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Item 23(p)(xv)
WILSHIRE ASSOCIATES INCORPORATED
POLICIES AND PROCEDURES
INSIDER TRADING AND SECURITIES FRAUD
ENFORCEMENT ACT OF 1988
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TABLE OF CONTENTS
<TABLE>
<S> <C>
I. BACKGROUND ............................................................................ 1
A. The Law ......................................................................... 1
B. Capsule Description of Wilshire Associates Incorporated ......................... 2
II. WILSHIRES POLICIES AND PROCEDURES
ESTABLISHED PURSUANT TO THE INSIDER TRADING ACT ....................................... 3
A. Implementation date ............................................................. 3
B. Definitions ..................................................................... 3
C. Penalties ....................................................................... 4
D. General Policies and Procedures ................................................. 4
E. Divisional Policies and Procedures .............................................. 9
1. Brokerage Division .................................................... 9
2. Consulting Division ................................................... 9
3. Asset Management Division (WAM) ....................................... 10
4. Investment Management Services Division ............................... 12
Investment Reporting Services Division ................................ 12
5. Information Technology Division ....................................... 12
6. Administrative/Clerical .............................................. 12
F. Admonition about consequences if
employee fails to follow policies and procedures ................................ 12
</TABLE>
("Material Non-public
Information" is
defined on Page 3)
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I. BACKGROUND
A. The Law
The Insider Trading and Securities Fraud Enforcement Act of 1988 (the
"Insider Trading Act"), among other things, amended Section 15 of the
Securities Exchange Act of 1934 by adding the following new subsection
"(f) Every registered broker or dealer shall establish, maintain,
and enforce written policies and procedures reasonably designed,
taking into consideration the nature of such broker's or dealer's
business, to prevent the misuse in violation of this title, or
the rules or regulations thereunder, of material, non-public
information by such broker or dealer or any person associated
with such broker or dealer. The Commission, as it deems necessary
or appropriate in the public interest or for the protection of
investors, shall adopt rules or regulations to require specific
policies or procedures reasonably designed to prevent misuse in
violation of this title (or the rules or regulations thereunder)
of material, non-public information."
The Insider Trading Act also added the following new section to the
Investment Advisers Act of 1940:
"Section 204A. Every investment adviser subject to section 204 of
this title shall establish, maintain, and enforce written
policies and procedures reasonably designed, taking into
consideration the nature of such investment advisers business, to
prevent the misuse in violation of this Act or the Securities
Exchange Act of 1934, or the rules or regulations thereunder, of
material, non-public information by such investment adviser or
any person associated with such investment adviser. The
Commission, as it deems necessary or appropriate in the public
interest or for the protection of investors, shall
("Material Non-public
Information" is
defined on Page 3)
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adopt rules or regulations to require specific policies or
procedures reasonably designed to prevent misuse in violation of
this Act or the Securities Exchange Act of 1934 (or the rules or
regulations thereunder) of material, non-public information."
B. Capsule Description of Wilshire Associates Incorporated
Wilshire Associates Incorporated ("Wilshire") is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a
member firm of the New York Stock Exchange and the American Stock
Exchange. Wilshire is also registered as an investment adviser under
the Investment Advisers Act of 1940.
All of Wilshire's brokerage customers are institutional; Wilshire
conducts no retail brokerage business, nor does Wilshire give
investment advice to individuals. Wilshire's Brokerage Division
executes trades for its customers and for customers introduced by
other registered broker-dealers who have entered a Securities Clearing
Agreement with Wilshire.
Wilshire's Consulting Division provides consulting services to
corporate and governmental pension and retirement plan sponsors,
endowments, foundations, and institutions. The Consulting Division
also provides discretionary asset management services for several high
net worth non-institutional accounts (no transactions for these
clients are placed through Wilshire's brokerage department).
Wilshire's Institutional Services Division provides a variety of
computerized investment analysis services to institutional money
managers, custodians, consultants, and a few plan sponsors.
