BARRETT ASSOCIATES, INC.
THE BARRETT FUNDS
JOINT CODE OF ETHICS
(AMENDED AND RESTATED OCTOBER 26, 2000)
INDEX
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Page
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A. PREAMBLE 1
B. DEFINITIONS 2
C. PROHIBITED TRANSACTIONS 4
D. COMPLIANCE PROCEDURES 6
E. EXEMPTED TRANSACTIONS 8
F. REPORTING OF VIOLATIONS 9
G. ANNUAL REPORTING 9
H. SANCTIONS 10
I. RETENTION OF RECORDS 10
Appendix A Insider Trading Policy
Appendix B Aggregation & Allocation Policy
Appendix C Pre-clearance Form
Exhibit A Initial Report
Exhibit B Annual Report
BARRETT ASSOCIATES, INC.
AND
THE BARRETT FUNDS
JOINT CODE OF ETHICS
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A. PREAMBLE
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High ethical standards are essential for the success of Barrett Associates,
Inc. ("BAI") and the Barrett Funds (the "Trust") and to maintain the confidence
of clients. Our long-term business interests are best served by adherence to
the principle that clients' interests come first. Further, BAI and the Trust
have a fiduciary duty to their clients which requires individuals associated
with our firm to act solely for the benefit of our clients. Potential conflicts
of interest may arise in connection with the personal trading activities of
individuals associated with investment adviser firms. In recognition of BAI and
the Trust's fiduciary obligations to their clients and BAI and the Trust's
desire to maintain high ethical standards, BAI and the Trust have adopted this
Code of Ethics containing provisions designed to prevent improper personal
trading, identify conflicts of interest and provide a means to resolve any
actual or potential conflict in favor of the client.
In addition, because of the nature of our business, employees may be
exposed to information which constitutes "inside information" or material, non-
public information. Federal securities laws prohibit the use of such
information for financial benefit. Accordingly, BAI and the Trust have also
adopted policies that prohibit the use of material non-public information. The
BAI/Trust Insider Trading Policy is attached to this Code of Ethics as Appendix
A.
One of our goals is to still allow BAI personnel to engage in personal
securities transactions, while protecting our clients and employees of BAI from
the conflicts that could result from a violation of the securities laws or from
real or apparent conflicts of interests. In this regard, we set out below
procedures governing personal transactions for members of the firm. As part of
this process, BAI and the Trust will make every effort to keep confidential all
personal information provided by employees.
Adherence to the Code of Ethics and the related restrictions on personal
investing is considered a basic condition of employment by BAI and the Trust.
If you have any doubt as to the propriety of any activity, you should consult
with the Compliance Officer or his/her designee, who is charged with the
administration of this Code of Ethics, has general compliance responsibility for
BAI and the Trust and may offer guidance on securities laws and acceptable
practices, as the same may change from time to time.
This Code of Ethics is being adopted by BAI and the Trust in compliance
with the requirements of Rule 17j-1 (the "Rule") adopted by the U.S. Securities
and Exchange Commission under the Investment Company Act of 1940, as amended
(the "Act") to effectuate the purposes and objectives of that Rule. The Rule
makes it unlawful for certain persons, in connection with purchase or sale by
such person of a security "held or to be acquired"1<F13> by the Trust:
1<F13> A security "held or to be acquired" is defined as (a) if within the most
recent fifteen (15) days, it (i) is or has been held by the Trust, or
(ii) is being or has been considered by the Trust or its investment
adviser for purchase by the Trust, and (b) any option to purchase or
sell, and any security convertible into or exchangeable for such a
security.
1. To employ a device, scheme or artifice to defraud the Trust;
2. To make to the Trust any untrue statement of a material fact or omit
to state to the Trust a material fact necessary in order to make the statements
made, in light of the circumstances in which they are made, not misleading;
3. To engage in any act, practice or course of business which operates or
would operate as a fraud or deceit upon the Trust; or
4. To engage in a manipulative practice with respect to the Trust.
The Rule also requires that the Trust, and its investment adviser shall
each adopt a written Code of Ethics, which shall be approved by a majority of
the Board of Trustees of the Trust (including a majority of Independent
Trustees) and that contains provisions reasonably necessary to prevent persons
from engaging in acts in violation of the above standard and to use reasonable
diligence and institute procedures reasonably necessary, to prevent violations
of the Code of Ethics.
Set forth below is the Code of Ethics adopted by the Board of Directors of
BAI and by the Board of Trustees of the Trust, in compliance with the Rule.
This Code of Ethics is based upon the principle that persons associated with
BAI, the Trust and certain affiliated persons of BAI and the Trust, owe a
fiduciary duty to, among others, the clients of BAI and the shareholders of the
Trust to conduct their affairs, including their personal securities
transactions, in such manner to avoid (i) serving their own personal interests
ahead of shareholders; (ii) taking inappropriate advantage of their position
with clients and/or the Trust; and (iii) any actual or potential conflicts of
interest or any abuse of their position of trust and responsibility.
