Flexible Reinvestment Program™ – Frequently Asked Questions

What is the Flexible Reinvestment Program™?

Scottrade's Flexible Reinvestment Program™ provides a commission-free way for you to invest dividends from most dividend-paying stocks or exchange-traded funds that you own into most eligible* stocks or ETFs. With FRIP™, you'll be able to use cash from dividends to buy most securities at no commission in a way that fits your investment strategy.

Is this similar to other brokerage dividend reinvestment programs (commonly called DRIP)?

A typical brokerage DRIP requires you to reinvest dividends from a dividend-paying security back into that same security. However the Flexible Reinvestment Program™ lets you invest dividends into up to five different eligible securities. The chart below provides a quick review of the differences between FRIP™ and DRIP.

Feature

FRIP™

Typical Brokerage DRIP

Commission-free reinvesting

Yes

Yes

Automatic Reinvesting

Yes

Yes

Pool of Accumulated Dividends

Yes. All designated dividend-paying securities feed into the pool

No. Dividends paid by a security can be invested only in that same security

Reinvest in Most Stocks or ETFs, Including Non-Dividend Securities

Yes

No

Flexible Allocation Percentage

Yes

No

Flexible Reinvestment Date

Yes. Date to invest funds can be altered at any time

No. Reinvest occurs only after a security pays a dividend

Fractional Shares

No. Only whole shares purchased

Yes

Can I choose which dividend-paying securities will feed funds into the dividend pool?

If you enroll in FRIP™, by default, all dividend-paying equities in your account will be included in the FRIP™ program and feed into the dividend pool. However, you will be allowed to manually remove any security from the program (or add it back in) at any time.

Can I enroll in FRIP™ if do not own any dividend-paying equities?

No. You need to own at least one dividend paying equity to enroll in the program.

How will the selection of reinvestment securities work?

You will decide which securities you want to invest in, and what percentage of your dividend pool you want invested in each. For example, you might decide to reinvest 50 percent of your dividend pool in Stock A, 25 percent in ETF B, 15 percent in Stock C, and 10 percent in ETF B. You then select whether you want dividends reinvested monthly or quarterly, and on which date. The total allocation must equal 100 percent. You can change the reinvestment securities, and the allocation rate, at any time.

What happens if I don't have enough funds to buy at least one full share of my eligible reinvestment securities in the allocation percentage I've made?

No orders will take place. The program will only execute purchases when there are enough funds to buy at least one share of every security, at approximately the allocation you specified.

What happens with the funds left over after a reinvestment?

They will stay in the FRIP™ dividend pool (or “program balance”) and will be available for future purchases.

Will funds in the dividend pool (or program balance) earn interest?

No. Credit interest will not be paid on FRIP™ pooled funds.

How often can I change the securities into which I am reinvesting funds?

As often as you like. You can add or drop a security from the reinvestment list at any time.

Once I decide which date I would like the reinvestment orders to be made, can I change it?

Yes, you can change the date at any time. However, it will take one business day from the time you select a new date to the time it can into effect.

Will I be able to invest in fractional shares?

No. Only full shares will be reinvested into your eligible securities.

I have an IRA account, am I eligible for the FRIP™ program?

Yes. IRA accounts, cash and margin accounts are all eligible.

Can I use dividends from mutual funds in the FRIP™ program?

No. Mutual funds are not eligible for the program, nor can you reinvest FRIP™ dividends into mutual funds.

Will limit orders be allowed in FRIP™?

No. All purchases will be executed automatically as market orders at 2 p.m. ET on the date you select.

How much money has to be in my FRIP™ account before trades will be made?

That depends on the number of securities you select, the price of each security and the percentage of your FRIP™ balance that you allocate to each security. In general, the more securities you have in your FRIP™ account, the more money you will need to accumulate from dividends for trades to occur. In addition, if you allocate low percentages to high-priced securities, you might have to accumulate substantial sums in your FRIP™ account before a trade will take place. For example, if you designate 10 percent of your FRIP™ balance to a stock trading at $200 per share, you will need at least $2,000 in your FRIP™ account for any purchases to be made. If you designate 5 percent to a stock trading at $400 per share, no trades would occur until you have at least $8,000 in your FRIP™ account.

Is there a formula I can use to determine the minimum needed in my FRIP™ account before trades will occur?

Yes. Divide the share price of each security by the allocation rate you set. The highest number generated by a security represents the minimum amount you would need before any trades can take place.

Can I use margin for my FRIP™ orders?

No. All orders are executed as cash trades.

How does a FRIP™ reinvestment affect my cost-basis in a security?

You should consult with a tax professional on the tax consequences of utilizing the FRIP™ program.

If I opt out of the FRIP™ program, what happens to my accumulated dividends?

They will be moved from the FRIP™ program balance to your brokerage account cash balance.

Can I move cash from my brokerage account into the FRIP™ dividend pool?

Under the rules of the program, you are not able to add additional funds to the FRIP™ pool. Only dividends received in your FRIP™ account after enrollment into the program will be placed in the FRIP™ pool of funds. You cannot withdraw funds from the pool without cancelling your enrollment in the program.

Can optional dividends be diverted into the FRIP™ program?

No. An optional dividend is when a company gives shareholders the choice take a dividend in cash or in stock. No optional dividend can be diverted into the FRIP™ program, even if the client chooses to take that dividend in cash.

Are capital gains distributions from exchange-traded funds diverted into my FRIP™ dividend pool?

Yes. All distributions from ETFs, whether dividends or capital gains, will be eligible for your FRIP™ dividend pool.

Can I enroll in the FRIP™ program if I don't have an online account?

Yes. Contact your branch office to enroll.

Get more information about Scottrade's Flexible Reinvestment Program™ :

*Marginable equities are eligible with the Program Balance, as defined in the Flexible Reinvestment Program™ Terms and Conditions.

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