Wilshire's Asset Management Division primarily manages assets for
institutional clients and for the Wilshire Target Funds, a family of
mutual funds, using index funds and other passive management
techniques. The division also manages accounts for certain high net
worth non-institutional clients, using a "Cash Alternative Account"
strategy that utilizes mutual funds in conjunction with index
futures.
Wilshire's Information Technology Division is responsible for the
operation of Wilshire's computer and communications networks and for
the development and maintenance of financial databases used in various
Wilshire services.
("Material Non-public
Information" is
defined on Page 3)
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II. WILSHIRE'S POLICIES AND PROCEDURES ESTABLISHED PURSUANT TO THE INSIDER
TRADING ACT
A. Implementation date. Policies and procedures under the Insider Trading
Act were implemented as of July 10, 1989 by Wilshire Associates, a
California general partnership which was the predecessor-in-interest
to Wilshire Associates Incorporated, and were most recently amended
effective October 1, 1998.
B. Definitions
The term MATERIAL NON-PUBLIC INFORMATION, as used throughout this
manual of policies and procedures, is defined as follows
MATERIAL information means 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 which is reasonably certain to have an effect on the
price of a company's securities.
Information which should be considered "material" includes, but
is not limited to, dividend changes, earnings estimates, changes
in previously released earnings estimates, significant expansion
or curtailment of operations, a significant increase or decline
in orders, significant new products or discoveries, extraordinary
borrowing, purchase or sale of substantial assets, significant
merger or acquisition proposals or agreements, major litigation,
liquidity problems, and extraordinary management developments.
"Material" information does not have to relate to a company's
business. For example, information about the contents of a
forthcoming newspaper or magazine article which is expected to
affect the price of a security should be considered material.
Similarly, information concerning significant transactions which
Wilshire's Asset Management Division intends to execute on behalf
of funds or managed accounts could be material information and is
prohibited from being communicated.
("Material Nonpublic
Information" is
defined on Page 3)
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Information is NON-PUBLIC until it has been effectively
communicated to the marketplace. One must be able to point to
some fact to show that the information is generally public. For
example, information appearing in the Dow Jones newswire service,
Reuters Economic Services, The Wall Street Journal, or other
publications of general circulation would be considered public.
C. Penalties
Penalties for trading on or communicating material, non-public
information are severe, both for the 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 of up to 10 years;
- 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 benefitted; and
- FINES for the employer or other controlling person of up to the
greater of $1,000,000 or three tines the amount of the profit
gained or loss avoided.
IN ADDITION, ANY VIOLATION OF THESE WILSHIRE POLICIES AND PROCEDURES
MAY RESULT IN SERIOUS SANCTIONS BY WILSHIRE, INCLUDING POSSIBLE
DISMISSAL OF THE PERSONS INVOLVED.
D. General Policies and Procedures. The policies and procedures in this
Section II.D apply to all employees of Wilshire.
1. Objective: Restrict and monitor trading in securities relating to
which Wilshire's employees have, or may have, Material Non-public
Information.
("Material Non-public
Information" is
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Policy: No Wilshire employee is to trade in any security of any
corporate client of Wilshire's Consulting Division (other than
clients of the Wilshire Compass service) or Asset Management
Division ("Restricted Companies"). This policy shall not prohibit
(i) indirect ownership through mutual funds or blind trusts or
(ii) ownership of securities of any Restricted Company acquired
before the employee became a Wilshire employee or before such
company became, or before it was known that such company would
become, a Restricted Company, provided that transactions in any
such securities shall be subject to the prior written consent of
Wilshire's Treasurer or General Counsel.
