervision, and the order desk manager failed to meet his duty of best execution to certain employee stock purchase plans, employee stock option plans, direct stock purchase and sale plans, and similar plans. The order desk manager executed purchase and sell orders from the plan customers at stale or inferior prices in cross trades with a favored handful of accounts held by hedge funds or individuals. The order desk manager directed traders under his supervision to do the same.

5. What is cross trading?

Cross trading is a practice where a single broker executes an order to buy and an order to sell the same security at the same time, typically involving two customers of the same broker.

6. What is the role of the Independent Distribution Consultant?

The SEC Order requires that Mellon Securities retain an Independent Distribution Consultant (IDC). The IDC's responsibilities include Developing the Plan of Distribution. The Distribution Plan includes:

  1. An explanation of the methodology used to calculate the payments to eligible shareholders;
  2. The procedures for locating eligible shareholders, and;
  3. The procedures for distributing the proceeds and interest to eligible shareholders.

7. Who is the Independent Distribution Consultant?

In accordance with the SEC Order, Mellon Securities has retained Alan Friedman as the Independent Distribution Consultant (IDC). Mr. Friedman is a Vice President at Charles River Associates, Inc. ("CRA"), a consulting firm. Mr. Friedman has experience serving as a distribution consultant and lead economic consultant to distribution consultants in several other Commission and regulatory matters.

8. Who was included in this settlement?

The Mellon Securities Order provides that the IDC shall develop a Distribution Plan to administer and distribute the Fair Fund "in a manner that compensates fairly and proportionately the Plan Customers for losses attributable to cross-trades conducted on their behalf by [Mellon Securities] from November 1999 through March 2008." Eligible Investors were considered for compensation if their trade was executed by the trading desk on the same day as a cross-trade in the same security or, where more sufficient data is unavailable, a range of days around the execution of each cross-trade. Eligible Investors have been identified on a best-efforts basis utilizing data provided by Mellon Securities. It should be noted, however, that complete customer information may not be available for the entire Relevant Time Period.

9. How was the distribution plan agreed to and calculated? How is my settlement payment calculated? Why did I receive this amount?

The Mellon Securities Order provided that the IDC shall develop a Distribution Plan to administer and distribute the Fair Fund "in a manner that compensates fairly and proportionately the Plan Customers for losses attributable to cross-trades conducted on their behalf by [Mellon Securities] from November 1999 through March 2008." Eligible Investors will be considered for compensation if their trade was executed by the trading desk on the same day as a cross-trade in the same security, where more sufficient data is unavailable, a range of days around the execution of each cross-trade. Eligible Investors have been identified on a best-efforts basis utilizing data provided by Mellon Securities. It should be noted, however, that complete customer information may not be available for the entire Relevant Period.

To accomplish this allocation, the relative impact of the cross-trades experienced by an Eligible Investor is estimated. In the view of the IDC, empirical analysis of the transactions at issue in this proceeding indicates that, for the specific facts set forth in the Mellon Securities and Shaw Orders, there is one component of impact suffered by Eligible Investors - the difference between a.) the price that could have been expected had the cross-trade received "best execution" (the "but-for price"), and b.) the price actually received.

A fair and reasonable method for determining the impact caused by the trading described in the Mellon Securities and Shaw Orders is to calculate the difference in the actual price received and the estimated price that should have been expected but for the conduct described in the Mellon Securities and Shaw Orders' findings. All parties that completed transactions in the same stock and on the same day as a cross-trade will generally be considered impacted by the cross-trade and will be eligible. However, if it can be reasonably determined that a particular account was not affected by a particular cross-trade, it will not receive payment for that trade.

10. If I want to participate in the settlement, what do I do? How long do I have to determine if I want to participate in the settlement?

If the IDC determined that you are an eligible investor/shareholder, you will automatically be a participant in the settlement. It is not necessary for you to do anything.

11. Is this a real check? Am I obligated to do anything if I cash this check?

This is a real check. It was drawn from the Mellon Securities SEC Fair Fund distribution bank account established to compensate eligible investors. By cashing this check you are not obligating yourself to anything. You received a payment because the Independent Distribution Consultant identified you as an eligible shareholder impacted by respondents' actions.

You should consult with your financial advisor or tax professional prior to cashing this check to determine the potential tax consequences and appropriate tax treatment for your particular situation.

12. I received a distribution check, what happens if I do not cash it?

The check will expire 90 days from the date the check was issued. All distributions will be on terms providing that checks not cashed within 90 days after distribution shall be void, unless the deadline for cashing checks is extended by the IDC.

Monies in the Escrow Account that remain undistributed because the checks were not cashed, or that were cashed and then returned by the recipient, will be returned to the SEC.

13. Who will pay the costs associated with the settlement and restitution?

The Respondents (Mellon Securities and Mark Shaw) are paying all costs associated with this settlement, including restitution, penalties and associated legal fees.

14. What are the tax consequences from this settlement?

The SEC and the Tax Administrator have drafted a notice entitled "Mellon Securities Fair Fund Statement to Eligible Investors". It is available on this website in the Tax Information page or through this link: http://bnymfairfund.com/files/BNY-Mellon-Securities-SEI.pdf

You should consult with your financial advisor or tax professional prior to cashing this check to determine the potential tax consequences and appropriate tax treatment for your particular situation.

15. Will I receive an IRS Form 1099 to use when filing my taxes for 2014?

You will not receive a Form 1099 for the distribution unless the interest portion of your distribution is over $600.00, in which case a 1099-INT will be produced and mailed under separate cover by the Tax Administrator, Miller Kaplan Arase LLP.

16. What happens if we do not cash our distribution check?

Monies that were not cashed or that were cashed and then returned by the recipient to the Fair Fund will be returned to the SEC upon Order's from the SEC to Terminate the Fair Fund after the issuance of de minimis checks.

17. Are you an employee of BNY Mellon/Mellon Securities?

No, I do not work for Mellon Securities. I work for Boston Financial Data Services, which has been hired by the Independent Distribution Consultant as the Fund Administrator.

18. Whom can I complain to if I do not agree with this decision?

Please fax or mail your written complaint to the attention of the IDC. The IDC will review and we will respond to all inquiries within 30 days. The IDC decision will be final. To fax your complaint to the IDC please send the fax to 816-374-7427. Please make sure to identify BNY Mellon Securities Fair Fund, Attention IDC, your check or reference number(s), your name and contact information. To mail your complaint, please use the address located in the left hand corner of the check.