Exhibit (p)(1)
Brazos Insurance Funds
(the "Trust")
CODE OF ETHICS
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I. LEGAL REQUIREMENT.
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Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for any officer or trustee of the Trust in
connection with the purchase or sale by such person of a security "held or to be
acquired" by the Trust:
1. To employ any 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 under
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 any manipulative practice with respect to the
Trust's investment portfolios.
II. PURPOSE OF THE CODE OF ETHICS.
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The Trust expects that its officers and trustees will conduct their
personal investment activities in accordance with (1) the duty at all times to
place the interests of the Trust's shareholders first, (2) the requirement that
all personal securities transactions be conducted consistent with this Code of
Ethics and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility,
and (3) the fundamental standard that investment company personnel should not
take inappropriate advantage of their positions.
In view of the foregoing, the provisions of Section 17(j) of the 1940
Act, the Securities and Exchange Commission's 1940 Act Release No. 23958
"Personal Investment Activities of Investment Company Personnel" (August 24,
1999), the "Report of the Advisory Group on Personal Investing" issued by the
Investment Company Institute on May 9, 1994 and the Securities and Exchange
Commission's September 1994 Report on "Personal Investment Activities of
Investment Company Personnel," the Trust has determined to adopt this Code of
Ethics on behalf of the Trust to specify a code of conduct for certain types of
personal securities transactions which might involve conflicts of interest or an
appearance of impropriety, and to establish reporting requirements and
enforcement procedures.
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III. DEFINITIONS.
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A. An "Access Person" means: (1) each trustee or officer of the Trust;
(2) each employee (if any) of the Trust (or of any company in a control
relationship to the Trust) who, in connection with his or her regular functions
or duties, makes, participates in, or obtains information 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; and (3) any natural
person in a control relationship to the Trust who obtains information concerning
recommendations made to the Trust with regard to the purchase or sale of a
security.
For purposes of this Code of Ethics, an "Access Person" does
not include any person who is subject to the securities
transaction pre-clearance requirements and securities
transaction reporting requirements of the Code of Ethics
adopted by the Trust's investment adviser or principal
underwriter in compliance with Rule 17j-1 under the 1940 Act.
B. "Restricted Trustee" or "Restricted Officer" means each trustee or
officer of the Trust who is not also a trustee, officer, partner, employee or
controlling person of the Trust's investment adviser, administrator, custodian,
transfer agent, or distributor.
C. An Access Person's "immediate family" includes a spouse, minor
children and adults living in the same household as the Access Person.
D. A security is "held or to be acquired" if within the most recent 15
days it (1) is or has been held by the Trust, or (2) is being or has been
considered by the Trust or its investment adviser for purchase by the Trust. A
purchase or sale includes the writing of an option to purchase or sell and any
security that is exchangeable for or convertible into any security that is held
or to be acquired by the Trust.
E. An "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which, immediately
before the registration, was not subject to the reporting requirements of
Sections 13 or 15(d) of the Securities Exchange Act of 1934.
F. "Investment Personnel" of the Trust means:
(i) Any employee of the Trust (or of any company in a control
relationship to the Trust) who, in connection with his or
her regular functions or duties, makes or participates in
making recommendations regarding the purchase or sale of
securities by the Trust.
(ii) Any natural person who controls the Trust and who obtains
information concerning recommendations made to the Trust
regarding the purchase or sale of securities by the Trust.
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G. A "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) or
Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 under the Securities
Act of 1933.
H. "Covered Security" means a security as defined in Section 2(a)(36)
of the 1940 Act, except that it does not include direct obligations of the
Government of the United States; bankers' acceptances; bank certificates of
deposit; commercial paper; high quality short-term debt instruments (any
instrument having a maturity at issuance of less than 366 days and that is rated
in one of the two highest rating categories by a nationally recognized
statistical rating organization), including repurchase agreements; and shares of
registered open-end investment companies.
I. "De Minimis Security" means securities issued by any company
included in the Standard and Poor's 500 Stock Index and in an amount less than
$10,000.