B. DEFINITIONS
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1. "Access Person" means any trustee, director, officer, or any employee
of BAI or the Trust (or of any company in a control relationship to BAI or the
Trust) who, in connection with his regular functions or duties, normally makes,
participates in, or obtains current information regarding the purchase or sale
of a security by a client or the Trust, or whose functions relate to the making
of any recommendations with respect to such purchases or sales; and any natural
person, or the families of such persons, in a control relationship to the
Adviser or the Trust who regularly obtains current information concerning
recommendations made to a client or the Trust with regard to the purchase or
sale of a security by a client or the Trust. "Access Person" also includes:
(a) An Access Person's spouse (other than a legally separated or
divorced spouse of the Access Person) and minor children;
(b) Any individuals who live in the Access Person's household and
over whose purchases, sales, or other trading activities the Access Person
exercises control or investment discretion;
(c) Any persons to whom the Access Person
o provides primary financial support or
o whose financial affairs the Access Person controls.
(d) Any trust or other arrangement which names the Access Person as a
beneficiary or remainderman; and
(e) Any partnership, corporation, or other entity of which the Access
Person is a director, officer or partner where the Access Person has a 25%
or greater beneficial interest, or in which the Access Person owns a
controlling interest or exercises effective control.
A comprehensive list of all Access Persons will be maintained by our
Compliance Officer.
2. "Covered Account" means any account in which an Access Person has any
beneficial ownership, with the following exceptions:
(a) Access Person as Trustee. A covered account does not include any
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account for which an Access Person serves as trustee of a trust for the benefit
of (1) a person to whom the Access Person does not provide primary financial
support, or (2) an independent third party.
(b) Covered Accounts of Other Access Persons. A Covered Account of
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an Access Person that is managed by another Access Person excluding Covered
Accounts of employees of BAI, is considered to be a Covered Account only if the
Access Person has a beneficial ownership in the Covered Account. The account is
considered to be a client account with respect to the Access Person managing the
Covered Account.
(c) Client Accounts. A client account includes any account managed
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by a portfolio manager of BAI which is not a Covered Account.
3. "Beneficial ownership" shall be as defined in, and interpreted in the
same manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
and regulations thereunder which, generally speaking, encompasses those
situations where the beneficial owner has the right to enjoy some economic
benefit from the ownership of the security. A person is normally regarded as
the beneficial owner of securities held in the name of his or her spouse or
minor children living in his or her household.
4. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.
5. "Independent Trustee" means a non-employee Director of BAI or a non-
employee Trustee of the Trust who is not an "interested person" of BAI or of the
Trust within the meaning of Section 2(a)(19) of the Act.
6. "Purchase or sale of a security" includes, among other activities, the
writing of an option to purchase or sell a security.
7. "Security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract, voting-
trust certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas, or other mineral rights, any put, call, straddle, option,
or privilege on any security (including a certificate of deposit) or on any
group or index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered into in
a national securities exchange relating to foreign currency, or, in general, any
interest or instrument commonly known as a "security," or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase, any of the
foregoing. Notwithstanding the above, "Security" shall not include securities
issued by the government of the United States or by federal agencies and which
are direct obligations of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of registered open-end
investment companies.
8. "Short Sale" means the sale of a security that the seller does not
own. A Short Sale is "against the box" to the extent that the seller
contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short.
C. PROHIBITED TRANSACTIONS
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Except with respect to paragraph (a), an Independent Trustee is not subject
to the prohibitions set forth below unless in conducting his or her transactions
the Independent Trustee knew or, in the course of fulfilling his or her official
duties as a trustee, should have known that, during the 15-day period
immediately preceding or after the date of the transaction by the trustee, such
security was purchased or sold by the Trust or was being considered for purchase
by the Trust or by its investment adviser.
1. General. No Access Person shall engage in any act, practice or course
of conduct, which would violate the provisions of Rule 17j-1 set forth above.
It is the responsibility of each Access Person to ensure that a particular
securities transaction being considered for his or her Covered Account is not
subject to a restriction contained in this Code of Ethics or otherwise
prohibited by any applicable laws. Personal securities transactions for Access
Persons may be effected only in accordance with the provisions of this Section.
2. Blackout Periods. As part of the pre-clearance process (as described
in Section 3), the Compliance Officer shall determine, by speaking with the
Director of Research and/or the President, whether a personal securities
transaction being considered in a Covered Account involves a security currently
on or likely to be added to or deleted from the BAI Focus List.
(a) If the personal securities transaction being considered involves
a security that is likely to or may be added to or be deleted from the BAI
Focus List within five (5) trading days, then the Access Person shall not
be allowed to trade the security in a Covered Account.
(b) If the personal securities transaction being considered involves
a security that is definitely not going to be added to or be deleted from
the BAI Focus List within five (5) trading days, then the Access Person
shall be allowed to trade the security in a Covered Account.
(c) When a security is first placed on the BAI Focus List, there is
an initial three (3) trading day waiting period before any Access Person is
allowed to trade in the security in a Covered Account. After that three
trading day period has expired, the Access Person may trade the security in
a Covered Account and must aggregate his or her personal trades in that
security with the client trades in accordance with the BAI Aggregation and
Allocation Policy (attached as Appendix B).
