Form ADV Part 2A
This brochure provides information about the qualifications and business practices of Union Gaming Research, LLC. If you have any questions about the contents of this brochure, please contact us at (702) 866 – 0743 or by email at firstname.lastname@example.org. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority but has been provided to the State of Nevada Office of the Secretary of State Securities Division.
Union Gaming Research, LLC is a registered investment adviser. Registration of an Investment Adviser does not imply a certain level of skill or training.
3930 Howard Hughes Parkway, Suite 230
Las Vegas, NV 89169
Phone: (702) – 866 – 0743
Fax: (702) – 699 – 9198
Item 2: Statement of Material Change
This brochure contains material changes from Union Gaming Research’s (UGR) previously published Form ADV Part II. In accordance with recently adopted SEC and State of Nevada rules, UGR has published this disclosure document effective September 30, 2011 in accordance with SEC and State of Nevada guidelines and as called for in the new investment adviser brochure format: Form ADV Part 2A. Accordingly, this brochure provides the firm’s clients with a narrative description of UGR’s business activities, fees, disclosures, policies and practices. This brochure has been updated since the firm’s last Updating Amendment of Form ADV Part 2A filed on 4/21/2011. UGR will provide clients with a new brochure when the firm’s business materially changes. UGR encourages readers of this brochure to review each section carefully and contact Greg Welk with any questions at (702) 866 – 0743 or by email at email@example.com.
Item 3: Table of Contents
- Item 2: Material Changes
- Item 3: Table of Contents
- Item 4: Advisory Business
- Item 5: Fees and Compensation
- Item 6: Performance-Based Fees and Side-By-Side Management
- Item 7: Types of Clients
- Item 8: Methods of Analysis, Investment Strategies and Risk of Loss
- Item 9: Disciplinary Information
- Item 10: Other Financial Industry Activities and Affiliations
- Item 11: Code of Ethics
- Item 12: Brokerage Practices
- Item 13: Review of Accounts
- Item 14: Client Referrals and Other Compensation
- Item 15: Custody
- Item 16: Investment Discretion
- Item 17: Voting Client Securities
- Item 18: Financial Information
- Item 19: Requirements for State-Registered Advisers
Item 4: Advisory Business
UGR is a Nevada-based Limited Liability Company (NV Business ID: NV20091136771) founded on April 17, 2009 and is a wholly owned subsidiary of Union Gaming Group, LLC, a Nevada-based Limited Liability Company (NV Business ID: E0175592009-2) founded on April 3, 2009. UGR, LLC received regulatory approval from the State of Nevada to operate as a state registered investment adviser on September 10, 2009.
B. Advisory Services Offered
UGR provides equity and debt research on the global gaming industry to institutional clients including advisors to investment companies and hedge funds. The firm provides equity and debt coverage on eighteen (18) companies that either operate casinos or manufacture equipment supplying those casinos. The firm conducts quantitative and qualitative analysis on the companies it covers and produces institutional research based on such analysis. The firm currently has no rating system but does maintain detailed financial models and estimates on each company covered. Additionally, the firm maintains an extensive database of each global gaming jurisdiction. General market analysis and industry research is also incorporated into the firm’s research offerings. The firm does not maintain client accounts nor does it have discretionary authority over client funds. Lastly, the firm conducts corporate field trips, non-deal roadshows and various other corporate access events to help its clients establish a deeper understanding of the gaming market.
C. Research Tailored to Individual Clients
UGR distributes published research equally across its customer base. However, the firm also provides targeted advice based on the individual needs of its institutional clients. Customized advice is provided on a case by case basis and is developed to suit the needs of individual clients.
D. Wrap Fee
UGR does not participate in wrap fee programs. The firm does not manage customer accounts.
E. Asset Management
UGR does not manage client assets. Accordingly, the firm does not maintain discretionary authority over client accounts.
Item 5: Fees and Compensation
A. Description of Fees and Compensation
UGR maintains a proprietary fee schedule based on the needs of its institutional clients. Since all of the firm’s clients and prospective clients are institutional in nature, they are highly sophisticated and often require specialized, custom advice. The firm’s fees are charged monthly, quarterly and bi-annually. Some clients do not pay according to the schedule described above but instead pay according to an internal vote based on how the firm ranks during a specific time frame relative to other research providers. Such payments are made directly to the firm or in the form of soft-dollar payments in accordance with Section 28(e) of the Investment Advisors Act of 1934.
B. Fees Deducted from Customer Accounts
UGR does not manage client accounts and therefore does not directly deduct fees from client accounts. Fees are paid according to the pay practices described in Section A above.
C. Other Fees
The firm does not charge fees other than fees described in Section A above.
D. Advance Payment of Fees
Fees may be paid by the firm’s clients in advance depending on the payment schedule assigned to the individual client. However, the firm may also receive fee payments after or concurrent to providing research to its clients. The timing of fee payments are negotiated on a case-by-case basis and may provide room for client discretion in the timing and amount of fees paid.
E. Sales of Securities and Other Investment Related Products
UGR does not sell securities or other investment related products.