IV. POLICIES OF THE TRUST REGARDING PERSONAL SECURITIES TRANSACTIONS.
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A. GENERAL POLICY.
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No Access Person of the Trust shall engage in any act, practice
or course of business that would violate the provisions of Rule 17j-1(b) set
forth above, or in connection with any personal investment activity, engage in
conduct inconsistent with this Code of Ethics.
B. SPECIFIC POLICIES.
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1. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY ACCESS PERSONS
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OTHER THAN RESTRICTED TRUSTEES AND RESTRICTED OFFICERS.
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a. Except as provided below in paragraph IV.B.1.d., no Access Person
who is not a Restricted Trustee or Restricted Officer may buy or sell Covered
Securities for his or her personal portfolio or the portfolio of a member of his
or her immediate family without obtaining oral authorization from the Compliance
Officer of the Trust's investment adviser PRIOR to effecting such security
transaction.
A written authorization for such security transaction will be
provided by the investment adviser's Compliance Officer to the
person receiving the authorization (if granted) and maintained by
the Trust's Compliance Officer to memorialize the oral
authorization that was granted.
NOTE: If an Access Person has questions as to whether
purchasing or selling a security for his or her personal
portfolio or the portfolio of a member of his or her
immediate family requires prior oral authorization, the
Access Person should consult the investment adviser's
Compliance Officer for clearance or denial of clearance to
trade PRIOR to effecting any securities transactions.
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b. Pre-clearance approval under paragraph (a) will expire at the
close of business on the trading day after the date on which oral authorization
is received, and the Access Person is required to renew clearance for the
transaction if the trade is not completed before the authority expires.
c. No clearance will be given to an Access Person other than a
Restricted Trustee or Restricted Officer to purchase or sell any Covered
Security (1) on a day when any portfolio of the Trust has a pending "buy" or
"sell" order in that same Covered Security until that order is executed or
withdrawn or (2) when the Compliance Officer has been advised by the investment
adviser that the same Covered Security is being considered for purchase or sale
for any portfolio of the Trust.
d. The pre-clearance requirements contained in paragraph IV.B.1.a,
above, shall not apply to the following securities ("Exempt Securities"):
i. Securities that are not Covered Securities;
ii. De Minimis Securities;
iii. Securities purchased or sold in any account over which
the Access Person has no direct or indirect influence or
control.
iv. Securities purchased or sold in a transaction which is
non-volitional on the part of either the Access Person or
the Trust.
v. Securities acquired as a part of an automatic dividend
reinvestment plan.
vi. Securities acquired 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.
vii. Securities which the Trust's investment portfolios are
not permitted to purchase under the investment objectives
and policies set forth in the Trust's then current
prospectus(es) under the Securities Act of 1933 or the
Trust's registration statement on Form N-1A.
e. The pre-clearance requirement contained in paragraph IV.B.1.a,
above, shall apply to ALL purchases of a beneficial interest in any security
through an Initial Public Offering or a Limited Offering by any Access Person
who is also classified as Investment Personnel. A record of any decision and the
reason supporting such decision to approve the acquisition by Investment
Personnel of Initial Public Offerings or Limited Offerings shall be made by the
Compliance Officer.
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2. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY RESTRICTED TRUSTEES AND
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RESTRICTED OFFICERS.
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The Trust recognizes that a Restricted Trustee and a Restricted
Officer do not have on-going, day-to-day involvement with the
operations of the Trust. In addition, it has been the practice
of the Trust to give information about securities purchased or
sold by the Trust or considered for purchase or sale by the
Trust to Restricted Trustees and Restricted Officers in
materials circulated more than 15 days after such securities
are purchased or sold by the Trust or are considered for
purchase or sale by the Trust. Accordingly, the Trust believes
that less stringent controls are appropriate for Restricted
Trustees and Restricted Officers, as follows:
a. The securities pre-clearance requirement contained in
paragraph IV.B.1.a. above shall only apply to a Restricted Trustee or Restricted
Officer if he or she knew or, in the ordinary course of fulfilling his or her
official duties as a trustee or officer, should have known, that during the
fifteen day period before the transaction in a Covered Security (other than an
Exempt Security) or at the time of the transaction that the Covered Security
purchased or sold by him or her other than an Exempt Security was also purchased
or sold by the Trust or considered for the purchase or sale by the Trust.
