Exhibit 99B16.C
LIGHTHOUSE CAPITAL MANAGEMENT
COMPLIANCE MANUAL
I. TRADING Page 2
A. The Portfolio Manager will determine appropriate
securities to buy or sell in all managed accounts. Page 2
B. Front Running Page 2
C. Insider Trading Page 2
D. Employee Trading Page 3
E. Block Trading Page 3
II. RECORD KEEPING Page 4
A. Business Accounting Records Page 4
B. Client Records Page 4
C. Performance and Recommendations Page 4
D. Trading Records Page 5
E. Corporate Records Page 5
F. Net Capital Requirements Page 5
G. Advertisements Page 5
III. SEC & STATE FILINGS Page 6
A. Form 13F Page 6
B. Form 13G Page 6
C. Form ADV Page 6
D. Registration Requirements Page 6
E. Specific Limitations Page 8
IV. CLIENT REPORTING Page 9
A. Quarterly Reports Page 9
B. Annual Reports Page 9
C. Compliance Page 9
V. NEW ACCOUNTS Page 10
A. The President or Compliance Officer will Determine Page 10
B. New Client Information Form - Approved by the
Compliance Officer Page 10
C. Schwab Application Forms - Approved by the President Page 10
D. Lighthouse Contract and ADV Page 10
E. Initial Client Portfolio Page 11
F. Account Transfers Page 11
G. Wrap Accounts Page 11
VI. RULES OF CONDUCT Page 12
A. Written Supervisory Procedures Page 12
B. Advertisements Page 12
C. Prohibited Business Practices Page 12
<PAGE>
LIGHTHOUSE CAPITAL MANAGEMENT
COMPLIANCE MANUAL
I. TRADING
A. THE PORTFOLIO MANAGER WILL DETERMINE APPROPRIATE SECURITIES TO BUY OR SELL IN
ALL MANAGED ACCOUNTS.
1. The Portfolio ManagerAdministrator will execute or initial all order
tickets or portfolio templates.
2. An order ticket or portfolio template is required for all trades
3. The Portfolio Manager will designate personnel with authority to place
trades.
4. After trades are placed, trade documents are to be given to the
Portfolio Management Systems analyst who will reconcile with broker
confirmations. The analyst will also inform the Portfolio Manager if any trade
documents are missing his approval.
B. FRONT RUNNING
1. The Portfolio Manager is responsible for ensuring that no preferential
treatment is afforded any employee when placing trades for that employee.
2. In the case of block trades, all orders for employees participating in
the block trade will be filled last.
3. No employee may buy securities in advance of a "buy" block trade, sell
securities after a "buy" block trade, sell in advance of a "sell" block trade,
or buy after a "sell" block trade in the same security. See "Trading Rules" for
detailed instructions.
C. INSIDER TRADING
1. It is a violation of federal and state securities regulations to buy or
sell securities based on nonpublic information (inside information) to prevent
any person from having an unfair advantage. Nonpublic information would include
information from company insiders that has not been publicly announced and
information concerning the content of articles about a company prior to its
publication.
2. If any employee receives nonpublic information from any source, that
employee is to immediately inform the Compliance Officer.
3. Under no circumstances may an employee trade or recommend a trade to
others of such security based on this nonpublic information.
4. If any employee knows that interviews or written articles will be
published concerning a specific company, that employee must inform the
Compliance Officer. The compliance officer will meet with the Portfolio Manager
and the employee to discuss the effect of such publication and document plans
for trading of that security in clients' accounts. Trading in employee accounts
should be suspended for one week prior and one week after the publication date.
2
<PAGE>
D. EMPLOYEE TRADING
1. All employees must maintain an account with Charles Schwab for purposes
of buying or selling securities for themselves or their immediate family. That
account must be linked to Lighthouse Capital's master account.
2. Any trades an employee wishes to make must be approved by the Portfolio
Manager. This approval may be in the form of a signed order ticket or other
signed portfolio template.
3. The Portfolio Manager is responsible for reviewing trading activity in
employee accounts on a monthly basis to assure the adherence to this policy.
4. The Compliance Officer is responsible for reviewing employee accounts on
a regular basis. The President is responsible for reviewing the Compliance
Officer's accounts.
5. All Employee accounts must adhere to any trading restrictions or limits
instituted for client accounts of the same type (i.e. Growth, Growth & Income).
The President may waive this restriction for any employee due to the size of the
account.