Implementation Procedures:
a. Dissemination of policy. Each Wilshire employee will be
informed in writing of the prohibition on owning or trading
in any security of a Restricted Company.
b. Client List. Wilshire's accounting office will maintain a
list of all Restricted Companies. Each Wilshire employee
will be provided with this list. The list will be updated
from time to time as companies become, or cease to be,
Restricted Companies. Whenever a company is added to or
removed from the list, an updated list will be circulated to
all Wilshire employees.
c. New clients; securities already owned; indirect
acquisitions. No Wilshire employee who either (1) becomes
the owner of a security of a Restricted Company (i) as the
result of the corporate issuer of the security subsequently
becoming a Restricted Company, (ii) as the result of a
merger, spin-off, etc., (iii) through a gift or inheritance,
or (iv) through any indirect means, or (2) at the time he or
she is hired by Wilshire as a full time employee owns a
security of a Restricted Company, shall engage in any
transactions in such security (for so long as such security
is the security of a Restricted Company and such employee
remains a Wilshire employee) without having requested in
writing, and received, the prior written consent of Alan
Manning or San Slawson, neither of whom may consent for his
or her own account.
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All requests shall be in writing and shall contain, at a
minimum, a description of the proposed transaction, the
reasons for the transaction and the timing thereof, and a
representation that the person who is making the transaction
decision is not in possession of Material Non-public
Information relating thereto and was not in possession of
such information at the time the transaction decision was
made. Any request shall be denied if it is determined that
the person making the transaction decision was in possession
of, or had access to, Material Non-public Information
relating thereto at the time the decision was made. Any
request may be denied if it is determined, from all the
facts and circumstances, that it might appear to a
reasonable person that the person making the transaction
decision was in possession of, or had access to, Material
Non-public Information relating thereto at the time the
decision was made.
Monitoring Procedures (which are conducted in accordance with
Wilshire's Procedures for Compliance with NYSE Rules 342.21,
342.22, and 351(e), and Wilshire's Procedures for Compliance with
Rule 407, copies attached as Appendix A):
(a) Prior written consent to establish outside accounts. All
Wilshire employees must obtain written consent of San
Slawson or Alan Manning prior to opening a securities or
commodities account outside of Wilshire.
(b) Duplicate confirmations. All Wilshire employees with
accounts outside of Wilshire must arrange to have duplicate
confirmations and monthly statements sent to Wilshire's
Accounting Department.
For the purpose of procedures (a) and (b) listed above,
"accounts" include, but are not limited to, the following: (1)
securities and commodities accounts, (2) limited or general
partnership interests in investment partnerships; (3) direct and
indirect participations in joint accounts; and (4) legal
interests in trust accounts.
These policies apply to All accounts in which the employee or any
of his or her immediate family members has a financial interest
or the power to make investment decisions (e.g., at any other
domestic or foreign brokerage firm, whether or not a member firm
of the NYSE, or with any
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investment adviser, bank, or financial institution).
"Immediate family member accounts" include accounts of
husbands, wives, children, sons-in-law, daughters-in-law,
and any household relative.
The requirement to send duplicate confirmations and
statements do not apply to transactions in unit investment
trusts and variable contracts or redeemable securities of
companies registered under the Investment Company Act of
1940, as amended, or to accounts which are limited to
transactions in such securities, or to Monthly Investment
Plan type accounts. HOWEVER, PLEASE NOTE THAT IT IS STILL
NECESSARY TO RECEIVE WRITTEN APPROVAL PRIOR TO OPENING THESE
TYPES OF ACCOUNTS.
c. Review of transactions; compare to lists. Wilshire reviews
the list of securities traded by employees and their
immediate family members against lists maintained by
Wilshire of (i) corporate clients of Wilshire's Consulting
Division and Asset Management Division, and (ii) securities
issues which Wilshire has been advised are subject to
investigation by the various regulatory agencies (normally
in the form of requests for information related to
suspected "insider trading"), and for "day trading". These
reviews will be conducted as described in Appendix A.
d. Investigations and reporting. If there is a match between
the confirmations and either of the lists, or if "day
trading" is detected, the transaction will be investigated.
If any investigation determines that a violation of the law
may have occurred, a written status report will be made to
the New York Stock Exchange and other appropriate regulatory
authorities.
2. Objective: Restrict communication within Wilshire of Material
Non-public Information.
Policies and Procedures: Since only a few of Wilshire's divisions deal
with Material Non-public Information, and since the nature and scope
of employees' involvement with Material Non-public Information differs
substantially from division to division, policies and procedures
related to this objective are mostly covered within the policies and
procedures for specific Wilshire divisions.