b. If the pre-clearance provisions of the preceding paragraph
apply, no clearance will be given to a Restricted Trustee or Restricted Officer
to purchase or sell any Covered Security (1) on a day when any portfolio of the
Trust has a pending "buy" or "sell" order in that same Covered Security until
that order is executed or withdrawn or (2) when the Compliance Officer has been
advised by the investment adviser that the same Covered Security is being
considered for purchase or sale for any portfolio of the Trust.
V. PROCEDURES.
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In order to provide the Trust with information to enable it to
determine with reasonable assurance whether the provisions of this Code are
being observed by its Access Persons:
A. Each Access Person of the Trust other than a trustee who is not an
"interested person" of the Trust (as defined in the 1940 Act) will submit to the
Trust's Compliance Officer an Initial Holdings Report in the form attached
hereto as Exhibit A that lists ALL Covered Securities beneficially owned1 by the
Access Person except as stated below. This report must be
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1. You will be treated as the "beneficial owner" of a security under this
policy only if you have a direct or indirect pecuniary interest in the security.
(a) A direct pecuniary interest is the opportunity, directly or indirectly,
to profit, or to share the profit, from the transaction.
(continued...)
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submitted within ten days of becoming an Access Person (or for persons already
designated as Access Person within 10 days of the adoption of this Code of
Ethics), and must include the title of each security, the number of shares held,
and the principal amount of the security. The Report must also include a list
of any securities accounts maintained with any broker, dealer or bank.
B. Each Access Person of the Trust other than a trustee who is not an
"interested person" of the Trust (as defined in the 1940 Act) will also submit
to the Trust's Compliance Officer an Annual Holdings Report attached hereto as
Exhibit A no later than thirty days after the end of the calendar year. Except
as stated below, the Annual Holdings Report must list ALL Covered Securities
beneficially owned by the Access Person, the title of each security, the number
of shares held, and the principal amount of the security, as well as a list of
any securities accounts maintained with any broker, dealer or bank.
C. Each Access Person of the Trust other than a Restricted Trustee or
Restricted Officer shall direct his or her broker to supply to the Trust's
Compliance Officer, on a timely basis, duplicate copies of confirmations of all
securities transactions in which the person has, or by reason of such
transaction acquires any direct or indirect beneficial ownership and copies of
periodic statements for all securities accounts.
D. Except as stated below, each Access Person of the Trust, other than
a trustee who is not an "interested person" (as defined in the 1940 Act), shall
submit reports in the form attached hereto as Exhibit B to the Trust's
Compliance Officer, showing all transactions in Covered Securities in which the
person has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership, as well as all accounts established with brokers, dealers
or banks during the quarter in which any Covered Securities were held for the
direct or indirect beneficial interest of the Access Person.(2) Such reports
shall be filed no later than 10 days after the end of each calendar quarter.
An Access Person of the Trust need not make a quarterly transaction report under
this paragraph if all of the information required by this paragraph V.D. is
contained in the brokerage confirmations or account statements required to be
submitted under paragraph V.C. and is received by the Trust's Compliance Officer
in the time period stated above.
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(...continued)
(b) An indirect pecuniary interest is any nondirect financial
interest, but is specifically defined in the rules to include
securities held by members of your immediate family sharing the
same household; securities held by a partnership of which you are
a general partner; securities held by a trust of which you are
the settlor if you can revoke the trust without the consent of
another person, or a beneficiary if you have or share investment
control with the trustee; and equity securities which may be
acquired upon exercise of an option or other right, or through
conversion.