6. If an employee must liquidate securities due to a margin call or other
financial difficulty, such liquidation should not violate the employee trading
rules. If the only securities available for liquidation are currently being
bought or sold for client accounts, and, therefore, such liquidation would
violate employee trading rules, Lighthouse Capital Management will advance the
appropriate funds until the proper trades can be made. That employee will then
be prohibited from any opening personal trades for a period of six months except
that he or she may invest in the company's mutual fund(s).
E. BLOCK TRADING
1. Partially filled block trades will be assigned on a random basis
referencing account number. Account numbers will be sorted at random and block
orders will be filled until completed in that order.
2. Under no circumstances will employee or family accounts be filled prior
to customer accounts.
3
<PAGE>
II. RECORD KEEPING
A. BUSINESS ACCOUNTING RECORDS
1. The following records will be prepared, kept current on site for a
period of 2 years and in an easily accessible off site location indefinitely
either in hard copy or on computer disk with backups:
i. A general ledger reflecting all asset, liability, income,
expense, and capital accounts.
ii. All trial balances, financial statements, and internal working
papers that may be prepared relating to the business of the Firm
iii. A record showing all payments received, including date of
receipt, purpose, and from whom received; and all disbursements,
including date paid, purpose, and to whom paid.
iv. All bills or statements (or copies thereof), paid or unpaid,
relating to the business of the Firm
v. All check books, bank statements, canceled checks,cash
reconciliations, receivables and payables
B. CLIENT RECORDS
1. The following records will be kept on site for a period of 2 years and
in an easily accessible off site location for a period of at least 3 additional
years from the end of the fiscal year during which the last entry was made on
such record either in hard copy or on computer disk with backups:
i. Instructions received from clients in regard to purchase, sale,
delivery or receipt of securities
ii. Copies or originals of communications sent to or received from
clients
iii. Copies or originals of client contracts, LPOA's and/or other
account documents
iv. Performance fee calculations (if applicable) and fee invoices
v. Copies of all complaints of clients relating to investment
activities for clients. "Complaint" means any written or oral
statement of a client or any person acting on behalf of a client
alleging a grievance involving the activities of persona under
the control of the Firm in connection with providing investment
advice to or placing orders on behalf of clients.
C. PERFORMANCE AND RECOMMENDATIONS
1. The following records will be kept on site for a period of 2 years and
in an easily accessible off site location for a period of at least 3 additional
years from the end of the fiscal year during which the advertisement was
published or disseminated either in hard copy or on computer disk with backups:
i. Copies of publications and recommendations distributed to at
least ten persons and research materials backing recommendations
ii. Copies of performance advertising and basis for performance
information
D. TRADING RECORDS
1. The following records will be kept on site for a period of 2 years and
in an easily accessible off site location for a period of at least 3 additional
years from the end of the fiscal year during which the last entry was made on
such record either in hard copy or on computer disk with backups:
4
<PAGE>
i. Order tickets including terms of the order
ii. Transaction confirmations
iii. Client account statements or custodian reports
iv. Records of trading activity showing securities purchased or sold
on advice of the Firm, and the date, amount, and price of each
purchase and sale
v. A record of every transaction in a security (other than direct
obligations of the United States) in which the Firm or any
representative has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership
E. CORPORATE RECORDS
1. The following records will be kept continuously on site:
i. Articles of incorporation and bylaws
ii. Minute book
iii. Stock certificate books
iv. Licenses
F. NET CAPITAL REQUIREMENTS
1. The Firm shall have at all times liquid net capital of not less than
that required by each state where business is transacted.
2. It shall be the responsibility of the Designated Supervisor to check the
financial records of the Firm and to examine the financial statements of the
Firm at least monthly to ensure compliance with the applicable rules.
G. ADVERTISEMENTS
1. A file containing copies of each notice, circular, advertisement,
newspaper article, investment letter, bulletin, or other communication
recommending the purchase or sale of a specific security, which the Firm or any
of its representatives circulate or distribute, directly or indirectly; and if
such notice, circular, advertisement, newspaper article, investment letter,
bulletin, or other communication does not state the reasons for such
recommendation, a memo of the Firm and/or the representative indicating the
reasons therefor.