(d) When the rating of a security on the BAI Focus List changes to
"buy," "sell," or "lighten" (each of which indicates that BAI clients will
likely trade in that security), there is an initial three (3) day waiting
period before any Access Person is allowed to trade the security in a
Covered Account. After the third day, such trades must be aggregated in
accordance with the BAI Aggregation and Allocation Policy (attached as
(Appendix B).
3. Trading on the Same Day As a Client After Blackout Periods of 2(b)
Above. An Access Person may execute a personal securities transaction after the
blackout periods of Section 2(b) above have expired for his/her Covered Account
on a day during which any client over which BAI has investment discretion
(including the Trust) has a pending "buy" or "sell" order in that same security
only if the Access Person aggregates his or her personal trade with the clients'
trades in accordance with the BAI Aggregation and Allocation Policy (attached as
Appendix B).
4. Short-Term Trading Profits. An Access Person shall not profit in the
purchase and sale, or sale and purchase, of the same or equivalent securities
within thirty (30) calendar days unless such restrictions would cause undue
hardship, as determined by the Compliance Officer, on the individual.
5. Gifts. An Access Person shall not seek or accept anything of more
than de minimis value, either directly or indirectly, from broker-dealers or
other persons providing services to BAI or the Trust because of such person's
association with BAI or the Trust.
6. Short Sales. An Access Person shall not engage in any short sale of a
security if, at the time of the transaction, any client account or the Trust
managed by the Access Person has a long position in such security. Short sales
against the box in securities held by a client are permitted except on a day
when a client account managed by the Access Person trades in the same security.
7. Initial Public Offerings. An Access Person shall not acquire any
direct or indirect beneficial ownership in any securities in any initial public
offering.
8. Private Placements and Investment Opportunities of Limited
Availability. An Access Person shall not acquire any beneficial ownership in
any securities in any private placement of securities or investment opportunity
of limited availability unless the Compliance Officer has given express prior
written approval. The Compliance Officer, in determining whether approval
should be given, will take into account, among other factors, whether the
investment opportunity should be reserved for BAI clients and whether the
opportunity is being offered to the Access Person by virtue of his or her
position with BAI. The Access Person who owns a Private Placement or investment
opportunity of limited availability must disclose to the President whenever he
or she recommends the purchase or sale of the same investment to a client.
9. Service on Boards. An Access Person shall not serve on any board of
directors of any publicly traded company without prior written authorization
from the President of BAI. Authorization will be based upon a determination
that the board service would not be inconsistent with the interest of any client
or the Trust. This restriction does not apply to service on the board of any
not-for-profit corporation or organization.
D. COMPLIANCE PROCEDURES
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1. Pre-clearance Requirement. With the exception of Independent
Trustees, all Access Persons are required to receive prior written approval from
the Compliance Officer before engaging in any non-exempted transaction in his or
her Covered Account. The Compliance Officer or his/her designee (who may have
no personal interest in the subject transaction) may approve the transaction if
the Compliance Officer concludes that the transaction would comply with the
provisions of this Code of Ethics and is not likely to have any adverse economic
impact on a BAI client or the Trust. A request for pre-clearance must be made
by completing the Pre-clearance Form in advance of the contemplated transaction.
A Sample Pre-clearance Form is attached as Appendix C. Any approval given under
this paragraph will remain in effect for 24 hours. The Compliance Officer will
retain a record of approval.
2. Disclosure of Personal Holdings and Business Activities Under Rule
17j-1. All Access Persons (with the exception of Independent Trustees) shall
disclose to the Compliance Officer all personal securities holdings in an
initial report upon commencement of employment, and thereafter as of the end of
each calendar year. The initial report shall be made no later than ten (10)
days after the person becomes an Access Person. The annual report shall be
submitted within thirty (30) days after the end of each calendar year and
provide information on personal securities holdings that is current as of a date
no more than thirty (30) days before the date such Annual Report is submitted.
The Access Person will also disclose the business activities in which the person
has a significant role and the name of banks, brokerage or investment advisory
firms where the Access Person maintains accounts. A sample Initial Report and
Annual Report are attached as Exhibits A and B, respectively.
3. Duplicate Copies of Broker's Confirmations and Account Statements.
(a) All Access Persons (excluding Independent Trustees) are required
to direct their brokers or custodians or any persons managing the Access
Person's account to supply the Trust's Compliance Officer with duplicate
copies of broker's trade confirmations within five (5) days after the
transaction.
(b) All Access Persons (excluding Independent Trustees) must provide
the Access Person's quarterly brokerage statements.
An Access Person shall not be required to submit broker's trade
confirmations or periodic statements for any transaction in a personal
account over which the Access Person has no direct or indirect influence or
control. Each Access Person has an affirmative obligation to notify the
Compliance Officer promptly if the Access Person opens any new account with
a broker or custodian or moves an existing account to a different broker or
custodian.
4. Quarterly Reporting Requirements.
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(a) Quarterly reporting is generally not required, because all Access
Persons (except for Independent Trustees) are required to provide duplicate
confirmations and account statements. Independent Trustees, however, are
required to report to the Compliance Officer the information described in
subparagraph (d)(ii) of this section with respect to transactions in any
security in which such person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security if
such trustee, at the time of that transaction knew, or, in the ordinary
course of fulfilling his official duties as a trustee, should have known
that, during the 15-day period immediately preceding or after the date of
the transaction by the trustee, such security was purchased or sold by the
Trust or was being considered for purchase by the Trust or by its
investment adviser.