For interpretive guidance on this test, you should consult
counsel.
2. See footnote 1 above.
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E. Each trustee who is not an "interested person" of the Trust need
not make an initial or annual holdings report but shall submit the same
quarterly report as required under paragraph V.D. to the Trust's Compliance
Officer, but only for a transaction in a Covered Security (except as stated
below) where he or she knew at the time of the transaction or, in the ordinary
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, such Covered Security is or was purchased or sold, or considered
for purchase or sale, by the Trust.
F. The reporting requirements of this Section V do not apply to
securities transactions effected for, and any Covered Securities held in, any
account over which an Access Person does not have any direct or indirect
influence or control.
G. The Trust's Compliance Officer shall notify each Access Person of
the Trust who may be subject to the pre-clearance requirement or required to
make reports pursuant to this Code that such person is subject to the
pre-clearance or reporting requirements and shall deliver a copy of this Code to
each such person.
H. The Trust's Compliance Officer shall review the initial holdings
reports, annual holdings reports, and quarterly transaction reports received,
and as appropriate compare the reports with the pre-clearance authorization
received, and report to the Trust's Board of Trustees:
a. with respect to any transaction that appears to evidence a
possible violation of this Code; and
b. apparent violations of the reporting requirement stated herein.
I. The Board shall consider reports made to it hereunder and shall
determine whether the policies established in Sections IV and V of this Code of
Ethics have been violated, and what sanctions, if any, should be imposed on the
violator, including but not limited to a letter of censure, suspension or
termination of the employment of the violator, or the unwinding of the
transaction and the disgorgement of any profits to the Trust. The Board shall
review the operation of this Code of Ethics at least once a year.
J. The Trust's investment adviser and principal underwriter shall
adopt, maintain and enforce separate codes of ethics with respect to their
personnel in compliance with Rule 17j-1 under the 1940 Act, and shall forward to
the Trust's Compliance Officer and the Trust's counsel copies of such codes and
all future amendments and modifications thereto. The Board of Trustees,
including a majority of the trustees who are not "interested persons" of the
Trust (as defined in the 1940 Act), shall approve this Code of Ethics, and the
codes of ethics of each investment adviser and principal underwriter of the
Trust, and any material amendments to such codes. Such approval must be based on
a determination that such codes contain provisions reasonably necessary to
prevent Access Persons of the Trust from engaging in any conduct prohibited
under such codes and under Rule 17j-1 under the 1940 Act. The Board shall review
and approve such codes at least once a year. Furthermore, any material changes
to an investment adviser's or principal underwriter's code will be approved by
the Board at the next scheduled quarterly board meeting and in no case more than
six months after such change. Before approving any material amendments to the
investment adviser's or principal underwriter's code
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of ethics, the Board must receive a certification from the investment adviser or
principal underwriter that it has adopted procedures reasonably necessary to
prevent Access Persons from violating its code of ethics and under Rule 17j-1
under the 1940 Act.
K. At each quarterly Board of Trustees' meeting the Trust's Compliance
Officer, investment adviser and principal underwriter of the Trust shall provide
a written report to the Trust's Board of Trustees stating:
a. any reported securities transaction that occurred during the
prior quarter that may have been inconsistent with the provisions of the codes
of ethics adopted by the Trust's investment adviser or principal underwriter;
and
b. all disciplinary actions(3) taken in response to such
violations.
L. At least once a year, the Trust's Compliance Officer shall provide
to the Board with respect to this Code of Ethics, and the Trust's investment
adviser and the Trust's principal underwriter shall provide to the Board with
respect to their codes of ethics, a written report which contains: (a) a summary
of existing procedures concerning personal investing by advisory persons and any
changes in the procedures during the past year; (b) an evaluation of current
compliance procedures and a report on any recommended changes in existing
restrictions or procedures based upon the Trust's experience under this Code of
Ethics, industry practices, or developments in applicable laws and regulations;
(c) describes any issues arising under the code of ethics or procedures since
the last report, including but not limited to, information about material
violations of the code or procedures and sanctions imposed in response to
material violations; and (d) a certification that the procedures which have been
adopted are those reasonably necessary to prevent Access Persons from violating
the respective Codes of Ethics.
