Ingenuity Capital Management, LLC
&
Marketocracy Funds
Code of Ethics
Last Updated: August 11, 2000
Code of Ethics
This Code of Ethics has been established for Ingenuity Capital
Management, LLC (the "Adviser") and Marketocracy Funds (the "Trust") primarily
for the purpose of establishing rules for Adviser and Trust employees, officers
and trustees with respect to their personal securities transactions. The Adviser
and Trust are required to adopt a code of ethics in accord with Rule 17j-1 under
the Investment Company Act of 1940 (the "1940 Act"). That Rule is applicable
because the Trust is a registered investment company.
The investment company industry is closely regulated under the
provisions of the 1940 Act, and by the regulations and interpretations of the
Securities and Exchange Commission ("SEC") under those statutes. Transactions in
securities are also governed by the provisions of the Securities Act of 1933
(the "Securities Act") the Securities Exchange Act of 1934 (the "Exchange Act"),
and the Investment Advisers Act of 1940 ("Advisers Act"), as well as by state
laws. The rules of conduct set forth in this Code are based in large part on
rules of law and legal concepts developed under those statutes. These legal
concepts do not remain static, and further developments of the law in these
areas may be expected. We believe that it is our job to conduct our business so
as to avoid not only any violation of law but also any appearance of violation
or ground for criticism.
For your guidance, some of the most important legal concepts within
which we operate are mentioned below.
A. Fiduciary Duty
Investment company employees, officers and trustees owe a fiduciary
duty to fund shareholders. This means a duty of loyalty, fairness and good faith
toward the shareholders, and a corresponding duty not to do anything prejudicial
to or in conflict with the interests of the shareholders. This is a higher
standard than that applicable to ordinary arm's length business transactions
between persons who do not owe a fiduciary duty to the other parties.
B. Fraud and Deceit; Inside Information
The various laws administered by the SEC contain very broad provisions
prohibiting fraud or deceit or "any manipulative or deceptive device or
contrivance" in connection with securities transactions and giving of investment
advice it is under these broad general provisions that the SEC and private
individuals have successfully brought many of the important cases in the
securities field that have received so much publicity in recent years, including
cases on improper use of material non-public "inside" information.
C. Manipulation
Care must always be taken to avoid market manipulation of securities,
which is strictly prohibited by law.
D. Penalties
Under the various federal and state securities statutes, penalties that
may be imposed for violations include civil liability for damages, temporary
suspension or permanent prohibition from engaging in various aspects of the
securities or investment advisory businesses and criminal penalties.
E. General
The Code of Ethics covers two general topic areas. The first portion of
this Code of Ethics includes some broad prohibitions against fraudulent conduct
in connection with the Adviser or Trust. Because fraudulent conduct can take
many forms, as noted above, the Code cannot reasonably include an all-inclusive
list of actions or omissions which are the only matters covered. Further, these
general prohibitions are basically the same as those in the federal securities
laws, and are intended to reflect the expansive and flexible nature of the
restrictions which are applicable to our activities.
The second portion of this Code of Ethics does include specific rules
and restrictions with respect to personal securities transactions. These
restrictions have been adopted for the purpose of better avoiding any conflicts
of interest, or any appearances of conflicts of interest, between the securities
trading which the Trust undertakes on its own behalf and personal securities
trading by the employees, officers and trustees of the Trust. The rules are
intended to better assure that trading on behalf of clients is given priority
over trading for personal ac-counts, and that trading for personal accounts does
not take place at a time which could adversely affect the trading for clients.
F. Reports
As required by the 1940 Act, most persons covered by this Code of
Ethics are also required to file with the Trust quarterly reports of their
personal securities transactions. These reports will be reviewed by the Chief
Compliance Officer of the Trust to determine whether the information suggests
any possible violation of this Code of Ethics. These reports also are reviewed
by the staff of the SEC when the SEC undertakes compliance examinations of the
Trust. In addition to better ensuring compliance with this Code, the reporting
requirements serve to create greater consciousness of possible conflicts and, at
the same time, provide a means to detect and correct possible problems. The
reporting system is an essential part of this Code and must be strictly adhered
to, without exception.
G. Persons Subject to the Code of Ethics
The operations of the Code of Ethics covers all persons who fit within
the definition of "Access Person", as defined below. The enforcement of these
rules and procedures is the responsibility of the Chief Compliance Officer. As
this Code emphasizes, personal trading must always be carried on in good
judgment and good faith. It is obvious that all possible situations cannot be
covered by this Code and that under special circumstances exceptions may
occasionally be appropriate. Any Access Person contemplating a transaction as to
which he or she may have any doubt, or anyone who has any other question as to
any part of this Code or our policy, should consult with the Chief Compliance
Officer. If the Chief Compliance Officer is absent or unavailable, his office
will be able to refer you to a senior officer of the Trust for assistance in
this regard.
