Shakepay Inc.

Appendix B – Terms and Conditions on Membership

Custodial Arrangement with Coinbase Custody Trust Company, LLC

Shakepay’s custodial arrangement with Coinbase Custody Trust Company, LLC (Coinbase Custody) is subject to the following conditions:

  1. Shakepay may custody assets with Coinbase Custody only in relation to its distribution of crypto contracts and operation of a platform that facilitates the buying, selling and holding of crypto assets.
  2. At all times, Shakepay will not hold less than 80% of the total value of all crypto assets held on behalf of clients with one or more third-party custodians that have been approved by CIRO and are functionally independent of Shakepay, within the meaning of National Instrument 31-103.
  3. Shakepay must provide clear disclosure informing clients of the regulatory oversight of Coinbase Custody by the New York State Department of Financial Services (NYS DFS) and provide a link to NYS DFS’s website. The content and form of this disclosure will require the approval of CIRO Staff, and clients must be required to acknowledge they have read and agreed to the disclosure.
  4. Shakepay must ensure and regularly confirm to CIRO, that Coinbase Custody at all times:
    1. maintains its good standing status as a New York State chartered trust company,
    2. maintains its good standing status with, and continues to be regulated by, NYS DFS, and
    3. complies with the NYS DFS capital and insurance requirements.
  5. Shakepay must verify immediately upon Coinbase Custody’s quarterly information becoming available that Coinbase Custody maintains a net worth in excess of $100 million CAD. Shakepay must notify CIRO of their action plan should Coinbase Custody’s net worth fall below $100 million CAD.
  6. Shakepay will obtain from Coinbase Custody a SOC 2, Type 2, report to be provided to CIRO on an annual basis.
  7. Each year Shakepay will provide CIRO with a copy of the audited financial statements prepared for Coinbase Custody.
  8. Shakepay’s custody agreement with Coinbase Custody must be in a form acceptable to CIRO and Shakepay must ensure that any proposed material amendments to the agreement are approved by CIRO.
  9. Shakepay will promptly notify CIRO if any United States regulatory authority makes a determination that Coinbase Custody, for Shakepay clients’ crypto assets, is not permitted by the regulatory authority to hold client crypto assets.
  10. Shakepay will notify CIRO, promptly, of any material breach or failure of Coinbase Custody’s systems of controls or supervision in relation to the crypto assets held by Coinbase Custody, and the steps taken by Shakepay to address each such breach or failure.

Trading Information

  1. Shakepay at its cost, shall be responsible for providing CIRO, in the form and format specified by CIRO, with (i) access to information relating to trades executed utilizing Shakepay’s trading platform; and (ii) any other information reasonably required by CIRO to effectively monitor the conduct of trading.
  2. At CIRO's request, Shakepay shall, at Shakepay's cost, provide CIRO with historic trade information and trading related activity on Shakepay’s trading platform. Such information shall be provided in such form and in such format as CIRO requests and within such time periods as CIRO shall reasonably direct.

Liquidity Providers

  1. Shakepay will take reasonable steps to verify, before using a Liquidity Provider, that the Liquidity Provider is appropriately registered and/or licensed to trade in crypto assets in their home jurisdiction or that their activities do not require registration in their home jurisdiction and that they are not in default of securities legislation in Canada.
  2. If Shakepay becomes aware that a Liquidity Provider is not appropriately registered or licensed to trade in crypto assets in their home jurisdiction as required or that the Liquidity Provider is in default of securities legislation in any jurisdiction in Canada, Shakepay will seek approval from CIRO to continue use of the Liquidity Provider, or, failing that approval, will follow established policies and procedures to promptly cease trading of any crypto assets with the Liquidity Provider except to allow clients to liquidate their positions.

Accounting Treatments

  1. Shakepay will apply the following accounting policies to the extent that Shakepay or its Panel Auditor believes either that any one of them does not comply with IFRS, or that IFRS allows Shakepay an alternative accounting choice:
    1. Shakepay to account for clients’ crypto asset holdings off-balance sheet.
    2. Shakepay to record gains and losses on proprietary trading in crypto assets on a net basis on Statement E.
    3. Shakepay to account for long-term proprietary positions in crypto assets as inventory.

Training for Approved Persons

  1. Shakepay will provide training, as represented to CIRO, to all Approved Persons, including Executives, Investment Representatives and Supervisors, as well as compliance staff, upon approval of the application for membership in order to ensure ongoing compliance with training and proficiency requirements in IDPC Rules 1407 and 2602(2).
  2. Shakepay will provide CIRO staff with notice of any substantive changes to its internal training plan including detailed analysis and explanation of the change, no later than 30 days in advance of the change.