PRIMEVEST believes it's important for investors to understand the risks of investing in volatile markets.

High volumes of trading at the market opening or during the day may cause trade execution delays or executions at prices significantly away from the price quoted or displayed at the time you enter your order. Therefore, it's important to know there's no guaranty that your orders will be executed at the prices displayed on this web site - whether the displayed quotes are "real-time" or delayed. In a fast moving market, stock prices may change rapidly. If there's a large volume of shares being traded in a particular stock, particularly thinly traded stocks, there may be a delay in executing your order. From the time you obtain a quote and place your order until the time your order is executed, the price may change considerably.

Investors should devise trading strategies for such periods of high volume, that include an understanding of the difference between market and limit orders and the benefits and risks of each. Investors should also understand the special risks of investing in "fast markets," initial public offerings ("IPOs") and volatile Internet stocks." Customers should also plan for the possibility of system delays and outages that can occur during periods of high volume.

Market Orders

Placing an order to buy or sell a stock at the current price is known as a market order. When you place a market order (except in the last few minutes of the trading day), you can usually be assured that it'll be executed. But you're not guaranteed a specific execution price. The execution may be at a price significantly different from the current quoted price of that security. In order to handle pricing uncertainties, you may want to place what is known as a limit order.

Limit Orders

A limit order lets you specify the highest price at which you're willing to buy, or the lowest price at which you're willing to sell. However, if you're placing an order to buy a stock and the price moves up, your order won't be executed. Likewise, if you're placing an order to sell and the price moves down, your order won't be executed. The advantage of a limit order is that you'll be protected from having to pay more than the price you specify for a buy order, or receiving less than the amount you specify for a sell order. The downside is that if the market moves in the wrong direction, your order won't be executed, and you won't own the stock you wanted to buy.

Fast Markets

A fast market is characterized by heavy trading and highly volatile prices. Orders are submitted to market makers and specialists at a rapid pace, resulting in backlogs and an imbalance of trade orders - for example, too many buy orders and not enough sell orders. With a backlog of orders in a fast market, a real time quote may not reflect the state of the market at the time your order is actually executed by the market maker or specialist.

Fast markets can result in significant delays for various reasons. For example, market makers may execute orders manually or reduce size guarantees. This means that when you place a market order, your order is executed on a first-come, first-served basis. If there are orders ahead of yours, those orders will be executed first. Execution of orders ahead of yours can significantly affect the execution price for your order. If you submit a market order, you can't change or cancel your order once it's begun trading.

Large orders can present problems in fast markets because they are often filled in smaller blocks. Once the order is received, it's executed at the best prices available, depending on how many shares are offered at each price. Fast markets can cause the market maker to reduce the size of guarantees. This could result in a large order being filled in unexpected smaller blocks and at significantly different prices.

Many kinds of events can trigger a fast market - for example:

• Highly anticipated initial public offerings ("IPOs")
   
• mportant company news
   
• A favorable or unfavorable analyst recommendation.
   
• National or world financial news or events.

Fast market conditions can affect your trades regardless of whether they're placed with a broker or over the Internet.

Fast markets present the risk that investors will receive execution prices substantially away from the market price at the time they place their orders. This risk may be significantly reduced by placing a limit order.

Internet Trading & Duplicate Orders

Because fast markets can cause significant delays in the execution of a trade, investors may be tempted to cancel and resubmit an order. Investors should consider that in a fast market, there may be a delay in the time it takes to report an execution. By canceling and resubmitting an order in a fast market, investors run the risk of entering duplicate orders.

System Delays

Investors may suffer market losses during fast markets when system problems result in inability to place buy or sell orders. During fast markets, investors may experience delays in accessing their on-line trading site due to high Internet traffic. They may also experience delays in reaching their broker or trading representative by telephone. It's possible that investors may suffer losses due to these delays. Investors should consider maintaining accounts with other brokerage firms to serve as back up during such periods of delay.

Free-Riding

Another risk of trading in fast markets is the risk that investors inadvertently engage in free-riding. Free-riding is when you buy a security low and sell it high, but use the proceeds of the sale to pay for the original purchase. Free-riding violates Federal Reserve Board Regulation T, which covers the extension of credit by broker-dealers to their customers. The penalty requires the broker-dealer to restrict the customer's account for 90 days - meaning all transactions must be paid for in advance.

To avoid free-riding, the funds for the original purchase of the security must come from some other source.
Another activity related to fast moving markets is day trading. This is the practice of buying and selling a security on the same day. There's no prohibition against day trading, as long as it doesn't result in free-riding.

Possible Actions By Brokerage Firms

PRIMEVEST makes every effort to minimize system delays during fast markets. We may respond to these possible delays in several ways. For example:

• We may temporarily halt on-line trading of certain volatile stocks, requiring customers to purchase these securities through a trading representative via the telephone. This would allow our trading representatives, when contacted, to explain the difference between market and limit orders and the benefits and risks of each. And they may encourage customers whose primary goal is to achieve a target price and protect against sudden price moves, and who understand that there is a possibility that the order will not be executed, to enter limit orders.
   
• We might not accept market orders for certain volatile stocks, requiring customers who wish to buy these stocks to enter limit orders specifying the highest price they would pay for these issues.
   
• We might not accept any orders for certain volatile stocks.
   
• We might raise margin requirements for certain volatile stocks.
   
• We might raise the amount of equity that must be maintained in margin accounts (maintenance margin) for long positions in certain volatile stocks to as high as 100%. The rationale for raising maintenance margin is to help ensure that the equity in a customer's margin account is sufficient to cover large changes in the price of a stock. Increasing maintenance margin requirements protects both the firm and its customers by ensuring that customers have more equity in their margin accounts as protection in case of a large change in the value of a stock. This reduces the likelihood that the firm will have to liquidate assets in the customer's account to meet a margin call.
   
• We might prohibit the use of margin to purchase certain stocks.
   
• We might designate certain stocks as "cash on hand," requiring customers to have 100% of the purchase price of the stock in the account before the transaction can be executed.