M. This Code, the codes of the investment adviser and principal
underwriter, a record of any violation of such codes and any action taken as a
result of the violation, a copy of each report by an Access Person, any written
report hereunder by the Trust's Compliance Officer, investment adviser or
principal underwriter, records of approvals relating to Initial Public Offerings
and Limited Offerings, lists of all persons required to make reports and a list
of all persons responsible for reviewing such reports shall be preserved with
the Trust's records for the period and in the manner required by Rule 17j-1.
VI. CERTIFICATION.
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3. Disciplinary action includes but is not limited to any action that has a
material financial effect upon the employee, such as fining, suspending, or
demoting the employee, imposing a substantial fine or requiring the disgorgement
of profits.
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Each Access Person will be required to certify annually that he or she
has read and understood this Code of Ethics, and will abide by it. Each Access
Person will further certify that he or she has disclosed or reported all
personal securities transactions required to be disclosed or reported under the
Code of Ethics. A form of such certification is attached hereto as Exhibit B.
The Board of Trustees of Brazos Insurance Funds
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EXHIBIT A
BRAZOS INSURANCE FUNDS
HOLDINGS REPORT
For the Year/Period Ended ___________________________
(month/day/year)
[ ] Check Here if this is an Initial Holdings Report
To: Compliance Officer of Brazos Insurance Funds
As of the calendar year/period referred to above, I have a
direct or indirect beneficial ownership interest in the securities listed below
which are required to be reported pursuant to the Code of Ethics of the Trust:
Title of Number Principal
Security of Shares Amount
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The name of any broker, dealer or bank with whom I maintain an
account in which my securities are held for my direct or indirect benefit are as
follows:
THIS REPORT (I) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I
HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (II) EXCLUDES OTHER TRANSACTIONS
NOT REQUIRED TO BE REPORTED, AND (III) IS NOT AN ADMISSION THAT I HAVE OR HAD
ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE.
Date: Signature:
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Print Name:
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EXHIBIT B
BRAZOS INSURANCE FUNDS
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended _______________________
(month/day/year)
To: Compliance Officer of Brazos Insurance Funds
During the quarter referred to above, the following
transactions were effected in securities of which I had, or by reason of such
transactions acquired, direct or indirect beneficial ownership, and which are
required to be reported pursuant to the Code of Ethics of the Trust:
<TABLE>
<CAPTION>
Nature of Broker/Dealer
Interest Rate Transaction or Bank
Date of Number of Principal and Maturity (Purchase, Through Whom
Security Transaction Shares Amount Date (if applicable) Sale, Other) Price Effected
-------- ----------- ------ ------- -------------------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
During the quarter referred to above, I established the
following accounts in which securities were held during the quarter for my
direct or indirect benefit:
1. The name of the broker, dealer or bank with whom I
established the account:
2. The date the account was established:
THIS REPORT (I) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I
HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (II) EXCLUDES OTHER TRANSACTIONS
NOT REQUIRED TO BE REPORTED, AND (III) IS NOT AN ADMISSION THAT I HAVE OR HAD
ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE.
Date: Signature:
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Print Name:
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EXHIBIT C
BRAZOS INSURANCE FUNDS
ANNUAL CERTIFICATE
Pursuant to the requirements of the Code of Ethics of Brazos
Insurance Funds, the undersigned hereby certifies as follows:
1. I have read the Trust's Code of Ethics.
2. I understand the Code of Ethics and acknowledge that I
am subject to it.
3. Since the date of the last Annual Certificate (if
any) given pursuant to the Code of Ethics, I have
reported all personal securities transactions and
provided any securities holding reports required to be
reported under the requirements of the Code of Ethics.
Date:
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Print Name
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Signature