Item 6: Performance-Based Fees and Side-By-Side Management
UGR does not manage its clients’ assets and does not charge performance-based fees.
Item 7: Types of Clients
UGR provides its publications and research offerings to institutional clients only. The firm’s institutional clients include advisors to investment companies and hedge funds. One hundred percent of the firm’s clients are institutional. The firm does not maintain relationships with retail clients. The firm’s institutional clients are staffed by highly trained professionals with several years of experience and investment knowledge.
Item 8: Methods of Analysis, Investment Strategies and Risk of Loss
A. Methods of Analysis
UGR conducts qualitative and quantitative analysis on gaming companies, the gaming industry and the domestic and global jurisdictions in which said companies operate. The firm conducts bottoms-up financial analysis, generates earnings estimates and assigns valuations to covered companies. UGR develops and keeps current detailed financial models and estimates for the individual companies it follows. It also generates detailed jurisdictional analysis, including jurisdictional revenue trend analysis and other detailed forecasts. The firm tracks regulatory and political developments closely to estimate their impact on individual companies and the gaming industry as a whole. The firm’s analysts work closely with corporate management teams, governments and other parties relevant to the global gaming business to provide further depth to the firm’s research offerings. Lastly, the firm monitors and interprets company and gaming industry news daily to provide its clients with up to date information on the companies, industry and jurisdictions it covers.
Investing in securities involves risk of loss that clients should be prepared to bear. The firm in no way guarantees performance or results. Clients should be prepared to bear the risks of investing in the companies covered by the firm and understand that they may lose some or all of their investment.
B. Material Risks to Methods of Analysis
UGR relies on information and data provided by covered companies, third-party research providers and governmental agencies to produce its research. The firm bases its analysis on the information provided by such parties. Incorrect data provided by or retrieved from parties external to the firm may present a material risk to the methods of analysis described in Section A above. The integrity and accuracy of data obtained by the firm undergoes intensive assessment prior to incorporation into the firm’s research analysis. Data sets, financial statements, qualitative information and other information are reviewed by senior research analysts and the firm’s principals prior to its usage in the firm’s research publications. Such data is cross-referenced, when possible, against other correlating information to ensure the accuracy of information conveyed and interpreted in the firm’s research offerings.
Further, misinterpretation, omission of material facts and computational errors present a material risk to the method of analysis described in Section A above. The firm safeguards against this risk by subjecting its research publications to a stringent review and approval process prior to publication. Research materials are reviewed by senior research analysts and the firm’s principals to reduce the possibility of misstatement in the firm’s publications.
The method of analysis described in Section A above does not contain significant or unusual risks.
C. Material Risks to Investing in Equity and Debt Securities
UGR produces research on both equity and debt securities. Investing in such securities involves risk of loss that each client should be prepared to bear. Such risks include interest rate risk, market risk, political risk, etc. Institutional clients should rely on their own expertise and investment knowledge when assessing such risks. The firm does not assess the risk posed by each security covered to its clients’ portfolios. Clients should understand that they may lose a portion or all of their investment when investing in securities covered by the firm.
Item 9: Disciplinary Information
On September 20, 2010 the State of Nevada Office of the Secretary of State Securities Division assessed a $26,000 examination fee on the firm for failing to update its Form ADV via an annual updating amendment pursuant to Rule 204-1 of the Investment Advisors Act of 1940 and NAC 90.380(3). The Consent to Order also stated that the firm failed to license two of its investment adviser representatives in the state of Nevada from September 2009 through September 2010. UGR consented to Administrative Order File No. Ci10-164-jh by rectifying the infractions listed above. Specifically, the firm agreed to cease violating the Nevada Uniform Securities Act, update its Form ADV annually within 90 days of its fiscal year end and submit payment of $26,000 to the Nevada Secretary of State for the cost of the examination including fees for inspection of records performed under NRS 90.410. In return, the State of Nevada Office of the Secretary of State Securities Division agreed not to pursue any further action against the firm other than as set forth in the Consent to Order.
Item 10: Other Financial Industry Activities and Affiliations
A. Management Persons Registered with Broker-Dealers
UGR is managed and operated by three principals: Richard Moriarty, Grant Govertsen, and William Lerner. Additionally, Gregory Welk serves as Chief Compliance Officer of UGR. Messers Moriarty, Govertsen, Lerner and Welk are also registered as principals and managers of the firm’s affiliate broker-dealer, Union Gaming Advisors, LLC (FINRA CRD: 151592). Messers Moriarty, Govertsen and Lerner also act as principals and managers of Union Gaming Research Macau Limited. For further details on the firm’s affiliate broker-dealers, please refer to subsection C below.
B. Registrations with Futures and Commodity Commissions
The firm does not transact business or recommend investment in futures or commodities. Accordingly, the firm is not registered with any Futures or Commodities regulatory organization.