(b) Reports required to be made under this Paragraph (d) shall be
made not later than ten (10) days after the end of the calendar quarter in
which the transaction to which the report relates was effected. A report
shall contain the following information:
o the date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
o the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
o the price at which the transaction was effected;
o the name of the broker, dealer or bank with or through whom
the transaction was effected; and
o the date that the report is submitted.
(c) Any such report may contain a statement that the report shall not
be construed as an admission by the person making such report that he or
she has any direct or indirect beneficial ownership in the security to
which the report relates.
5. Annual Certification of Compliance with Code of Ethics. Every Access
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Person, including the Independent Trustees, shall certify in the Annual Report
(Attached as Exhibit C) that:
(a) they have read and understand the Code of Ethics and recognize
that they are subject thereto;
(b) they have complied with the requirements of the Code of Ethics;
and
(c) they have reported all personal securities transactions required
to be reported pursuant to the requirements of the Code of Ethics.
6. Conflict of Interest. Every Access Person shall notify the Compliance
Officer of any personal conflict of interest relationship that may involve a
client or the Trust, such as the existence of any economic relationship between
their transactions and securities held or to be acquired by any series of the
Trust.
7. Notification by Compliance Officer. The Compliance Officer shall
notify each Access Person that he or she is subject to these reporting
requirements, and shall deliver a copy of this Code of Ethics to each Access
Person.
8. Review of Transactions. The Compliance Officer of the Trust and
Adviser shall review the initial, quarterly, and annual holdings reports, as
well as the trade confirmations and transaction statements submitted to them by
Access Persons as soon as practicable after the submission of such reports to
the Compliance Officer to determine compliance with this Code of Ethics. Each
Access Person's transactions in his/her Covered Account will be reviewed on a
regular basis and compared to transactions entered into by BAI for clients. Any
transactions that are believed to be a violation of this Code of Ethics will be
reported promptly to the Compliance Officer who must report to the President of
BAI.
9. Authority to Exempt Transactions. The Compliance Officer (or, if not
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available, the President first, or a member of the Executive Committee second,)
has the authority to exempt any Access Person or any personal securities
transaction of a Access Person from any or all of the provisions of this Code of
Ethics if the Compliance Officer determines that such exemption would not be
against the interests of any client. The Compliance Officer shall prepare and
file a written memorandum of any exemption granted, describing the circumstances
and reasons for the exemption.
E. EXEMPTED TRANSACTIONS
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The following transactions are exempt from the pre-clearance requirements
of Section D. Exemptions for transactions described in 1 through 6 below are
also exempted from the filing requirement of a Pre-clearance Form. The
quarterly reporting obligations of the Code of Ethics will continue to apply to
any transaction exempted from pre-clearance pursuant to this Section.
1. Any transaction involving U.S. Government securities, municipal
securities, shares of open-end investment companies, bank certificates of
deposit and money market instruments;
2. Purchases or sales of securities with respect to which an Access
Person has (or by reason of such transaction would have) no beneficial
ownership;
3. Purchases or sales that are non-volitional on the part of the Access
Person such as purchases that are made pursuant to a dividend reinvestment plan;
4. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of the issuer's securities, to the extent such
rights were acquired from such issuer, and sales of such rights so acquired;
5. Transactions effected in, and the holdings of, any account over which
the Access Person has no direct or indirect influence or control (i.e., blind
trust, discretionary account or trust managed by a third party);
6. Purchases or sales of shares of any series of the Trust;
7. Transactions in securities which are not eligible for purchase or sale
by any client of BAI or the Trust, and the value of which is not based upon,
related to or determined by reference to any security which is eligible for
purchase or sale by any client of BAI or the Trust. A Pre-clearance Form must
still be filed; and
8. Purchases of 500 shares or less of stock of companies with more than
$1 billion market capitalization. Blackout periods must still be observed and a
Pre-clearance Form must still be filed.
F. REPORTING OF VIOLATIONS TO THE BOARDS OF BAI AND THE TRUST
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1. The Compliance Officer shall promptly report to the Boards all
apparent violations of this Code of Ethics and the reporting requirements
thereunder.
2. When the Compliance Officer finds that a transaction otherwise
reportable to the Boards under Paragraph (1) of this Section could not
reasonably be found to have resulted in a fraud, deceit or manipulative practice
in violation of Rule 17j-1(a), he or she may, in their discretion, lodge a
written memorandum of such finding and the reasons therefor with the reports
made pursuant to this Code of Ethics, in lieu of reporting the transaction to
the Boards.