1. DEFINITIONS
1.1 Access Person any director, trustee, officer or Advisory Person of the
Trust or the Adviser.
1.2 Advisory Person
(a) any employee of the Trust or of the Adviser (or of any company in
a control relationship to the Trust or the Adviser) who, in
connection with his or her regular functions or duties, makes any
recommendation, who participates in the determination of which
recommendation shall be made, or whose functions or duties relate
to the determination of which recommendations shall be made
regarding the purchase or sale of a security by the Trust, or
whose functions relate to the making of any recommendations with
respect to such purchases or sales or any employee who, in
connection with his or her duties, obtains any information
concerning which securities are being recommended prior to the
effective dissemination of such recommendations or of the
information concerning such recommendations;
(b) any natural person in a control relationship with the
Trust or the Adviser (such as a director or trustee) who
obtains information concerning recommendations made to the
Trust with regard to the purchase or sale of a security;
and
(c) any of the following persons who obtain information
concerning securities recommendations being made to the
Trust by the Adviser prior to the effective dissemination
of such recommendations:
(i) any person controlling, controlled by or under common
control with the Adviser or the Trust,
(ii) any affiliated person of such person, and
(iii) any affiliated person of such affiliated person.
1.3 Affiliated Person of Another Person
(a) any person directly or indirectly owning, controlling, or
holding with power to vote, 5% or more of the outstanding
voting securities of such other person;
(b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled,
or held with power to vote, by such other person;
(c) any person directly or indirectly controlling, controlled by, or
under common controlled with, such other person; and
(d) any officer, director, partner, co-partner or employee of such
other person.
1.4 Beneficial Ownership
Interpreted in the same manner as it would be in determining whether a
person is subject to the provisions of Section 16 of the Exchange Act.
"Beneficial ownership" includes accounts of a spouse, minor children and
relatives resident in the home of the Access Person, as well as ac-counts of
another person if by reason of any contract, understanding, relationship,
agreement or other arrangement the Access Person obtains therefrom benefits
substantially equivalent to those of ownership.
1.5 Control
The power to exercise a controlling influence over the management or
policies of a company, unless such power is solely the result of an official
position with such company. Any person who owns beneficially, either directly or
through one or more controlled companies, more than 25% of the voting securities
of a company is presumed to control such company.
1.6 Disinterested Trustee
A director or trustee of the Trust who is not an "interested person" of
the Trust within the meaning of Section 2(a)(19) of the 1940 Act.
1.7 Purchase or Sale of a Security
Includes, among other acts, the writing or acquisition of an option to
purchase or sell a security.
1.8 Security
"Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, and shall include: equity and debt securities; options on and warrants
to purchase equity or debt securities; shares of closed-end investment
companies; and Related Securities. "Related Securities" are instruments and
securities that are related to, but not the same as, a Security. For example, a
Related Security may be convertible into a Security, or give its holder the
right to purchase the Security. For purposes of reporting, "Security" shall
include futures contracts. "Security" shall not include: securities issued by
the Government of the United States (including short term debt securities which
are U.S. government securities pursuant to Section 2(a)(16) of the 1940 Act);
bankers' acceptances; bank certificates of deposit; commercial paper; shares of
registered open-end investment companies; Securities which are not eligible for
purchase or sale by the Fund (including any Securities representing an ownership
interest in the Fund's principal underwriter and proprietary investment
adviser); and such other instruments as may be determined by the Fund's Board of
Trustees, from time to time.
2. GENERAL RESTRICTIONS
2.1 No Access Person may:
(a) employ any device, scheme or artifice to defraud the Adviser or
Trust;
(b) make to the Adviser or Trust any untrue statement of a
material fact or omit to state to such client a material
fact necessary in order to make the statements made in
light of the circumstances under which they are made, not
misleading;
(c) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Adviser or Trust;
or
(d) engage in any manipulative practice with respect to the Adviser
or Trust.
2.2 Personal Trading Prohibitions
The following rules are intended to prevent any suggestion or
implication that Access Persons are using their relationship with the Adviser or
Trust to obtain advantageous treatment to the detriment of the interests of the
Trust.
(a) Hot Issues. No Access Person may purchase any security in any
public offering that may be construed as a "hot issue."
(b) When the Trust Holds Restricted Securities. If the Trust
holds or is considering the purchase of restricted
securities, no Access Person shall purchase any securities
of that issuer (either publicly or privately) except with
the prior permission of the Chief Compliance Officer. A
list of these issuers is available from the Chief
Compliance Officer.
(c) Dealings With the Trust. No Access Person may knowingly sell any
portfolio security to the Trust or knowingly purchase any
portfolio security from the Trust.