2. A file containing a copy of all advertisements relating to the Firm's
business
3. Each distribution of "advertisements" must include a list of those to
whom the advertisement was sent
5
<PAGE>
III. SEC & STATE FILINGS
A. FORM 13F
1. For any quarter in which managed equities exceed $100 million, Form 13F
will be filed with the SEC within 45 days of the end of the quarter
B. FORM 13G
1. The Compliance Dept. will monitor levels of equity holdings. Form 13G
will be filed with the SEC if holdings of any equity exceed 5% of the
outstanding stock within 45 days of the end of the calendar year
C. FORM ADV
1. Changes to the following will be promptly reported
i. Part I-1. Name of Company
ii. Part I-2. Principal place of business; business hours; telephone
number
iii. Part I-3. Location of books & records
iv. Part I-4. Person to contact, title, address, telephone number
v. Part I-5. Person for notice, address
vi. Part I-8. Type of organization, date, jurisdiction
vii. Part I-11. Disciplinary questions
viii. Part I-13A. Custody of client funds
ix. Part I-13B. Custody of client securities
x. Part I-14A. Related persons with custody of client funds
xi. Part I-14B. Related persons with custody of client securities
2. Material changes in the following will be reported promptly
i. Part I-9. Taking over business of an RIA
ii. Part I-10. Persons not listed having control
iii. Part II. All parts except Item 14 (balance sheet)
3. All changes not listed above will be reported by March 30 each year
4. The Firm shall file a completed Form ADV-S, in triplicate, each copy
being manually signed, with the U.S. Securities & Exchange Commission,
Washington, D.C., within 90 days after the end of each fiscal year.
D. REGISTRATION REQUIREMENTS
1. The Firm shall have at least one full-time employee, located at its
principal place of business, whose responsibilities shall include supervising
the advisory services of the Firm and its Investment Adviser Representatives.
2. Currently, the Firm's Designated Supervisor for compliance is Christine
Cobb, CFO.
3. In order to qualify as a Designated Supervisor of the Firm's advisory
activities, an individual must:
6
<PAGE>
i. be a full-time employee;
ii. be located in an operate from the Firm's principal place of
business;
iii. have passed all applicable state investment adviser
representative examinations where the Firm transacts business,
unless the examination has been waived; and
iv. have been identified as the Firm's Designated Supervisor in a
letter to each state's Securities Administrator in the states
where the Firm will transact business and be registered in those
states if necessary.
4. The Firm may have one or more individuals represent it as Investment
Adviser Representatives. Primary responsibilities of Representatives may include
seeking client accounts and rendering advisory services to clients.
5. To qualify as a Representative of the Firm, an individual must:
i. have passed all applicable state investment adviser
representative examinations, unless the examination has been
waived; and
ii. unless exempt, be registered as a Representative of the Firm in
all states where business activities are conducted. Passing an
exam does not necessarily mean registration is granted.
6. No Investment Adviser Representative of the Firm shall solicit potential
business from a prospective advisory client or render any advice unless
registered for the Firm in the client's state of residence to do so, unless
he/she is exempt from registration. Questions regarding the registration
requirements of states must be directed to the Firm's Designated Supervisor.
7. The Firm shall file state registration renewal applications each year
when due.
8. It is the responsibility of the Designated Supervisor to ensure that
Form ADV-S and state license renewal applications are completed and filed when
due each year.
9. It is the responsibility of the Designated Supervisor to ensure that all
reporting requirements to state administrators are met including financial
statements, lawsuits and administrative proceedings, transfer of control, name
change, amendments to state applications, and change of supervisor.
10. Each representative of the Firm is responsible for keeping his or her
qualification application (Form U-4 or other form) on file with state
administrators complete and current, and for reporting to the Firm certain
events and occurrences. In addition, each employee has an obligation under
federal law to file a list of his or her personal securities transactions with
the Firm. Accordingly, each representative of the Firm must make the following
reports to the Firm's Designated Supervisor:
i. A written report within 10 days of any event that occurs so as
to make any answers to the questions contained in the
Representative's Schedule D to Form ADV and his or her
qualification application on file with any state administrator
inaccurate, incomplete, or misleading.
ii. Copies of any complaint involving any aspect of the investment
advisory business naming the Representative as a defendant in
any civil or criminal proceeding or in any administrative or
disciplinary proceeding, by any public or private regulatory
agency, within 20 days of the date the complaint is served on
the Representative; a copy of any answer filed thereto by the
7
<PAGE>
Representative within 10 days of the date such answer is file;
and a copy of any decision, order or sanction made with respect
to such proceeding within 20 days of the date the decision,
order or sanction is rendered.