G. ANNUAL REPORTING TO THE BOARDS OF BAI AND THE TRUST
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The Compliance Officer shall prepare an annual report relating to this Code
of Ethics to the Boards. Such annual report shall:
1. summarize existing procedures concerning personal investing and any
changes in the procedures made during the past year;
2. describe any issues arising under the Code of Ethics or procedures
since the last report to the Board of Trustees including, but not limited to,
information about material violations of the Code of Ethics or procedures and
sanctions imposed in response to the material violations;
3. identify any recommended changes in the existing restrictions or
procedures based upon the Trust's and BAI's experience under its Code of Ethics,
evolving industry practices or developments in applicable laws or regulations;
and
4. certify that the Trust and BAI have adopted procedures reasonably
necessary to prevent Access Persons from violating this Code of Ethics.
H. SANCTIONS
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The President of BAI, with advice of legal counsel, shall consider reports
made to him and upon determining that a violation of this Code of Ethics has
occurred, may impose such sanctions or remedial action as he deems appropriate
or to the extent required by law. These sanctions may include, among other
things, a letter of censure, disgorgement of profits, suspension or termination
of employment with BAI, or criminal or civil penalties.
I. RETENTION OF RECORDS
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This Code of Ethics, a list of all persons required to make reports
hereunder from time to time or who are responsible for reviewing such reports, a
copy of each report made by an Access Person hereunder, each memorandum made by
the Compliance Officer hereunder and a record of any violation hereof and any
action taken as a result of such violation, and a copy of each annual report to
the Boards of BAI and the Trust shall be maintained by the Trust as required
under Rule 17j-1.
The Compliance Officer shall keep in an easily accessible place for at
least five years copies of all broker confirmations and periodic statements of
Access Persons, copies of all pre-clearance forms, acknowledgments and other
memoranda relating to the administration of this Code of Ethics.
APPENDIX A
INSIDER TRADING PROCEDURES
THE INSIDER TRADING AND SECURITIES FRAUD ENFORCEMENT ACT
OF 1988 (ITSFEA)
SECTION 1. POLICY STATEMENT ON INSIDER TRADING
A. POLICY STATEMENT ON INSIDER TRADING
Barrett Associates, Inc. (BAI) and the Trustees of the Barrett Funds (the
"Trust") forbid any officer, director or employee from trading, either
personally or on behalf of others, including mutual fund and private accounts
managed or advised by BAI, on material nonpublic information or communicating
material nonpublic information to others in violation of the law. This conduct
is frequently referred to as "insider trading." BAI's policy applies to every
officer, director and employee and extends to activities within and outside
their duties at BAI. Every officer, director and employee must read and retain
this policy statement. Any questions regarding BAI's policy and procedures
should be referred to the Compliance Officer.
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material nonpublic information to
trade in securities (whether or not one is an "insider") or to communications of
material nonpublic information to others.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
1) trading by an insider, while in possession of material nonpublic
information, or
2) trading by a non-insider, while in possession of material nonpublic
information, where the information either was disclosed to the non-
insider in violation of an insider's duty to keep it confidential or
was misappropriated, or
3) communicating material nonpublic information to others.
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If, after reviewing this policy statement, you have any
questions you should consult the Compliance Officer.
1. WHO IS AN INSIDER?
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The concept of "insider" is broad. It includes officers, directors and
employees of a company. In addition, a person can be a "temporary insider" if
he or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, BAI may become a temporary insider of a
company it advises or for which it performs other services. According to the
Supreme Court, the company must expect the outsider to keep the disclosed
nonpublic information confidential and the relationship must at least imply such
a duty before the outsider will be considered an insider.
2. WHAT IS MATERIAL INFORMATION?
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Trading on insider information is not a basis for liability unless the
information is material. "Material information" generally is defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions,
or information that is reasonably certain to have a substantial effect on the
price of a company's securities. Information that officers, directors and
employees should consider material includes, but is not limited to: dividend
changes, earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
Material information does not have to relate to a company's business. For
example, in Carpenter v. U.S. 18 U.S. 316 (1987), the Supreme Court considered
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as material certain information about the contents of a forthcoming newspaper
column that was expected to affect the market price of a security. In that
case, a Wall Street Journal reporter was found criminally liable for disclosing
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to others the dates that reports on various companies would appear in the
Journal and whether those reports would be favorable or not.
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3. WHAT IS NONPUBLIC INFORMATION?
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Information is nonpublic until it has been effectively communicated to the
market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services,
The Wall Street Journal or other publications of general circulation would be
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considered public.
4. BASIS FOR LIABILITY.
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(i) Fiduciary Duty Theory.
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In 1980, the Supreme Court found that there is no general duty to disclose
before trading on material nonpublic information, but that such a duty arises
only where there is a fiduciary relationship. That is, there must be a
relationship between the parties to the transaction such that one party has a
right to expect that the other party will disclose any material nonpublic
information or refrain from trading. Chiarella v. U.S. 445 U.S. 22 (1980).
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In Dirks v. SEC, 463 U.S. 646 (1983), the Supreme Court stated alternate
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theories under which non-insiders can acquire the fiduciary duties of insiders:
they can enter into a confidential relationship with the company through which
they gain information (e.g., attorneys, accountants), or they can acquire a
fiduciary duty to the company's shareholders as "tippees" if they are aware or
should have been aware that they have been given confidential information by an
insider who has violated his fiduciary duty to the company's shareholders.
