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EXHIBIT (p)(3)
NUMERIC INVESTORS L.P.
COMPLIANCE MANUAL
July 10, 2000
by:
Daniel J. Lehan III, CFA
Chief Financial Officer
Compliance Officer
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COMPLIANCE PROCEDURES FOR NUMERIC INVESTORS L.P. AND THE N/I FAMILY OF MUTUAL
FUNDS
PURPOSE
The purpose of this document is to specify the responsibilities of all employees
of Numeric Investors L.P. to comply with laws and regulations governing their
conduct when trading securities for client accounts or for their own accounts.
Such laws and regulations may be promulgated by Federal or state legislative
statute, by a Federal or state agency having jurisdiction over the conduct of
investment advisory services, or by the Institute for Chartered Financial
Analysts, or its successor.
GENERAL CONCEPT
All employees of Numeric Investors L.P. shall conduct themselves in full
compliance with all laws and regulations concerning the securities industry, in
particular but not limited to, those laws and regulations governing "insider
trading" and fiduciary responsibilities. Further, all employees shall conduct
themselves in compliance within the spirit of the laws and guidelines set forth
in this document. It shall be the responsibility of every employee to know said
laws, regulations and guidelines.
Numeric wishes to achieve a reputation for the highest integrity. This requires
that all employees adhere to a set of principles which 1) place the interests of
our clients and shareholders first; 2) require any personal securities
transactions to be accomplished in a way that avoids any actual or potential
conflict of interest or any abuse of an individual's position of trust and
responsibility; and 3) reflect a fundamental standard that Numeric employees
must not take inappropriate advantage of their positions. Consequently,
violations of any of the laws or regulations referenced above or guidelines
outlined below will not be tolerated.
Personal trading exposes the Firm and its employees to additional risks for
which there exists no compensation. Failure to comply with all laws,
regulations and guidelines may, depending on the circumstance, result in
immediate dismissal from Numeric Investors L.P. For this reason, Numeric
personnel (including on-site consultants) are encouraged to minimize the amount
of trading of individual publicly held equity securities or derivatives for
their personal accounts, or of non-Numeric accounts over which they exercise any
degree of control or in which they have an economic interest, including accounts
of immediate family members. Immediate family includes the following persons
sharing the same household: child, stepchild, parents, spouse, sibling, mother-
in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-
law and shall include adoptive relationships and any other relationship which
the Compliance Officer determines could lead to the possible conflicts of
interest or appearances of impropriety which this document is intended to
prevent.
(Unless stated otherwise, reference in this document to "equity securities" and
"derivatives" refers to publicly traded equity securities and publicly traded
derivatives.)
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TOPICS IN THIS MANUAL
1. INSIDER TRADING
2. RESTRICTIONS ON PERSONAL TRADING
INITIAL PUBLIC OFFERINGS
PRIVATE PLACEMENTS
BLACKOUT PERIODS AND TRADING PROCEDURES
BAN ON SHORT-TERM TRADING PROFITS
GIFTS
SERVICE AS A DIRECTOR
3. OTHER RESPONSIBILITIES
TIMELY REPORTING OF TRADES
EMPLOYEE'S RESPONSIBILITY TO KNOW THE RULES
EMPLOYEE'S RESPONSIBILITY TO REPORT VIOLATIONS
COMPLIANCE OFFICER RESPONSIBILITIES
4. FUTURES AND OPTION TRADING
5. PROMOTIONAL MATERIAL RELATED TO FUTURES AND OPTIONS
6. CLIENT COMPLAINTS
7. NUMERIC INVESTORS NEW EMPLOYEE COMPLIANCE
CHECKLIST
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INSIDER TRADING
All employees are responsible for ensuring that trades they execute for their
own accounts or for client accounts not be made on the basis of "insider
information". Numeric as a firm is liable for damages and may be prosecuted for
the actions of its employees.
Congress has never precisely defined insider information and recent court cases
are expanding the scope of actions that can be construed as "insider trading".
Accordingly, all employees are expected to err on the side of caution and take
no action that could be so construed.
"Insider trading" occurs when someone in a fiduciary relationship with a firm
breaches their fiduciary responsibilities and reveals material non-public
information about the firm to someone who then takes investment action with this
non-public information. Information is deemed material when it is of sufficient
importance to have caused an informed investor to take investment action.
Anyone taking action with such information can be found guilty of insider
trading even if they have not received such information directly from the
fiduciary.
Accordingly, all Numeric employees must determine if their investment decision
is made on the basis of information that is not in the public domain and if the
source of such information, even if several people removed, had a fiduciary
responsibility.
