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Policy & Procedure 333
BROWN INVESTMENT ADVISORY
& Trust Company
BROWN ADVISORY INCORPORATED
Code of Ethics
I. STATEMENT OF GENERAL PRINCIPLES
Brown Investment Advisory & Trust Company and Brown Advisory
Incorporated (collectively, the "Company") are committed to providing services
with the utmost professionalism and integrity. The Company and its Employees (as
defined below) owe an undivided duty of loyalty to the Company's clients and
must place clients' interests first at all times. Employees must avoid any
activity that might create an actual or potential conflict of interest and
should never take unfair advantage of their positions with the Company.
Employees may not cause a client to take action (or fail to take action) for the
Employee's personal benefit, rather than for the benefit of the client.
The Company recognizes, however, that Employees should have an
opportunity to develop investment programs for themselves and their families.
The Company's Code of Ethics sets forth policies and procedures reasonably
designed to ensure that Employees conduct their personal securities transactions
in a manner that complies with the securities laws, rules and regulations and
that does not raise even the appearance of impropriety.
All Employees are expected to adhere to the Code of Ethics. Technical
compliance with these policies and procedures will not automatically insulate
from scrutiny any transaction or pattern of transactions that is not in keeping
with the principles stated above. Employees should address any questions
regarding the Code of Ethics to the Compliance Officer.
II. DEFINITIONS
Beneficial Interest means the opportunity, directly or indirectly, to profit or
share in any profit derived from a transaction in securities.
Employee means any officer or employee of the Company.
Employee Account means the following securities accounts: (Note that an Employee
Account may be exempt from certain provisions of this Code of Ethics if it is a
Fully Discretionary Account, as defined below)
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o Personal Accounts: any account held in an Employee's name.
o Joint Accounts: any joint or tenant-in-common account in which an
Employee is a participant.
o Trust Accounts: an account of a trust if:
o an Employee is a beneficiary of the trust; or
o an Employee is a trustee and a beneficiary of the trust is a
member of the Employee's immediate family (i.e., the Employee's
spouse, minor child and any other relative who shares the
Employee's household).
o Corporate Accounts: an account of a corporation or similar entity in
which an Employee is a shareholder and if the Employee controls the
entity or the Employee has or shares control over its investment
portfolio.
o Accounts under an Employee's Control: an account (other than a
non-related client account) over which an Employee has investment
discretion or otherwise exercises control.
o Other Accounts: any other account in which an Employee has a direct or
indirect Beneficial Interest.
Exempt Investments means the following types of securities: mutual fund shares;
direct obligations of the U.S. Government (i.e., Treasury securities); and money
market instruments (i.e., bankers' acceptances, bank certificates of deposits,
commercial paper and high quality short-term debt instruments).
Fully Discretionary Account means an Employee Account or Related Account over
which the Employee has no direct or indirect influence or control (i.e., if
investment discretion for that account has been delegated in writing to an
independent manager at another firm and that discretion is not shared with the
Employee). In order to have an account treated as a Fully Discretionary Account
for purposes of this Code of Ethics, the Employee must certify to the Company in
writing that he or she has not, and will not, discuss potential investment
decisions with the manager before a transaction.
Fund means a registered investment company for which the Company serves as
adviser or sub-adviser.
Growth Equity Guide List means those securities covered by the Company's Growth
Equity research analysts.
Investment Person means an Employee 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 a Fund; an Employee who is a research
analyst, assistant
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research analyst, portfolio manager or assistant portfolio manager; or any other
Employee identified by the Compliance Officer.
Rating Change means the addition or deletion of a stock to or from the Growth
Equity Guide List or a change in the rating of a stock on the Growth Equity
Guide List.
Related Account means an account of an Employee's spouse, minor child or any
other relative who shares the Employee's household (to the extent such an
account is not otherwise an Employee Account).
III. POLICIES AND PROCEDURES FOR PERSONAL INVESTING
A. Preclearance of Securities Transactions
Employees must preclear all securities transactions in Employee
Accounts and Related Accounts (except for those transactions listed in Section
III.A.2 below).