However, in the "tippee" situation, a breach of duty occurs only if the
insider personally benefits, directly or indirectly, from the disclosure. The
benefit does not have to be pecuniary, but can be a gift, a reputational benefit
that will translate into future earnings, or even evidence of a relationship
that suggest a quid pro quo.
(ii) Misappropriation Theory.
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Another basis for insider trading liability is the "misappropriation"
theory, where liability is established when trading occurs on material nonpublic
information that was stolen or misappropriated from any other person. In
U.S. v. Carpenter, supra the Court found, in 1987, a columnist defrauded
------------------------
The Wall Street Journal when he stole information from the Journal and used it
----------------------- -------
for trading in the securities markets. It should be noted that the
misappropriation theory can be used to reach a variety of individuals not
previously thought to be encompassed under the fiduciary duty theory.
5. PENALTIES FOR INSIDER TRADING
-----------------------------
Penalties for trading on or communicating material nonpublic information
are severe, both for individuals involved in such unlawful conduct and their
employers. A person can be subject to some or all of the penalties below even
if he or she does not personally benefit from the violation. Penalties include:
- civil injunctions
- treble damages
- disgorgement of profits
- jail sentences
- fines for the person who committed the violation of up to three
times the profit gained or loss avoided, whether or not the person
actually benefited, and
- fines for the employer or other controlling person of up to the
greater of $100,000 or three times the amount of the profit gained
or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by BAI, including dismissal of the persons involved.
SECTION II. PROCEDURES TO IMPLEMENT BAI'S INVESTMENT
ADVISER'S POLICY
A. PROCEDURES TO IMPLEMENT BAI INVESTMENT ADVISER'S POLICY AGAINST INSIDER
TRADING
The following procedures have been established to aid the officers,
directors and employees of BAI in avoiding insider trading, and to aid BAI in
preventing, detecting and imposing sanctions against insider trading. Every
officer, director and employee of BAI or of the Trust must follow these
procedures or risk serious sanctions, including dismissal, substantial personal
liability and criminal penalties. If you have any questions about these
procedures, you should consult the Compliance Officer.
1. Identifying Inside Information
Before trading for yourself and others, including investment companies or
private accounts managed by BAI, in the securities of a company about which you
may have potential inside information, ask yourself the following questions:
(i) Is the information materialo Is this information that an investor
would consider important in making his or her investment decisionso
Is this information that would substantially effect the market price
of the securities if generally disclosedo
(ii) Is the information nonpublico To whom has this information been
providedo Has the information been effectively communicated to the
marketplace by being published in Reuters, The Wall Street Journal or
other publications of general circulationo
If after consideration of the above, you believe that the information is
material and nonpublic, or if you have questions as to whether the information
is material and nonpublic, you should take the following steps.
(i) Report the matter immediately to the Compliance Officer.
(ii) Do not purchase or sell the securities on behalf of yourself or
others, including investment companies or private accounts managed
by BAI.
(iii) Do not communicate the information inside or outside BAI, other
than to the Compliance Officer.
(iv) After the Compliance Officer has reviewed the issue or consulted
with counsel (as appropriate), you will be instructed to continue
the prohibitions against trading and communication, or you will be
allowed to trade and communicate the information.
2. Personal Securities Trading
A. Reporting
---------
All Access Persons of BAI are required by the BAI Code of Ethics to
submit to the Compliance Officer:
(i) duplicate copies of trade confirmations within 5 days after the
Access Person's personal securities transactions and
(ii) the Access Person's monthly or quarterly brokerage statements.
In addition, all Access Persons are required by the BAI Code of
Ethics to submit upon commencement of employment with BAI, a
statement listing all of the
(a) securities in which the Access Person has any beneficial
ownership,
(b) business activities in which the Access Person has a
significant role and
(c) the names of any brokerage firms where the Access Person
maintains an account.
B. Preclearance.
------------
In addition, the BAI Code of Ethics requires Access Persons to obtain
the prior written approval of the Compliance Officer before engaging in any
personal securities transaction.
C. Other Code of Ethics Provisions.
-------------------------------
The BAI Code of Ethics contains other restrictions on the personal
securities trading of Access Persons. The BAI Code of Ethics is incorporated by
reference into this policy. A personal securities transaction that would be
permissible under the Code of Ethics is nevertheless still subject to this
policy.
3. Restricting Access to Material Nonpublic Information
Information in your possession that you identify as material and nonpublic
may not be communicated to anyone, including persons within BAI, except as
provided in paragraph 1 above. In addition, care should be taken so that such
information is secure. For example, files containing material nonpublic
information should be sealed; access to computer files containing material
nonpublic information should be restricted.
4. Resolving Issues Concerning Insider Trading
If, after consideration of the items set forth in paragraph 1, doubt
remains as to whether information is material or nonpublic, or if there is any
unresolved question as to the applicability or interpretation of the foregoing
procedures, or as to the propriety of any action, it must be discussed with the
Compliance Officer before trading or communicating the information to anyone.
