Flexible Reinvestment Program™

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 eligible* securities, including most stocks or ETFs. With FRIP™, you'll be able to use cash from dividends to buy securities at no commission in a way that fits your investment strategy.

How does it work?

  • Choose which dividend-paying securities you want to include in the program. After enrolling, any dividend-paying equity is included automatically.
  • Select up to five eligible stocks or exchange-traded funds that you want to buy using your FRIP pool.
  • Select the date you want your trades placed.
  • Determine the frequency of your trading — either monthly or quarterly.

This chart outlines some of the features of FRIPTM.

Feature

FRIP

Commission-free reinvesting

Yes

Automatic Reinvesting

Yes

Pool of Accumulated Dividends

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

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

Yes

Flexible Allocation Percentage

Yes

Flexible Reinvestment Date

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

Fractional Shares

No. Only whole shares purchased

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

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.

How does 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 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 takes effect. Also, the trade date may change if your selected date falls on a weekend or a market holiday.

Will I be able to invest in fractional shares?

No. Only full shares of your selected securities will be purchased.

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

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

Will limit orders be allowed in FRIP™?

No. All program trades are submitted as market orders at 12 p.m. ET on the date you select.

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

Your balance must cover at least one full share of each security (at the percentage allocated) that you have selected for purchase. 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?

The program order status on your FRIP™ page will show you the status of your pending order. To calculate the minimum amount needed for your order to be submitted, you can divide the share price of each security by the allocation rate you set. The highest dollar amount represents the minimum amount you would need before any trade will be submitted.

Can I use margin for my FRIP™ orders?

No. All trades are submitted as cash market orders.

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

FRIP™ trades are cash market orders. 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 for the program, cash in your FRIP™ program can be moved to your brokerage account cash balance, but funds cannot be moved from your brokerage account cash balance to the FRIP™ 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 you choose 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.

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