Welcome!Welcome!Integrity Financial Integrity Financial regional meeting regional meeting

April 4th, 2006April 4th, 2006

Annual Growth RatesAnnual Growth Rates

10.73%

11.71%

-0.60% -1.80%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

2005 2004 2003 2002

ProEquities Growth

Annual Growth RatesAnnual Growth Rates

10.73%12.73%

11.71%

18.93%

-0.60%

5.17%

-1.80%

4.83%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

2005 2004 2003 2002

ProEquities Growth

Large BranchGrowth

Annual Growth RatesAnnual Growth Rates

10.73%

12.73%

4.88%

11.71%

18.93%

-5.11%

-0.60%

5.17%

-11.86%

-1.80%

4.83%

-12.58%-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

2005 2004 2003 2002

ProEquities Growth

Large BranchGrowth

Small BranchGrowth

What has been causing this growth?What has been causing this growth?

We have seen the greatest percentages of Asset and Revenue

growth in:

Investment Advisory Direct Investments

Direct InvestmentsDirect Investments

ProEquities In the top 5 B/Ds with other

Industry Leaders. Inland

CNL

Atlas

Behringer Harvard

Etc.

- $136 Million invested last year

● How are we and ProEquities helping?

Due Diligence

Education

Support

Investment AdvisoryInvestment Advisory

Options & Flexibility> Fee Based Planning> You decide Comp Structure

Wrap Fee Accounts –CAM With Retail Mutual Fund’s Stocks,

Bonds, Options Institutionally Managed Accts Separately Managed Accts Private Equity Funds

BD Results> 1.2 Billion AUM (+36.6%)

> Producing IARs (+20%)

Training via IA Workshop &

Fee-Based Academy

What Has Integrity Financial Done What Has Integrity Financial Done To Help Get You There?To Help Get You There?

ProEquities Support

• BDU• Coaching Program• Product Road Show•Forefield

Marketing/Branch Development

• Setup Classes to help reps get licensed• Business evaluation with reps•One on One coaching and business development

Supervision Operations

• Internal systems to improve efficiencies to move business faster• Supervisory Program Rewrite

•Began STP Initiative• Software and Hardware evaluation and implementation•VPN integration with network

• And Much Much More

Financial PlanningBusiness and Marketing

Development

•Continuous regional meetings• Evaluate business needs and opportunities of growth• Continue systemizing business• One on One meetings• Work with reps to bring on new reps•Help reps Recruit and train JR reps• Continue bringing new strategies and ideas to grow your business

•Evaluating financial planning software• Integrity Financial web-site•Server to access your business•Assist reps with technology needs

What Else Can We Do What Else Can We Do To help You Grow? To help You Grow?

NEW Technology Directions

•Please: Ask for Assistance

The Ugly part of our The Ugly part of our business….Compliance Statisticsbusiness….Compliance Statistics

Customer Complaints 20 in 2005; 17 in 2004; 32 in 2003; 52 in

2002 Regulatory Inquiries

6 in 2005; 18 in 2004; 29 in 2003; 34 in 2002

Internal Disciplinary Actions (2005) 6 Letters of Caution 2 Fines Totaling $2,750

2005 Settlements $281,000 in total settlement dollars

529 Plans Update529 Plans Update

NASD Began a Sweep in 2005 Fined Ameriprise $500,000 for

Inadequate Supervision of Sales by its Brokers; plus Ordered Restitution of $750,000

Major Points of Regulator Contention Tax Advantages of In-State vs. Out of

State Effectively Evaluate Suitability,

Considering Costs, Plan Fees, Share Classes

Mutual Fund Share Classes UpdateMutual Fund Share Classes Update

Still Seeing Regulatory Actions Latest Action – Merrill, Wells Fargo,

and LPL hit on B and C Shares (Dec 2005)

Collective Fine of $19.4 Million – ML $14; Wells $3; LPL $2.4

140,000 Clients Offered Remediation Regulators Still Emphasizing the Lower

Cost with A Shares as Being More Advantageous to the Client

Variable AnnuitiesVariable Annuities

Remains on Radar Screen of NASD Exchanges; USL Use with Proper

Documentation is Critical Suitability Issues - Elderly Sales, Large

Percentages of Net Worth, Large Transactions – Supervise Closely

NTM 04-45 Has Been “Watered Down”, but Eventually it will become Effective

Equity Indexed Annuities OverviewEquity Indexed Annuities Overview

Uncertainty Whether a Security or Not Private Security Transaction or OBA? Marketing of EIAs as an Investment Do Agents (Reps) Selling EIAs

Understand the Features of the Product?