APPENDIX B
BARRETT ASSOCIATES, INC. ("BAI")
THE BARRETT FUNDS (THE "TRUST")
AGGREGATION AND ALLOCATION POLICY
I. INTRODUCTION.
------------
This policy sets forth the procedures to be used to: (i) aggregate client
and Trust orders for the same security; (ii) aggregate orders for Covered
Accounts with client and Trust orders for the same security; (iii) properly
allocate securities that have been aggregated; and (iv) deal with directed
orders by client. Because each client's and the Trust's portfolio are
individually managed and have many objectives and restrictions, it is not
always possible for all managers to transact client and Trust orders in the
same security that other managers are trading at the same time on a given
day or even on the same day. BAI does recognize its obligation to ensure
that all clients with similar objectives, restrictions and procedures and
the Trust are treated as equitably as possible given the practical
restraints that confront each manager. It is our intention, that to the
best of our ability, that no client or the Trust is disadvantaged in any
way.
II. PLACEMENT OF ORDERS.
-------------------
All client and Trust orders shall be coordinated to the extent possible and
executed, subject to the following exception:
All orders for a Covered Account (as defined in the BAI/The Barrett Funds
Code of Ethics) shall be aggregated with client and Trust orders for the
same security. Orders for an Access Person's Covered Account executed
after a client order in the same security but in the morning or afternoon
on the same day will, if possible, be aggregated and allocated in
accordance with Section III below. Directed brokerage trades for Access
Persons need not be aggregated with client or Trust trades if no client or
Trust trades were executed with the same broker at the directed brokerage
firm on the trade date.
III. AGGREGATION AND ALLOCATION OF ORDERS.
------------------------------------
Aggregation of orders shall be made only in accordance with this Section.
The Allocation Statement (or order ticket) is used to set forth the
accounts participating in the aggregation and the intended manner of
allocation of the aggregated order among participating accounts.
A. Filling Orders.
--------------
Aggregation will be made twice per day: once for trades executed
before 12:00 p.m. (noon) and once for trades aggregated after 12:00
p.m. Unless otherwise specified, all allocations of aggregated orders
shall be made in accordance with the designations made by the
portfolio managers. Each participating account shall receive the
average price of the security executed. All participating accounts
shall share any brokerage costs or other expenses of the order on a
pro rata basis, based on order size, except as provided in Section
III(E) below. Directed brokerage trades for Access Persons need not
be aggregated if no client or Trust trades were executed with the same
broker at the brokerage firm on the trade date.
B. Partial Fills.
-------------
If an aggregated order is not completely filled during the day on
which the order is entered, the aggregated order shall be allocated
among participating accounts on a pro rata basis, based on order size.
No trade for an Access Person will participate in partial fills.
C. Non-Pro Rata Allocations.
------------------------
A non-pro rata allocation of a partial fill may be made if it is
determined that the pro rata allocation is not appropriate for an
account. In such case the allocation statement shall be amended to
set forth the revised method of allocation and the reason(s) for the
revision. In addition, allocations based on filling to completion the
orders of the smallest accounts is permissible.
D. Allocation of IPOs.
------------------
An allocation of an initial public offering ("IPO") shall take into
consideration a client's or the Trust's permitted policies, investment
objective, suitability and value in context of a client's or the
Trust's portfolio. This may result in some clients or the Trust being
given no stock on a particular offering. Access Persons and Covered
Accounts are prohibited by the Code of Ethics from participating in
IPOs.
E. Allocation of Brokerage or Other Expenses.
-----------------------------------------
Brokerage or other expenses of the aggregated order shall be borne by
the participating accounts and the Trust based on the size and expense
attendant to individual client accounts and the Trust.
IV. RECORDKEEPING.
-------------
A. For each order placed for the purchase or sale of a security for any
account or the Trust, whether executed or unexecuted, the portfolio
manager placing such order shall provide the following information
contemporaneously with the initial order, which shall be recorded on
the trade ticket or electronic order:
1. The account(s)/Trust for which the order is being placed,
including the number of shares, principal amount, or dollar
amount being purchased or sold for each account;
2. Any market order or limit order and limit price;
3. The name of any broker-dealer directed to execute the order;
4. The name of the person who placed the order;
5. Any other relevant terms or conditions of the order, including
any priority, special de minimis requirements or other specific
method of allocation among accounts; and
6. The date and time (time-stamped) of entry of the order.
V. DIRECTED ORDERS.
---------------
All directed orders shall be executed in accordance with the direction.
Whenever possible, directed orders shall be aggregated.
Orders for clients with designated brokers will be executed on a "first-in,
first executed basis" in the order these are placed by our managers. This
may result in these clients receiving different prices.
VI. REVIEW OF PROCEDURES.
--------------------
The compliance officer will annually review these procedures to ensure that
they are adequate to prevent any account or the Trust from being
systematically disadvantaged as a result of the aggregation and allocation
of orders.
APPENDIX C
BARRETT ASSOCIATES, INC. (BAI)
THE BARRETT FUNDS (THE "TRUST")
PRECLEARANCE FORM
FOR TRANSACTIONS IN COVERED ACCOUNTS OF ACCESS PERSONS
ACCESS PERSONS MUST COMPLETE THIS PRECLEARANCE FORM PRIOR TO ENGAGING IN ANY
PERSONAL TRANSACTION (UNLESS EXCEPTED BY THE CODE OF ETHICS).