If a Numeric employee is making an investment decision at the suggestion of
another party (a broker or friend, for instance) and the decision is influenced
by non-public information supplied or suggested by this other party, the Numeric
employee is responsible to ask the other party if the other party believes such
information came from an "insider" with fiduciary responsibilities.
A Numeric employee trading for his or her own account with specific brokers must
advise these brokers, in writing, that he/she specifically wishes not to be
provided with such non-public information if the source of the information could
possibly be breaching their fiduciary responsibilities.
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RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
Numeric discourages personal trading of equity securities or derivatives.
However, employees may seek approval from the Compliance Officer to trade such
securities. With the exception of unique circumstances, approval for purchases
or short sales of equity securities or derivatives will generally not be
granted, even if the equity security or derivative is not held in clients'
accounts and the equity security or derivative is not being contemplated for
purchase or sale for clients' accounts. Approval for liquidations of existing
positions will generally be granted, provided that the equity security or
derivative is not being contemplated for purchase or sale for clients' accounts
in the next five business days. If approval is granted, the employee may trade
the security as long as it falls within the following guidelines:
Initial Public Offerings. In order to preclude any possibility of an employee
profiting from their position on behalf of the Company, all personnel are
prohibited from acquiring any securities in an initial public offering.
Exceptions to this policy may be granted if a company's shares are offered
directly to the investing public without the use of an intermediary or
underwriter, and the employee purchases the shares in the offering directly from
the issuing company.
Private Placements. Any employee interested in acquiring any security in a
private placement must obtain express prior approval from the Compliance
Officer. Approval will take into account the potential purchase of the security
by the portfolio management staff for client portfolios and whether the
investment opportunity is being offered to an individual by virtue of his or her
position with the investment company.
Blackout Periods and Trading Procedures. In concept, blackout periods and
trading procedures ensure that any employee trading activity be entirely
segregated from and have no impact on the investment process Numeric performs
for its clients. These rules are intended to avoid actual or perceived conflicts
of interest and front-running, as well as to limit personal trading activity
which might provide a distraction from managing client assets.
Numeric Investors L.P. has a fiduciary responsibility to its clients to take
action on the clients' behalf before taking action in the interest of its
employees or Numeric as a firm. Accordingly, this requires that any trades
which a Numeric employee undertakes for his or her own account, or for the
account of any non-Numeric client, must be done so as not to disadvantage any
Numeric client or to interfere with client portfolios in any way.
Any Numeric employee considering the sale or purchase of any common stock or
equity derivative is required to ask the Compliance Officer if that stock or
derivative is currently being bought or sold for clients' accounts or if that
stock is being contemplated for purchase or sale for clients' accounts. The
employee is prohibited from trading the security until explicit authorization is
given by the Compliance Officer.
The employee may be given a special authorization to trade. However, if
authorization is provided and the Portfolio Management staff decides that it
wishes to trade in that security within the subsequent five trading days (not
including the day the security was initially traded by the employee), it may, in
its sole discretion, require the employee to assign his or her
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trade executed earlier to the clients' portfolios. If the employee's original
trade is unwound for any reason within the five day period subsequent the
initial execution, but before the portfolio management staff has decided to
allocate the trade to client accounts, the employee must disgorge any profit in
the trade to the clients' accounts. If the employee trade has already passed the
settlement date, the profits from that trade must be given up to a charitable
organization of Numeric's choosing.
Ban on Short-Term Trading Profits. In addition to the blackout periods
described above, Numeric prohibits all investment personnel from profiting in
the purchase and sale, or sale and purchase, of securities or their equivalent
within 60 calendar days. Any profits realized on such short-term trades will be
required to be disgorged. The Compliance Officer may make an exception for
severe and extenuating circumstances.
Gifts. All personnel are prohibited from receiving any gift, service or other
thing of more than $100 value from any person or entity that does business with
or on behalf of Numeric or has in the past or may in the future do business with
Numeric. This policy excludes business meals, and tickets to events, however,
any meal or event with a cost in excess of $100 per person must be reported to
the Compliance Officer. All invitations to events (sporting, theatre or
otherwise) must be unsolicited.
Service as a Director. Investment personnel are prohibited from serving on
boards of directors of publicly traded companies, absent prior authorization
from the Compliance Officer, based on a determination that the board service
would be consistent with the interests of the Company and its clients. Any
personnel serving on a board will be isolated from the investment decision-
making process by a "Chinese Wall."
Any violation of the above policies will subject the violating employee to
disciplinary action, including but not limited to monetary penalties and/or
termination of their employment at Numeric Investors.