The following procedure applies to all Wilshire employees:
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a. Mislaid documents. If any Wilshire employee during the
course of his or her employment happens across any mislaid
document (e.g., a document accidentally left in a photocopy
or facsimile machine or dropped on the floor) that appears
to contain Material Non-public Information, he or she shall
make no copies of the document, but shall immediately give
it to Wilshire's general counsel. The general counsel shall
make no copies of the document but shall attempt to return
it to the person who mislaid it, or, if unable to do so,
shall destroy it.
3. Objective #3: Restrict dissemination outside of Wilshire of
Material Non-public Information.
Policies and Procedures: For the reasons stated above, policies
and procedures related to this objective are covered within the
policies and procedures for specific Wilshire divisions.
4. Objective #4: Restrict access to files likely to contain Material
Non-public Information.
Policies and Procedures: For the reasons stated above, policies
and procedures related to this objective are covered within the
policies and procedures for specific Wilshire divisions.
5. Objective #5: Continuing education of Wilshire employees as to
their responsibilities with respect to inside information.
Policy: Every Wilshire employee shall be made aware of (i) those
Insider Trading Act policies and procedures relating to all
Wilshire employees and (ii) those Insider Trading Act policies
and procedures relating to the Wilshire division in which he or
she works.
Implementing Procedures:
a. On at least an annual basis, every Wilshire employee will
receive a copy of the general policies and procedures
relating to the entire firm and a copy of
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the policies and procedures relating to the division in
which he or she works.
b. As changes are made to any existing policy or procedure or
any new policy or procedure is adopted by Wilshire, all
persons who work in the relevant division(s) will receive a
copy of the change or addition.
c. Each division will meet, on at least an annual basis, to
review the policies and procedures relevant to that
division.
E. Divisional Policies and Procedures. Since only a few of Wilshire's
divisions deal with Material Non-public Information, and since the
nature and scope of employees' involvement with such Material
Non-public Information differs substantially from division to
division, policies and procedures regarding the restriction of access
to Material Non-public Information are set forth on a
division-by-division basis. Its addition, in order to prevent even
the appearance of improprieties, parsons who work in one particular
division (Asset Management Division) are subject to more stringent
restrictions regarding their owning and dealing in securities than are
other Wilshire employees.
1. Brokerage Division. This division executes trades for Wilshire
customers and for customers introduced by other registered
broker-dealers who have entered a Securities Clearing Agreement
with Wilshire. All brokerage customers are institutional.
Wilshire does not engage in proprietary trading, nor does it
maintain a "buy" or "sell" list. Wilshire's Brokerage Division
does not exercise discretionary authority over any account, nor
does it ever execute trades for Wilshire's Asset Management
Division.
2. Consulting Division. This division provides comprehensive
consulting services assisting governmental and corporate plan
sponsors, foundations, endowments, and institutions in their
investment activities. These services provide assistance in the
planning, implementation, and review functions required of
pension management, including analysis of future plan
obligations, determination of the appropriate asset mix,
establishment of investment policies and guidelines, selecting
and monitoring investment managers, and performance measurement
and review of asset
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managers. This division uses strictly historical public
information in their activities and not recommend the purchase or
sale of specific securities.
Theoretically, while visiting a corporate client, a Wilshire
consultant who works in the Consulting Division could become
aware of Material Non-public Information about the client. This
is highly unlikely, however, since the pension departments of
companies generally do not have access to that sort of non-public
information.
Policy: Any Wilshire consultant who becomes aware of any Material
Non-public Information regarding one of his or her clients shall
not communicate that information to any other person, nor make
any record of any such information.