<TABLE>
A. INVESTMENT INFORMATION
Investment Type:
<S> <C> <C>
-------------------------- Issuer ---------- Common -------------------- Debt (indicate issue)
--------------- Ticker ---------- Pfd -------------------- Derivative (indicate type)
B. TRANSACTION INFORMATION
Transaction Type:
------ Buy --------------- Estimated Trade Date -------------------- Estimated Price
------ Sell --------------- Estimated Time -------------------------- Broker/Dealer
------ Short Sale --------------- Quantity --------------------------------- Account Name(s) (or attach list)
</TABLE>
C. UNRESTRICTED SECURITIES
The investment is not the subject of a security restriction AND (please check
all that apply):
----- is not currently held OR is not being purchased or sold by managed
accounts or the Trust
----- is a private placement or an investment of limited availability
AND IF A PURCHASE
I believe it is not an appropriate investment because (please check all that
apply):
----- Investment is too risky
----- Managed Account/Trust is already exposed to industry
----- Investment by the Managed Account/Trust would cause it to exceed its
policy on investment in the securities of a single issuer
----- Insufficient available information about the issuer or available
information is not favorable
----- Investment is outside of the Managed Account's/Trust's permitted
policies (e.g., short selling)
----- Other: ----------------------------
D. RESTRICTED SECURITIES
The investment is a restricted security AND (please check all that apply):
----- is not the subject of a waiting period restriction
----- will be aggregated with Managed Account or Trust orders if any, in
accordance with the BAI Aggregation and Allocation Policy
---
----- is a de minimus trade of 500 shares or less of a stock with a market
capitalization of $1 billion or more
----- no client or Trust trades are being executed at the same brokerage firm
on the trade date during the: (circle) AM PM
Please add any additional factors relevant to a conflict of interest analysis on
an attached page.
--------------------------------------------------------------------------------
REPRESENTATION AND SIGNATURE
By executing this form, I represent that my trading in this investment is not
based on any material nonpublic information. I understand that preclearance
will only be in effect for 24 hours from the date and time of the Compliance
Officer's signature.
----------------------------- -------------------- -------------------
Employee Name (please print) Employee Signature Date
DISPOSITION OF PRECLEARANCE REQUEST
Approved -------- -------------------- ------------------- -----------
Denied ---------- Compliance Officer Date Time
EXHIBIT A
THE BARRETT FUNDS
BARRETT ASSOCIATES, INC.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer:
1. I hereby acknowledge receipt of the Code of Ethics and certify that I have
read and understand it and agree to abide by it. I hereby represent that
all of my personal securities transactions will be effected in compliance
with the Code.
2. I also confirm that I have instructed all brokerage firms where I maintain
an account to supply duplicate copies of my trade confirmations and at
least quarterly brokerage account statements to the Compliance Officer at
Barrett Associates (this requirement excludes Independent Trustees of The
Barrett Funds).
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may
involve Barrett Associates or The Barrett Funds, such as any economic
relationship between my transactions and securities held or to be acquired
by Barrett Associates or The Barrett Funds.
4. I hereby certify that I have never been found liable for, nor guilty of,
insider trading and that no legal proceedings alleging that I have violated
the law on insider trading are now pending or, to my knowledge, threatened
by any person or authority.
5. As of the date below I had a direct or indirect beneficial ownership*<F14>
in the following securities (attach pages if necessary):
Type of Interest
Name of Security Number of Shares (Direct or Indirect)
---------------- ---------------- -------------------
6. I hereby represent that I maintain account(s) as of the date this report is
submitted in which securities are held for my direct or indirect benefit
with the brokers, dealers or banks listed below.
Name and Address of Broker/Dealer
or Bank Maintaining Account Account Number Date Established
--------------------------- --------------- ----------------
Name: ----------------------
Title: ----------------------
Date: ----------------------
*<F14> Beneficial ownership also includes securities held in the name of your
spouse or minor children living in your household.
EXHIBIT B
THE BARRETT FUNDS
BARRETT ASSOCIATES, INC.
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer:
1. I have read and understand the Code of Ethics and recognize that I am
subject thereto in the capacity of an "Access Person."
2. I hereby certify that, during the year ended December 31, ----, I have
complied with the requirements of the Code of Ethics and I have reported
all securities transactions required to be reported pursuant to the Code of
Ethics.
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may
involve The Barrett Funds, such as any economic relationship between my
transactions and securities held or to be acquired by the Trust or any of
its Series.
4. As of December 31, ----, I had a direct or indirect beneficial
ownership*<F15> in the following securities:
Type of Interest
Name of Security Number of Shares (Direct or Indirect)
---------------- ---------------- -------------------
5. I hereby represent that I maintain the account(s) listed below in which
securities are held for my direct or indirect benefit with the brokers,
dealers or banks listed below.
Name and Address of Broker/Dealer
or Bank Maintaining Account Account Number Date Established
--------------------------- -------------- ----------------
Name: ------------------------
Title: ------------------------
Date: ------------------------
*<F15> Beneficial ownership also includes securities held in the name of your
spouse or minor children living in your household.