Supervision – Calling for Firms to Adopt Special Procedures under Rule 3030 (OBA)

Other Suggestions – Run Through Firm; Approved List of EIAs

ProEquities Equity Indexed ProEquities Equity Indexed Annuities Review and Action PlanAnnuities Review and Action Plan

Action Plan Status Survey Reps & OSJ’s Ongoing Obtain Producer Information Ongoing Create Due Diligence Checklist 80%

Complete Review Product Information March/April Make OBA vs. Security Decision April Implement OBA or Security Strategy April/May

Equity Index Annuities Equity Index Annuities Currently Many QuestionsCurrently Many Questions

Is it a Security or Not?

Sales Supervision

Marketing and Advertising Concerns

ProEquities EIA Policy

To be, or not to be…a securityTo be, or not to be…a security

To prevent complication, please note that EIAs may not be marketed primarily as an investment. It is an insurance product and

should be represented as such.

If an EIA is deemed to be a security under the

securities laws (even if it has not been registered by

the issuing insurance company), a sale of the EIA must

run through the Firm or there will be a violation of

NASD Conduct Rule 3040 (Private Securities

Transactions).

Sales SupervisionSales Supervision If an associated person sells a registered

EIA outside of their regular scope of employment with the firm, Rule 3040 requires the sale be treated as a private securities transaction.

The firm must supervise the sale in accordance with the provisions of rule 3040

Rep must notify firm of sale prior to participating Firm must supply written approval to the rep

If the EIA is not registered, it is to be treated as an Outside Business Activity and also disclosed in

writing as such.

EIA Marketing & Advertising ConcernsEIA Marketing & Advertising ConcernsNASD is concerned about the manner in which associated persons are marketing

and selling unregistered EIA’sSales materials that don’t fully describe features and riskscan be problematic. Some statements can be misleading:

“Growth potential without market risk.”

“You lose nothing if the market goes down.”

“A Win/Win investment Vehicle!” “If you’re looking for upside potential and not market downside

look no further than [name of EIA]. This fixed annuity …enables you to make the most of the S&P 500 Index Gains.”

“How your retirement funds can have: security of principal, higher than CD rates of interest, opportunity for growth (no losses).”

EIA Marketing and AdvertisingEIA Marketing and Advertising

Sales materials should reference: Possible surrender charges

Combination of caps and participation rates

If sales pieces are deemed to be broker-dealer

communications with the public, they would be

subject to the NASD advertising rules, therefore they

have to provide a more balanced description of

features and risks of the product.

Under all circumstances, NASD suitability Under all circumstances, NASD suitability

rules apply to any recommendation that a rules apply to any recommendation that a

customer liquidate or surrender a registered customer liquidate or surrender a registered

security for the purpose of purchasing an security for the purpose of purchasing an

unregistered EIAunregistered EIA..

ProEquities’ EIA PolicyProEquities’ EIA Policy

ProEquities’ EIA PolicyProEquities’ EIA Policy

Proper disclosure forms should be signed by the client and submitted to ProEquities any time you recommend or transact an exchange from variable to fixed, or from a fixed to a variable product including:

Universal Switch Letter Proper Acknowledgement Form

Failure to comply could result in disciplinary action or mandatory requirement for all EIA’s to come through the firm to protect against unauthorized exchanges.

Please note…Please note…

As we continue to assess our position on EIAs, our policy

may change or require amendments.

The firm will notify you via Advisor Portal and email alerts well in advance of any policy

or procedural changes.

Univesal Switch Letter IssuesUnivesal Switch Letter Issues

1035s/Replacements Extra caution and information for switches with

high concentration of net worth and or Age Be sure switch letters are completed Pay

attention to details No blanks, especially on existing policy information

such as, Investment Date, Investment Amount, Surrender Charges and Death Benefits

No liquid paper Be sure changes are initialed

Merrill RuleMerrill Rule

Under ProEquities’ policy, reps must register as IAR if any of the following:

Rep is CFP, ChFC Uses the term financial planning or

otherwise holds themselves out as a financial planner or offering planning services

Rep provides financial plans to customers If providing a Financial Plan, rep must

obtain a signed Financial Planning Services Agreement and fee for planning ($100 minimum)

Merrill RuleMerrill Rule

The SEC has issued very little guidance on this Rule. ProEquities has issued the following guidance on what constitutes planning:

Delivering a document with the title, “Financial Plan”

A comprehensive analysis of a client’s financial situation, as compared to an analysis that is limited in scope

Contact the compliance department with specific questions

Merrill RuleMerrill Rule

Risk of conducting planning activities by a Non-IAR:

The rep will likely be deemed by the SEC to be conducting advisory business as an unregistered advisor, which will lead to disciplinary action against both the rep and ProEquities

Mark Your CalendarsMark Your Calendars

Our next meeting dates are:

Tuesday May 2cd

&

Tuesday June 6th.