11. Upon receipt of any of the foregoing reports from its Representatives,
the Firm shall take the necessary action to file the information with each state
in which the representative is qualified.
E. SPECIFIC LIMITATIONS
1. The Firm shall not engage in investment advisory activities when it is
not, but is required to be, registered under the Investment Advisers Act of
1940, or conduct business in a state unless it is licensed or exempt from
licensing.
2. The firm shall not employ directly any individual to represent it as a
Representative in a state except an individual who has fulfilled the
requirements of Section D.5 herein, unless such requirements have been waived by
the appropriate state administrator.
3. It shall be the responsibility of the Firm's Designated Supervisor to
examine client correspondence, transaction confirmations, and other records
periodically to ensure Representatives of the Firm are not transacting business
in a state when not registered to do so.
4. No employee or Representative of the Firm shall solicit client accounts
or provide advice on behalf of the Firm to clients in a state unless he/she has
fulfilled the requirements of Section D.5 herein and have been authorized by the
Firm to transact business as a representative.
5. No employee or Representative of the Firm shall transact business on
behalf of or represent any broker-dealer, issuer, or other investment adviser or
be separately licensed as an investment adviser without the prior consent of the
Designated Supervisor.
6. No employee of the Firm shall issue, offer, or sell any type of
investment instrument, including promissory notes, general partnership
interests, joint venture interests, limited partnership interests, or commercial
paper without first obtaining consent of the Firm's Designated Supervisor.
8
<PAGE>
IV. CLIENT REPORTING
A. QUARTERLY REPORTS
1. Performance information, since inception, annual, quarter
2. Asset allocation as of quarter end
3. Fee invoice(s)
B. ANNUAL REPORTS
1. The Firm should offer, in writing, to deliver upon request a copy of
Part II, Form ADV. The statement must be mailed or delivered within seven days
of the receipt of such request.
2. Realized Gains/Losses
C. COMPLIANCE
1. Reconciliation of broker statement to portfolio management system.
Reviewed by compliance officer
2. Quarterly reports reviewed by President and Compliance Officer
3. Fee invoices to custodians will be submitted 3 days after mailing
invoices to clients
4. All client correspondence (incoming or outgoing) will be reviewed by the
President or Compliance Officer. All client complaints will be reviewed by the
President.
9
<PAGE>
V. NEW ACCOUNTS
A. THE PRESIDENT OR COMPLIANCE OFFICER WILL DETERMINE
1. Suitability of investments and contract
2. Investment objectives
3. Financial status
4. Tax status
5. Family background
6. Cash flow needs
7. Qualified plan requirements
B. NEW CLIENT INFORMATION FORM - APPROVED BY THE COMPLIANCE OFFICER
1. Name, address, phone, tax identification number, other advisors
2. Client, portfolio, accounts including internal accounting codes
3. Portfolio objective
4. Type of fees and method of payment
5. Fiscal year
6. Margin or cash account
7. Cash deposit and/or transfer
8. Taxable or tax-deferred account
9. Regular distribution if applicable
C. SCHWAB APPLICATION FORMS - APPROVED BY THE PRESIDENT
1. Refer to Schwab procedures manual for proper forms to submit for various
accounts
2. Refer to Schwab procedures manual for procedure in transferring accounts
from another brokerage firm, mutual fund or trust company
D. LIGHTHOUSE CONTRACT AND ADV
1. Written contract, a copy of which must be given to the client within 20
days after execution. No Representative shall render investment advice to any
person unless a contract has been signed by the client and by an authorized
principal of the Firm.
2. In order for a client to enter into a participating contract
(performance bonus will be calculated), the client must meet a suitability
standard of either 1) $750,000 under management or 2) $1.5 million net worth.
Request should be made for the client's net worth statement. If the client
prefers not to provide that statement, the President should ascertain whether
the client qualifies and make note for the reason for the absence of such
statement.
10
<PAGE>
3. The contract should disclose:
i. that no assignment of the contract may be made without the
consent of the client
ii. fees to be charged and the formula for computing the advisory
fee
iii. termination provisions and the formula for computing the amount
of prepaid fee to be returned in the event of contract
termination
4. The Firm shall, in accordance with Regulation ss. 275.204-3 under the
Investment Advisers Act of 1940, furnish each advisory client and prospective
advisory client with Part II, Form ADV.