3. PERSONAL SECURITIES TRANSACTIONS SUBJECT TO RESTRICTIONS
3.1 Direct or Indirect Beneficial Ownership Purchases and sales of
securities (other than securities, or transactions in securities,
described in Sections 3.3 or 3.4 below) by an Access Person for his
or her own account, for the account of a member of his or her family or
for any account in which such Access Person or a member of his or her
family may have a direct or indirect beneficial ownership interest, are
subject to the personal securities transaction rules described in
section 4 hereof. Most of such transactions are also subject to the
reporting requirements of Section 5 hereof.
3.2 Special Rule for Disinterested Trustees
Notwithstanding subsection 3.1 above, transactions in securities by
Disinterested Trustees of the Trust are not subject to the requirements of
Sections 4 and 5 hereof if the Disinterested Trustee is an Access Person solely
by reason of his or her trusteeship with the Trust, except where at the time of
such transactions such Disinterested Trustee knew, or in the ordinary course of
fulfilling his or her official duties as a Disinterested Trustee should have
known, that such a transaction would violate the rules described in section 4
hereof. Most of such transactions are also subject to the reporting requirements
of Section 5 hereof.
3.3 Exempted Transactions
Notwithstanding subsections 3.1 and 3.2, the following transactions are
exempted from the requirements of Section 4 hereof:
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or
control. Employer-sponsored automatic investment programs
fall in this category.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Trust.
(c) Purchases or sales which are nonvolitional on the part of the
Access Person or the Trust.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from
such issuer, and sales of such rights so acquired.
(f) Purchases or sales which receive the prior approval of the
Chief Compliance Officer on the basis that the potential
for harm to the Trust is remote because the transactions
would be very unlikely to affect market price or
liquidity, or because they clearly are not related
economically to the securities to be purchased, sold or
held by the Trust.
4. RESTRICTIONS ON TIMING OF PERSONAL SECURITIES TRANSACTIONS
The following are specific restrictions relating to personal securities
transactions. As described below, these restrictions are applicable with regard
to particular securities and particular transactions based upon those securities
then being actively traded, or actively considered for trading, on behalf of the
Trust.
4.1 Purchases or Sales of Securities
(a) Block Trading. An Access Person may trade in the same security
on the same day as the Trust under the following conditions:
(i) the Access Person and the Trust trade in the
same security on the same day through the
same brokerage getting the same average
execution for all trades in that security.
(ii) contrary trades are not allowed on the same day (i.e.
Trust security purchases can not be blocked with
Access Person sales and vice versa).
(iii) the brokerage must have the capability to
maintain a holding account which enables
Access Persons and the Trust to get the
exact same average execution for all trades
in a specific security on a specific day.
(iv) for agency trades through brokerages where
the Access Person's commission rate is
higher than the Trust's, if the brokerage's
systems are able to support it, the Access
Person should pay the higher commission rate
for their trades.
(v) when the Trust trades in the same security
through multiple brokerages on a given day,
the Access Person will get the average
execution through the single brokerage where
both they and the Trust traded, which won't
necessarily be the Trust's average execution
across all brokerages for that security.
(b) Front or Back Running
Except in the case of the previously described "block trade", an Access
Person may not knowingly purchase a security within one day of the Trust's
trades in that same security (I.E. IF THE TRUST TRADES ON A GIVEN WEDNESDAY, AN
ACCESS PERSON MAY TRADE ON A GIVEN MONDAY OR FRIDAY, BUT NOT ON TUESDAY,
WEDNESDAY OR THURSDAY).
An Access Person may not knowingly trade in a security which is under
active buy or sell consideration by the Trust.
Exceptions are granted in the following circumstances:
(i) Upon written approval from at least two
officers of the Trust or Adviser, the Trust
may trade in a security one day or less
after an Access Person if there is
significant new market information for that
security or major shareholder redemptions
make it necessary.
(ii) Upon written approval from at least two
officers of the Trust or Adviser, an Access
Person may sell that security less than two
days after the Trust in order to meet margin
calls.
(iii) Block trades are not subject to trade blackout periods.
(iv) Personal trades in securities in companies
with a market capitalization of $1 billion
or more are not subject to front or back
running restrictions.
(c) Holding Period
All Access Person trades must have a holding period of at least 30
days.
Exceptions are granted in the following circumstances:
(i) Personal trades in securities in companies
with a market capitalization of $1 billion
or more are not subject to holding period
restrictions.
(ii) Upon written approval from the Chief
Compliance Officer, an Access Person may
sell a security with less than a 30-day
holding period in order to meet margin
calls.
(iii) An Access Person may sell a security with
less than a 30-day holding period if such
security has an expiration date less than or
close to 30 days after purchase (i.e. an
option on a stock which expires 30 days
after purchase can be sold before expiration
in order to avoid having it automatically
exercised).
