2.2.0.7 false Related Party Transactions 0211 - Disclosure - Related Party Transactions true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Related Party Transactions [Abstract] 0 amtd_RelatedPartyTransactionsAbstract amtd false na duration Related party transactions. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Related party transactions. false 3 RELATED PARTY TRANSACTIONS 1 us-gaap_RelatedPartyTransactionsDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. RELATED PARTY TRANSACTIONS</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Transactions with TD and Affiliates</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the acquisition of TD Waterhouse during fiscal 2006, TD became an affiliate of the Company. TD owned approximately 45.9% of the Company’s common stock as of June 30, 2010, of which 45% is permitted to be voted under the terms of the Stockholders Agreement among TD, the Company and certain other stockholders. Pursuant to the Stockholders Agreement, TD has the right to designate five of twelve members to the Company’s board of directors. The Company transacts business and has extensive relationships with TD and certain of its affiliates. A description of significant transactions with TD and its affiliates is set forth below. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Insured Deposit Account Agreement</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is party to an insured deposit account (“IDA”) agreement (formerly known as the money market deposit account or “MMDA” agreement) with TD Bank USA, N.A. (“TD Bank USA”), TD Bank, N.A., (“TD Bank”, and together with TD Bank USA, the “Depository Institutions”) and TD. Under the IDA agreement, the Depository Institutions make available to clients of the Company FDIC-insured money market deposit accounts as either designated sweep vehicles or as non-sweep deposit accounts. The Company provides marketing, recordkeeping and support services for the Depository Institutions with respect to the money market deposit accounts. In exchange for providing these services, the Depository Institutions pay the Company a fee based on the yield earned on the client IDA assets, less the actual interest paid to clients, a flat fee to TD Bank USA of 25 basis points and the cost of FDIC insurance premiums. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The IDA agreement has a term of five years beginning July 1, 2008, and is automatically renewable for successive five-year terms, provided that it may be terminated by any party upon two years’ prior written notice. The agreement provides that the fee earned on the IDA agreement is calculated based on three primary components: (a) the actual yield earned on investments in place as of July 1, 2008, which were primarily fixed-income securities backed by Canadian government guarantees, (b) the yield on other fixed-rate investments, based on prevailing fixed rates for identical balances and maturities in the interest rate swap market (generally LIBOR-based) at the time such investments were added to the IDA portfolio and (c) floating-rate investments, based on the monthly average rate for 30-day LIBOR. The agreement provides that, from time to time, the Company may request amounts and maturity dates for the other fixed-rate investments (component (b) above) in the IDA portfolio, subject to the approval of the Depository Institutions. For the month of June 2010, the IDA portfolio was comprised of approximately 10% component (a) investments, 82% component (b) investments and 8% component (c) investments. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">In the event the fee computation results in a negative amount, the Company must pay the Depository Institutions the negative amount. This effectively results in the Company guaranteeing the Depository Institutions revenue of 25 basis points on the IDA agreement, plus the reimbursement of FDIC insurance premiums. The fee computation under the IDA agreement is affected by many variables, including the type, duration, credit quality, principal balance and yield of the investment portfolio at the Depository Institutions, the prevailing interest rate environment, the amount of client deposits and the yield paid on client deposits. Because a negative IDA fee computation would arise only if there were extraordinary movements in many of these variables, the maximum potential amount of future payments the Company could be required to make under this arrangement cannot be reasonably estimated. Management believes the potential for the fee calculation to result in a negative amount is remote and the fair value of the guarantee is not material. Accordingly, no contingent liability is carried on the Condensed Consolidated Balance Sheets for the IDA agreement. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The Company earned fee income associated with the insured deposit account agreement of $180.1 million and $505.4 million for the three months and nine months ended June 30, 2010, respectively, and $125.1 million and $424.9 million for the three months and nine months ended June 30, 2009, respectively, which is reported as insured deposit account fees on the Condensed Consolidated Statements of Income. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Mutual Fund Agreements</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The Company and an affiliate of TD are parties to a sweep fund agreement, transfer agency agreement, shareholder services agreement and a dealer agreement pursuant to which certain mutual funds are made available as money market sweep or direct purchase options to Company clients. The Company performs certain distribution and marketing support services with respect to those funds. In consideration for offering the funds and performing the distribution and marketing support services, an affiliate of TD compensates the Company in accordance with the provisions of the sweep fund agreement. The Company also performs certain services for the applicable fund and earns fees for those services. The agreement may be terminated by any party upon one year’s prior written notice and may be terminated by the Company upon 30 days’ prior written notice under certain circumstances. The Company earned fee income associated with these agreements of $2.3 million and $6.3 million for the three months and nine months ended June 30, 2010, respectively, and $19.0 million and $102.0 million for the three months and nine months ended June 30, 2009, respectively, which is included in investment product fees on the Condensed Consolidated Statements of Income. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Securities Borrowing and Lending</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with its brokerage business, the Company engages in securities borrowing and lending with TD Securities, Inc. (“TDSI”), an affiliate of TD. Receivable from brokers, dealers and clearing organizations includes $0.4 million and $0.6 million of receivables from TDSI as of June 30, 2010 and September 30, 2009, respectively. Payable to brokers, dealers and clearing organizations includes $19.9 million and $34.0 million of payables to TDSI as of June 30, 2010 and September 30, 2009, respectively. The Company earned net interest revenue of $0.4 million and $1.1 million for the three months and nine months ended June 30, 2010, respectively, and earned net interest revenue of $0.2 million and incurred net interest expense of $0.2 million for the three months and nine months ended June 30, 2009, respectively, associated with securities borrowing and lending with TDSI. The transactions with TDSI are subject to similar collateral requirements as transactions with other counterparties. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Referral and Strategic Alliance Agreement</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">TDA Inc. is a party to a referral and strategic alliance agreement with TD Bank and TD Wealth Management Services, Inc. (“TDWMS”). Under the agreement, TD Bank will promote TDA Inc.’s brokerage services to its clients using a variety of marketing and referral programs and TDWMS referred its existing brokerage account clients to TDA Inc. while TDWMS discontinued its brokerage operations. TD Bank clients that open brokerage accounts at TDA Inc. and TDWMS clients that elected to transfer their accounts to TDA Inc. are considered program clients. TDA Inc. retains a fee for providing brokerage services to the program clients, and the program’s net margin is shared equally between TDA Inc. and TD Bank. The Company earned pre-tax income associated with the referral and strategic alliance agreement of $0.3 million and $0.2 million for the three months and nine months ended June 30, 2010, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Cash Management Services Agreement</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to a cash management services agreement, TD Bank USA provides cash management services to clients of TDA Inc. In exchange for such services, the Company pays TD Bank USA service-based fees agreed upon by the parties. The Company incurred expense associated with the cash management services agreement of $0.2 million for the three months ended June 30, 2010 and 2009 and $0.6 million for the nine months ended June 30, 2010 and 2009, which is included in clearing and execution costs on the Condensed Consolidated Statements of Income. The cash management services agreement will continue in effect for as long as the IDA agreement remains in effect, provided that it may be terminated by TDA Inc. without cause upon 60 days’ prior written notice to TD Bank USA. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Indemnification Agreement for Phantom Stock Plan Liabilities</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to an indemnification agreement, the Company agreed to assume TD Waterhouse liabilities related to the payout of awards under The Toronto-Dominion Bank 2002 Phantom Stock Incentive Plan following the completion of the TD Waterhouse acquisition. Under this plan, participants were granted units of stock appreciation rights (“SARs”) based on TD’s common stock that generally vest over four years. Upon exercise, the participant receives cash representing the appreciated value of the units between the grant date and the redemption date. In connection with the payout of awards under the 2002 Phantom Stock Incentive Plan, TD Discount Brokerage Holdings LLC (“TDDBH”), a wholly-owned subsidiary of TD, agreed to indemnify the Company for any liabilities incurred by the Company in excess of the provision for such liability included on the closing date balance sheet of TD Waterhouse. In addition, in the event that the liability incurred by the Company in connection with the 2002 Phantom Stock Incentive Plan is less than the provision for such liability included on the closing date balance sheet of TD Waterhouse, the Company agreed to pay the difference to TDDBH. There were 25,815 and 43,590 SARs outstanding as of June 30, 2010 and September 30, 2009, respectively, with an approximate value of $1.0 million and $1.6 million, respectively. The indemnification agreement effectively protects the Company against fluctuations in TD’s common stock price with respect to the SARs, so there will be no net effect on the Company’s results of operations resulting from such fluctuations. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Canadian Call Center Services Agreement</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the Canadian call center services agreement, TD receives and services client calls at its London, Ontario site for clients of TDA Inc. After May 1, 2013, either party may terminate this agreement without cause and without penalty by providing 24 months’ prior written notice. In consideration of the performance by TD of the call center services, the Company pays TD, on a monthly basis, an amount approximately equal to TD’s monthly cost. The Company incurred expenses associated with the Canadian call center services agreement of $4.4 million and $13.1 million for the three months and nine months ended June 30, 2010, respectively, and $4.0 million and $11.8 million for the three months and nine months ended June 30, 2009, respectively, which is included in professional services expense on the Condensed Consolidated Statements of Income. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Certificates of Deposit Brokerage Agreement</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">TDA, Inc. is party to a certificates of deposit brokerage agreement with TD Bank USA, under which TDA Inc. acts as agent for its clients in purchasing certificates of deposit from TD Bank USA. Under the agreement, TD Bank USA pays TDA Inc. a placement fee for each certificate of deposit issued in an amount agreed to by both parties. TDA Inc. has periodically promoted limited time offers to purchase a three-month TD Bank USA certificate of deposit with a premium yield to clients that made a deposit or transferred $25,000 into their TDA Inc. brokerage account during a specified time period. Under these promotions, TDA Inc. reimburses TD Bank USA for the subsidized portion of the premium yield paid to its clients. The Company incurred net costs to TD Bank USA associated with this promotional offer of $0 and $2.3 million for the three months and nine months ended June 30, 2010, respectively, and $0 and $3.3 million for the three months and nine months ended June 30, 2009, which is included in advertising expense on the Condensed Consolidated Statements of Income. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Sale of thinkorswim Canada, Inc. and Trading Platform Hosting and Services Agreement</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">On June 11, 2009, immediately following the closing of the thinkorswim acquisition, the Company completed the sale of thinkorswim Canada, Inc. (“thinkorswim Canada”) to TD Waterhouse Canada Inc. (“TDW Canada”), a wholly-owned subsidiary of TD, for cash equal to the total tangible equity of thinkorswim Canada immediately prior to the closing of the transaction. The Company received gross proceeds from the sale of approximately $1.7 million. The Company did not recognize a gain or loss on the sale of thinkorswim Canada. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the sale of thinkorswim Canada, the Company and TDW Canada entered into a trading platform hosting and services agreement. The agreement has an initial term of five years beginning June 11, 2009, and will automatically renew for additional periods of two years, unless either party provides notice of non-renewal to the other party at least 90 days prior to the end of the then-current term. Because this agreement represents contingent consideration to be paid for the sale of thinkorswim Canada, the Company recorded a $10.7 million receivable for the fair value of this agreement. Under this agreement, TDW Canada uses the thinkorswim trading platform and TDA Inc. provides the services to support the platform. In consideration for the performance by TDA Inc. of all its obligations under this agreement, TDW Canada pays TDA Inc., on a monthly basis, a fee based on average client trades per day and transactional revenues. Fees earned under the agreement are recorded as a reduction of the contingent consideration receivable until the receivable is reduced to zero, and thereafter will be recorded as fee revenue. As of June 30, 2010 and September 30, 2009, $9.9 million and $10.4 million, respectively, of contingent consideration is included in receivable from affiliates on the Condensed Consolidated Balance Sheets. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Other Related Party Transactions</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">TD Options LLC, a subsidiary of TD, paid the Company the amount of exchange-sponsored payment for order flow that it received for routing TDA Inc. client orders to the exchanges. The Company earned $0 and $0.5 million of payment for order flow revenues from TD Options LLC for the three months and nine months ended June 30, 2010, respectively, and $1.7 million and $3.3 million for the three months and nine months ended June 30, 2009, respectively, which is included in commissions and transaction fees on the Condensed Consolidated Statements of Income. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">TD Securities (USA) LLC, an indirect wholly-owned subsidiary of TD, was the joint lead manager and participated as an underwriter in the Company’s offering of $1.25 billion of Senior Notes in November 2009. In this capacity, TD Securities (USA) LLC earned a discount and commission of $0.5 million. This amount is being accounted for as part of the debt issuance costs included in other assets on the Condensed Consolidated Balance Sheets and is being amortized to interest expense over the terms of the respective Senior Notes. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Except as otherwise indicated, receivables from and payables to TD and affiliates of TD resulting from the related party transactions described above are included in receivable from affiliates and payable to affiliates, respectively, on the Condensed Consolidated Balance Sheets. Receivables from and payables to TD affiliates resulting from client cash sweep activity are generally settled in cash the next business day. Other receivables from and payables to affiliates of TD are generally settled in cash on a monthly basis. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock This element may be used for the entire related party transactions disclosure as a single block of text. Disclosure may include: the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph k -Article 4 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 57 -Paragraph 1-4 false 1 2 false UnKnown UnKnown UnKnown false true