OTHER RESPONSIBILITIES
TIMELY REPORTING OF TRADES
Numeric employees trading any security (a "security," as defined within this
section includes all types of equity or debt instruments but does not include
shares of open end mutual funds, direct obligations of the US government,
bankers acceptances, bank certificates of deposit, commercial paper, and high
quality short-term debt instruments, including repurchase agreements and
includes the n/i numeric mutual funds) for their own account must provide
written confirmation of all trades to Numeric's Compliance Officer within five
business days of the trade. Employees are also required to report transactions
in securities in which Numeric has any direct or indirect beneficial ownership.
Employees must also provide the Compliance Officer with monthly summaries
showing all trades of securities executed during the preceding month, within
fifteen days of the end of the preceding month.
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Further, employees must provide the Compliance Officer with a statement of all
securities holdings both at the commencement of employment at Numeric, and
annually thereafter.
In addition, employees must certify within ten calendar days of the end of each
calendar quarter, that all trades made by the employee were disclosed to the
company and were in conformance with all compliance procedures as specified in
this manual.
Finally, employees should keep a written log documenting the time and date of
each trade, together with a brief description of the investment rationale for
the trade.
EMPLOYEE RESPONSIBILITY TO KNOW THE RULES
Numeric employees are responsible for their actions under the law and therefore
required to be sufficiently familiar with the law to avoid infringing it.
Employees who have any doubt about the reporting, timing, feasibility or any
other question regarding a personal securities transaction must seek
clarification from the Compliance Officer or his designate before transacting in
the security. Misinterpretation of the rules will not be tolerated as an excuse
for mistakenly transacting in a security. Any uncertainty about the rules and
regulations will require that the individual not transact in the security.
Within thirty days of receiving the book, Numeric employees must have read and
become familiar with this Compliance Manual and with the CFA Code of Ethics and
Standards of Practice Handbook. Employees must certify, in writing, that they
have read and understood these two publications and that they will conduct
themselves professionally in complete accordance with the requirements and
standards therein.
EMPLOYEE RESPONSIBILITY TO REPORT KNOWLEDGE OF ANY VIOLATIONS TO COMPLIANCE
OFFICER
Numeric employees have an obligation to report to the Compliance Officer any
knowledge they have of violations of this Compliance Manual or violations of any
other applicable law, rule, or regulation of any government, governmental
agency, or regulatory organization governing Numeric's professional, financial,
or business activities. Failure to report knowledge of any violation will be
considered a violation and will subject the employee to immediate dismissal. It
is each employee's responsibility to know the laws and rules governing personal
trading activity and the Company's business activities.
COMPLIANCE OFFICER RESPONSIBILITIES
It shall be the responsibility of the Compliance Officer to enforce the
provisions of this document and to educate employees to their responsibilities
herein. The Compliance Officer will provide new employees with a copy of this
manual and of the CFA Code of Ethics and Standards of Conduct as soon as
possible after they join the firm.
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The Compliance Officer is responsible to stay current with significant new legal
developments in the area of financial advisory services, fiduciary
responsibilities, and insider trading and to convey such developments to
Numeric's employees.
The Compliance Officer will review all employee trading documents in a timely
manner and take such action as this manual requires in regards to employee
trading and conduct.
The Compliance Officer will maintain a set of records certifying that he has
conducted the tasks required in this manual.
FUTURES AND OPTIONS TRADING
All futures and options trades must be reviewed by a partner, officer or
director of Numeric Investors L.P. This review must be documented.
PROMOTIONAL MATERIAL RELATED TO FUTURES AND OPTIONS
All promotional material which describes Numeric Investors L.P.'s use of futures
and options must be reviewed and approved by an officer, general partner, or
other supervisory employee other than the individual who prepared such material.
This review must be documented and filed.
CUSTOMER COMPLAINTS
Customer complaints must be promptly reported to the Compliance Officer. The
Compliance Officer is responsible for recording, investigating, and responding
to all complaints. All complaints will be recorded in Numeric Investors L.P.'s
complaint file.
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NUMERIC INVESTORS EMPLOYEE COMPLIANCE CHECKLIST
EMPLOYEE NAME:________________________________
DATE OF HIRE:_________________________________
I certify that I introduced this employee to the concept of compliance and
provided him/her with a copy of the Numeric Investors Compliance Manual and the
CFA Code of Ethics and Standards of Practice Handbook.
COMPLIANCE OFFICER:_________________________________________
DATE
I certify that I have read and understood the Numeric Investors Compliance
Manual and the CFA Code of Ethics and Standards of Practice Handbook and that I
will conduct myself in accordance with the rules, laws, and standards therein.
I further certify that I will always act as a responsible fiduciary for Numeric
Investors' clients and that I will not utilize material non-public information
in any investment decision I make on my own behalf or on behalf of Numeric
Investors' clients.
EMPLOYEE:___________________________________________________
DATE
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