(iv) Upon written approval from the Chief
Compliance Officer, an Access Person may
sell a security held less than 30 days after
purchase if significant new market
information for that security make it
prudent.
(v) Securities which have not been held by the
Trust and are not derivatives of any
holdings of the Trust during the period that
an Access Person has held them and are not
under current buy consideration by the Trust
are not subject to the holding period
restrictions.
4.2 Other Transactions
(a) Short Sales
Short sales are permitted by Access Persons provided the requirements
of this Section 4 are met.
(b) Convertible Securities
The foregoing restrictions in this Section 4 also apply to any purchase
or sale of a security which is convertible into or exchangeable or exercisable
for a security that is being purchased or sold, or is actively being considered
for, purchase or sale, for the account of the Trust.
(c) Initial Public Offerings and Limited Offerings
All Access Persons are prohibited from acquiring any security
distributed in an initial public offering and limited offerings, until trading
of the security commences in the secondary market.
5. REPORTING REQUIREMENTS
5.1 Personal Trading Reports
Copies of the personal securities transactions described in Section
3.1, except those subject to the exemption in Section 3.2, must be sent by each
Access Person or their broker, dealer or bank with the Chief Compliance Officer
within ten days after each nonexempt transaction. Each report must contain the
following information:
(a) the date of the transaction, the title and the number of shares
(or the principal amount) of each security involved;
(b) the nature of the transaction (e.g., purchase, sale, option or
any other type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through
whom the transaction was effected. At the option of the
reporting person, the SEC allows such reports to contain a
statement declaring that the reporting of any transaction
is not to be construed as an admission by the reporting
person that he or she has any direct or indirect
beneficial ownership in the security. Using that
disclaimer language may be useful in an unclear situation
to avoid a potential risk in not reporting a transaction
while at the same time avoiding prejudicing any position
the, person may take or later seek to take with respect to
ownership status.
5.2 Exemptions from Reporting
Reports are not required with respect to any transactions:
(a) in securities which are direct obligations of the United States;
(b) in securities of registered open-end investment companies other
than the Trust or the Adviser; or
(c) over which the reporting person does not have any direct
or indirect influence or control. Please note that there
are categories of securities, or particular transactions,
which are not subject to the restrictions of Section 4
(e.g., purchases under an automatic dividend re-investment
plan) but which are subject to the reporting requirement
of Section 5.
6. OTHER RULES
6.1 Inside Information
No Access Person may use any material non-public information, no matter
how acquired, in his or her own transactions or in the discharge of his or her
responsibilities to the Trust.
6.2 Disclosure of Information; Confidentiality
Information about actual purchase or sale decisions, contemplated
purchases or sales, or other transactions under consideration for the Trust,
whether or not actually authorized, must be kept confidential. Research
information on portfolio companies must not be divulged to persons who do not
have a need to know such information in connection with their employment by the
Trust. In addition, information about clients is and must not be disclosed.
Access Persons must use care in keeping information confidential.
6.3 Gifts and Other Preferential Treatment
An Access Person may not in relation to the business of the Adviser or
the Trust seek or accept from any broker or dealer, other financial institution
or supplier or contractor to the Adviser or the Trust either:
(a) any gifts of material value (i.e., in excess of $200 per year)
or
(b) any sort of preferential treatment from, or special arrangements
with, such person or entity.
6.4 Finder's Fees
Access Persons should not become involved in negotiations for corporate
financings, acquisitions or other transactions for outside companies (whether or
not held by any of the clients) without the prior permission of the Chief
Compliance Officer. Specifically, no finder's or similar fee in connection with
any such transactions may be negotiated or accepted without prior permission.
7. SANCTIONS
Careful adherence to this Code is one of the basis conditions of
employment of every Access Person. Any Access Person may be required to give up
any profit or other benefit realized from any transaction in violation of this
Code, and in appropriate cases the Trust may impose other sanctions for conduct
inconsistent with this Code.
In addition, as pointed out in the preamble to this Code, certain
violations of this Code may also involve violation of laws, with the possibility
of civil or criminal penalties. Procedures for Personal Trading Compliance In
order to enforce compliance with all personal trading restrictions described in
this document, all access persons, before making personal trades, must have a
signed statement from the compliance officer specifying that such a personal
trade is in compliance with this document.
ADVISER & TRUST PERSONNEL
MARKETOCRACY FUND
President Kendrick Kam
Secretary Elaine E. Richards
Treasurer Kendrick Kam
Trustees Kendrick Kam
William Scilacci
Arthur Roth
INGENUITY CAPITAL MANAGEMENT, LLC
President Kendrick Kam
Secretary Kendrick Kam
Treasurer Kendrick Kam
Employees None
CHIEF COMPLIANCE OFFICER Kendrick Kam
ACCESS PERSONS Kendrick Kam
DISINTERESTED TRUSTEES Arthur Roth
William Scilacci