C. Relationship with Affiliate Broker-Dealer: Union Gaming Advisers, LLC
Union Gaming Advisors, LLC (UGA) and Union Gaming Research Macau Limited (UGRML) are wholly owned subsidiaries of Union Gaming Group, LLC (UGG), the holding company of Union Gaming Research (UGR). As such, UGA and UGRML are under common control with UGR. UGA is a FINRA member broker-dealer specializing in equity and debt offerings, private placements, mergers and acquisitions and equity trading. UGA distributes research produced by UGR and is compensated via soft-dollar order flow from institutional clients. UGRML has begun the registration process to become a Macau-based broker-dealer. UGRML is currently working with local counsel to register itself as a broker-dealer in Macau, SAR.
Item 11: Code of Ethics
UGR has adopted a Code of Ethics to inform its personnel of their ethical obligations to the firm and its clients and to provide guidance on the rules governing personal securities transactions, client conflicts of interest and insider trading obligations. UGR personnel are expected to place the interest of the firm’s clients ahead of their own and should avoid engaging in activities that are in direct conflict, perceived or otherwise, with the firm’s obligations to its customers. Personnel are prohibited from trading in securities covered by the firm so as to eliminate any conflict of interest that could arise from such transactions. Therefore, management and representatives of the firm do not own or trade securities in which the firm publishes research. UGR enforces all applicable rules of the Nevada Securities Act and Investment Advisors Act of 1940 including prohibitions against insider trading.
A copy of UGR’s Code of Ethics will be sent to the firm’s clients upon request.
Item 12: Brokerage Practices
UGR does not recommend broker-dealers for client transactions. However, the firm’s institutional clients may elect to trade through the firm’s affiliate broker-dealer, Union Gaming Advisors, LLC (UGA) and receive institutional research distributed directly through said broker-dealer. The firm does not actively solicit institutional clients to trade through UGA, although clients may elect to place order flow through UGA in order to receive UGR research. Given the close nature of both UGR and UGA, the firm’s client base is generally aware of the capability to trade through UGR’s affiliate broker-dealer, although UGR’s clients are not actively solicited to do so. Clients electing to transact business through UGA may pay higher commissions and fees than transacting business through other broker-dealers. In such instances, higher commissions and fees reflect the added value of receiving UGR’s research. UGR’s parent company, Union Gaming Group, LLC receives implicit compensation when client’s elect to place trades through UGA in exchange for research offerings.
Item 13: Review of Accounts
UGR does not maintain client accounts. Accordingly, the firm does not review its institutional clients’ portfolios.
Item 14: Client Referrals and Other Compensation
Clients are established based on pre-existing relationships between the firm’s management and institutional customers. The firm does not compensate or otherwise provide any economic benefit to persons who refer clients to the firm. Compensation is not paid to individuals outside of the firm for client referrals.
Item 15: Custody
UGR does not maintain client accounts or hold client funds.
Item 16: Investment Discretion
UGR does not maintain client accounts or hold client funds. As such, the firm does not maintain discretionary authority over its client accounts.
Item 17: Voting Client Securities
UGR does not maintain client accounts or hold client funds. Therefore, the firm does not vote its clients’ securities.
Item 18: Financial Information
UGR does not require or solicit prepayment of more than $1,200 six months or more in advance. Therefore, the firm is not subject to the financial information section of this Brochure.
Item 19: Principal Executive Officers
William Lerner: Principal, Analyst
Bill Lerner has spent 14 years on Wall Street in sell side research. Most recently, Bill was the Managing Director and Senior Gaming & Lodging Analyst at Deutsche Bank Securities. This followed ten years at Prudential Securities and Deutsche Morgan Grenfell. Bill currently also serves as principal for UGR’s broker-dealer affiliate, Union Gaming Advisors, LLC. Lerner has an MBA from Boston University and a BA from Syracuse.
Richard Moriarty: Principal, Institutional Sales
Rich Moriarty has spent 13 years on Wall Street in institutional equity sales. Most recently, Rich was Director of the Institutional Client Group at Deutsche Bank Securities in New York. This followed nine years at Lehman Brothers, now Barclays and Susquehanna International Group. At Deutsche, Moriarty managed a team responsible for institutional coverage of the world’s largest hedge funds, mutual funds and sovereign wealth funds. Rich maintains a BA from the University of Massachusetts at Amherst.
Grant Govertsen: Principal, Analyst
Grant Govertsen has spent 6 years on Wall Street as a gaming analyst. While supporting research coverage on Deutsche Bank’s gaming platform with William Lerner, he was also lead analyst of the bank’s Lifestyle Brands / Leisure Products sector. Prior to joining Deutsche Bank, Govertsen worked at several boutique economic consulting firms where he had primary responsibility for feasibility and market studies related to gaming and real estate developments. He began his career with Coopers & Lybrands’s Financial Advisory Services Group with a focus on securities litigation support. Grant maintains a BS from the University of Nevada Las Vegas.
Gregory Welk: Chief Compliance Officer
Greg Welk has spent 6 years in the financial services industry. Most recently, Greg served as Chief Compliance Officer and FINOP for ARC Securities, a boutique broker-dealer specializing in mergers and acquisitions and private placements in technology and aerospace industries. Mr. Welk currently serves as Chief Compliance Officer and FINOP for Union Gaming Advisors, UGR’s affiliate broker-dealer. Mr. Welk began his career as a retail broker at Morgan Stanley and maintains a BA in economics from Boston University.