E. INITIAL CLIENT PORTFOLIO
1. Portfolio summary listing expected portfolio size, portfolio type,
accounts under portfolio, expected account sizes and special requirements will
be given to the Portfolio Manager when initial transfers or deposits are
complete
2. Portfolio summary will be approved by the Compliance Officer
3. Portfolio summary will be updated as actual amounts are received and a
final prepared when all account transfers and deposits are complete
F. ACCOUNT TRANSFERS
1. The Client Account Administrator will monitor account transfers until
complete
2. Reconciliation of expected transfers with actuals will be done when
transfers are complete
G. WRAP ACCOUNTS
1. The President is responsible for approving all agreements with brokerage
firms and registered representatives to manage wrap accounts
2. The registered representative is responsible for determining investment
objectives and suitability
3. Lighthouse Capital will not normally have contact with the brokerage
client
4. All reporting will be directed to the registered representative
11
<PAGE>
VI. RULES OF CONDUCT
A. WRITTEN SUPERVISORY PROCEDURES
1. The Firm has established these written supervisory procedures and a
system for applying them that the Firm believes will prevent and detect any
violation of the Investment Advisers Act of 1940 and applicable state laws and
rules and orders thereunder. These procedures include the designation of a
number of supervisory employees reasonable in relation to the number of the
Firm's qualified Investment Adviser Representatives, offices, and services to
clients.
2. It shall be the responsibility of the Firm's Designated Supervisor to
review these procedures annually to update them and ensure that new
Representatives and employees have received and reviewed a copy of them.
B. ADVERTISEMENTS
1. Neither the Firm nor any of its Representatives shall publish,
circulate, distribute or otherwise use any advertisement that is incomplete,
false, or misleading. All advertisements developed by, or on behalf of, the Firm
or its Representatives shall be constituent with the provisions of Sec. 206(4)
of the Investment Advisers Act of 1940 and Regulation ss. 275.206(4)-1
thereunder, and applicable state standards and rules thereunder. All
advertisements, including form letters, relating to advisory services must be
approved by the firm's Designated Supervisor prior to being circulated.
2. Neither the Firm nor any of its Representatives may pay a cash fee,
directly or indirectly, to any person seeking clients for the Firm unless the
prior consent of the Firm's Designated Supervisor has been obtained and the
payments are made in compliance with all applicable laws and rules.
C. PROHIBITED BUSINESS PRACTICES
1. The Firm or any of its employees or Investment Adviser Representatives
shall NOT engage in any of the following practices in connection with providing
the Firm's advisory services. It shall be the responsibility of the Firm's
Designated Supervisor to make sure that proper compliance has been obtained and
the payments are made in compliance with all applicable laws and rules.
i. Exercise any discretionary power of any kind unless the Firm has
obtained written discretionary authority from the client.
ii. Place an order to purchase or sell a security for the account of
a client upon instruction of a third party without first
obtaining a third party trading authorization from the client.
iii. Induce trading in a client's account that is excessive in size
or frequency in view of the financial resources and character of
the account.
iv. Recommend to a client the purchase, sale or exchange of any
security unless the recommendation is suitable for the client
based upon the client's financial situation and needs and
investment objective.
12
<PAGE>
v. Place an order to purchase or sell a security for the account of
a client without authority to do so.
vi. Borrow money or securities from or lend money or securities to a
client.
vii. Represent itself or themselves as a financial or investment
planner, consultant, or adviser, when the representation does
not accurately describe the nature of the services offered, the
qualifications of the person offering the services, and the
method of compensation for the services.
viii. Place an order for a client for the purchase or sale of a
security unless the security is either registered or the
security or transaction is properly exempted under applicable
state and federal securities laws.
ix. Recommend to a client that the client engage the services of a
broker/dealer, agent, or investment adviser not licensed in the
state where the client resides, unless the client is a
"financial institution or institutional investor" in the state
where the client resides.
x. Place an order to purchase or sell a security for a client
through a broker/dealer or agent not licensed in the state where
the client resides, unless the client is a "financial
institution or institutional investor" in the state where the
client resides.
xi. Take or have custody of any securities or funds of any client.
xii. Effect a security transaction as principal (for its or their own
account) with a client.
xiii. Falsify any information on Firm records pertaining to a client's
account, including a client's name or address.
xiv. Disclose to third parties any information received from a
client, including the client's name, unless obligated to do so
by law or unless permission of the client is obtained prior to
providing the information.
xv. Employ any device, scheme or artifice to defraud a client, or
engage in any act, practice or course of business that operates
or would operate as a fraud or deceit upon a client.
13