3. Asset Management Division ("Wilshire Asset Management", or "WAM") .
This division primarily manages assets for institutional clients and
for the Wilshire Target Funds, a family of mutual funds, using index
funds and other passive management techniques. This division also
manages accounts for certain high net worth clients, using a "Cash
Alternative Account" strategy that utilizes mutual funds in
conjunction with index futures. The Asset Management Division makes
investment decisions end recommendations strictly on the basis of
historical public information; it neither seeks nor uses non-public
information. In addition, portfolios under management are very broadly
based, because (i) the dollar value of managed portfolios is very high
and (ii) index and other passive management techniques attempt to
mirror an index and increase value as the index in general goes up,
rather than trying to "pick the winners". Therefore, since the number
of different securities held in each portfolio is very large,
information as to which particular securities are held in any
portfolio is not useful to persons who might attempt to gain an
advantage through inside information.
Policies and Procedures
Policy re: Personal trading by WAM employees
a. Access to trading lists. There are three individuals within
WAM who have access to the lists of trades, buys, and sells
which occur at quarter-end dates associated with rebalancing
this "style" portfolios managed by WAM, until after that
activity has been accomplished. There is very little
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opportunity for anyone to benefit from advance knowledge of
trading activity, due to the investment approach described
above, which utilizes large numbers of securities.
Nevertheless, in order to avoid even the appearance of
improprieties or violations of law, Wilshire has determined
that these three individuals should be precluded from any
trading which might be viewed as an attempt to take
advantage of their advance knowledge.
From the time buy and sell lists are created until one day
after the date of the conclusion of the trading activity:
i. Only those WAM employees whose job responsibilities
require them to have access to information as to
trades, buys, and sells for the benefit of WAM's
managed funds and portfolios shall have access to such
information until at least one day after the conclusion
of the subject trading activity.
ii. All WAM employees whose job responsibilities require
them to have access to information as to trades, buys,
and sells for the benefit of WAM's managed funds and
portfolios shall take precautions to ensure that this
information is kept secure. Therefore, until at least
one day after the date of the conclusion of the subject
trading activity:
(a) Information stoned in a computer as to planned
trading activity shall be password protected, and
only those persons whose job responsibilities
require them to have access to this information
shall be given the password. The password shall
be changed with sufficient frequency to ensure
security.
(b) A11 such information in hard copy form shall be
kept in locked facilities and, when disposed of
prior to one day after the conclusion of the
subject trading activity, such information shall
be shredded.
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Information" is
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b. Personal trading by WAM employees. All WAM employees who
have access to buy and sell lists prior to implementation of
trading are precluded from taking new positions or
supplementing existing positions in securities identified
for purchase, or in liquidating (in whole or in part)
positions in securities identified for sale, from the time
the buy and sell lists are created until one day after the
date of the conclusion of the trading activity.
c. Trading restrictions. WAM exclusively uses nonaffiliated
brokers; it never trades through Wilshire's Brokerage
Division.
4. Investment Management Services Division and Investment Reporting
Services Division. These divisions provide a variety of
computerized investment analysis services to institutional money
managers, custodians, consultants, and a few plan sponsors. All
of the services provided by these divisions use strictly
historical public information in their analyses. These divisions
neither seek nor use nonpublic information.
5. Information Technology Division. This division is responsible for
operation of Wilshire's computer center and domestic
communications network and for the development and maintenance of
Wilshire's financial databases, which use strictly historical
public information. This division neither seeks nor uses
non-public information.
6. Administrative/Clerical
Policies re: preparation of confidential documents:
a. Any document designated by the originator as "confidential"
shall be typed in a manner which minimizes then opportunity
for unauthorized snooping.
b. All drafts and transcriptions of confidential documents are
to be delivered to the originator by hand. If any
confidential, document or draft of a confidential document
cannot be delivered immediately to the originator, it is to
be kept in a locked drawer until personal delivery can be
accomplished.
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c. All dictation tapes containing material to be transcribed on
a confidential basis are to be returned to the originator
without being erased. After the transcription has been
proofed by the originator, the tape will be given to the
transcriber, who will erase the tape and return it to the
originator.
F. FAILURE BY ANY EMPLOYEE TO FOLLOW THE POLICIES AND PROCEDURES RELEVANT
TO THE DIVISION IN WHICH HE OR SHE WORKS WILL RESULT IN APPROPRIATE
DISCIPLINARY ACTION AND/OR DISMISSAL.
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