1. Preclearance Process
a) In General
To obtain preclearance, an Employee must complete an Employee
Transaction Approval Form (see Exhibit A) and submit it to the Head Trader (or
his or her designee) electronically. Personal security transactions by the Head
Trader must be reviewed and approved by the Compliance Officer (or his or her
designee).
As soon as possible after receipt of the request, the reviewer should
examine the form and determine whether to approve or deny the transaction.
Before granting approval, the reviewer must be satisfied that the transaction
complies with the Code of Ethics, including the trading restrictions in Section
III.D below, and presents no conflict of interest. The reviewer should indicate
his or her approval by signing and dating the Employee Transaction Approval
Form. The Head Trader is responsible for retaining the signed copy of each form.
Employees will be notified by e-mail when their request is approved. No
order subject to preclearance may be entered prior to receipt of such approval.
Verbal authorization is not sufficient. In addition, the approval is valid only
until the close of business on the day it is granted. If the order is not placed
during that period or is placed but not executed, a new approval must be
obtained.
b) Transactions in Certain Trust Accounts
Certain accounts may be both an Employee Account or Related Account and
a bona fide client account. The Company owes a duty of loyalty to all of its
clients. Accordingly, the Company has adopted special procedures to ensure that
securities
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transactions in these accounts are consistent with the Company's fiduciary
obligations and with the Code of Ethics.
The procedures apply to transactions in a client account held by a
trust in which an Employee has a Beneficial Interest (other than as the grantor
of the trust -- i.e., the person who established the trust), provided that:
o The Company serves as corporate trustee pursuant to a written agreement
and is compensated for its services; and
o The account is managed on a non-discretionary basis and the Company, as
trustee, must approve each transaction. (An account that meets these
conditions is referred to as a "Covered Trust Account").
Each transaction in a Covered Trust Account must be reviewed and
approved by a person other than the Employee with the Beneficial Interest in the
account in accordance with the Company's fiduciary obligations and the written
agreement governing the account. The reviewer should indicate his or her
approval by completing and signing an appropriate form. Such approval will
satisfy the preclearance requirement of the Code of Ethics.
Except as noted in Section III.D.3.e below, Covered Trust Accounts and
securities transactions in those accounts are subject to all other provisions of
the Code of Ethics.
2. Exceptions
The preclearance requirement set forth above does not apply to:
o Transactions in Fully Discretionary Accounts;
o Transactions in Exempt Investments;
o Automatic transactions (e.g., purchases under dividend reinvestment
plans); and
o Transactions that are not voluntary on the part of the Employee (e.g.,
stock dividends or splits; mergers or other corporate reorganizations).
B. Transaction Reporting
Employees must report securities transactions in any Employee Account
or Related Account (including a Fully Discretionary Account), unless the account
holds only Exempt Investments (e.g., a mutual fund account).
To ensure compliance with this requirement, Employees must instruct an
outside institution that maintains an Employee Account or Related Account to
send duplicate copies of periodic account statements promptly to:
Brown Investment Advisory & Trust Company
P.O. Box 1944
Baltimore, Maryland 21203-1944
Attn: Head Trader
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The Company generally must receive account statements no later than 10 days
after the end of any calendar month or quarter (depending on the type of
account) in which a transaction took place.
If an Employee chooses to open or maintain an Employee Account or
Related Accounts with the Company, that will constitute agreement to allow the
Company to have access to all account information and statements. Periodic
statements for such an account automatically will be forwarded to the Head
Trader.
C. Disclosure of Holdings
1. Initial Holdings Report
Within 10 days of commencing employment, each Employee must submit an
Initial Holdings Report (Exhibit B) to the Compliance Officer.
2. Annual Holdings Report
Every year on or before May 31st, each Employee must submit an Annual
Holdings Report (Exhibit B) to the Compliance Officer. The information in the
Annual Holdings Report must be current as of a date no more than 30 days before
the report is submitted.
3. Certification of Compliance
As part of initial and annual holdings reports, Employees are required to
certify that they have read, understand and complied with the policies and
procedures in the Code of Ethics.
D. Trading Restrictions
In addition to preclearance and reporting requirements, the Company has
imposed certain substantive restrictions on personal securities trading. Any
transaction in an Employee Account or Related Account (except for those
transactions listed in Section III.A.2 above) must comply with the following
policies and procedures. To the extent that trading in a security is restricted,
trading in options on or instruments convertible into that security also will be
restricted.
1. Initial Public Offerings
Investment Persons may not acquire securities in an initial public
offering.
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2. Private Placements
Employees may not acquire securities in a private placement without prior
written approval of the Compliance Officer (or his or her designee). This
requirement applies to an Employee's investment in any private investment fund,
whether administered by the Company or otherwise. Subsequent capital
contributions to such a fund do not require separate approval provided that the
timing and amount of the contribution are not within the Employee's control.
To obtain approval, an Employee must complete a Request for Approval of
Private Placement (Exhibit C) and submit it to the Compliance Officer
electronically. In evaluating the Employee's request, the reviewer should
consider all relevant factors, including:
o Whether the investment opportunity is being made available to the
Employee due to the Employee's position with the Company; and
o Whether the investment opportunity is suitable for and should be
reserved for the Company's clients.
If the reviewer approves the Employee's request to participate in a
private placement, the reviewer must sign the form and must indicate the reasons
for his or her decision. The Compliance Officer must retain each form for at
least five years after the end of the fiscal year in which the approval was
granted.
If an Investment Person has acquired securities in a private placement, he
or she must disclose that interest to the Compliance Officer before the
Investment Person may play a material role in a decision to recommend or cause a
Fund to invest in securities of the same issuer. This disclosure is required
even if the Investment Person has complied with the preclearance and reporting
requirements of the Code of Ethics. Once disclosure is made, the Fund's
investment decision must be subject to independent review by another Employee.
3. Blackout Periods
Employees should be aware that, in addition to any other sanction
provided for under the Code of Ethics, profits realized in connection with a
transaction during a blackout period generally must be disgorged.
a) Pending Trades
Employees may not purchase or sell a security in an Employee Account or
Related Account on a day during which any client has a pending order in the same
(or an equivalent) security. This restriction applies until the client's order
has been executed or cancelled.
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b) Securities Under Consideration
Employees may not purchase or sell a security in an Employee Account or
Related Account if the Employee knows that a transaction in the same (or an
equivalent) security is being considered for any client or that a decision has
been made to effect such a transaction.
c) Additional Restrictions for Investment Persons
Investment Persons may not purchase or sell a security in an Employee
Account or Related Account for a period of four business days before and after a
Fund trades the same (or an equivalent) security.
d) Rating Changes
Employees may not purchase or sell a security in an Employee Account or
Related Account for a period of four business days before and after a Rating
Change with respect to the same (or an equivalent) security.
Research analysts generally must inform the Head Trader four business days
before making a Rating Change. If a research analyst believes immediate action
is necessary, he or she should contact the Compliance Officer to request an
exception to the above policy.
e) Transactions in Certain Trust Accounts
As described in Section III.A.1.b, the Company has adopted special
procedures for Covered Trust Accounts to ensure that securities transactions in
those accounts are consistent with the Company's fiduciary obligations and with
the Code of Ethics. Notwithstanding the blackout periods set forth above,
Covered Trust Accounts are permitted to trade along with clients. In accordance
with the Company's allocation policy (see Policy 445), a Covered Trust Account
must receive an average price and, in the event of a partial fill, must be
allocated shares on terms that are no more or less favorable than other
similarly-situated clients.
4. Short-Term Trading
Investment Persons may not engage in the purchase and sale, or sale and
purchase, of the same (or an equivalent) security within 60 calendar days. In
addition to any other sanction provided for under the Code of Ethics, profits
realized from short-term trading generally must be disgorged.
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5. Insider Trading; Confidentiality
Employees must comply with the Company's policy on the handling and use of
material inside information (See Policy 305). Employees are reminded that they
may not purchase or sell, or recommend the purchase or sale, of a security for
any account while they are in possession of material inside information. In
addition, Employees may not disclose confidential information (including, but
not limited to, information about pending or contemplated transactions for
client accounts) except to other Employees who "need to know" that information
to carry out their duties to clients.
6. Diversion of Investment Opportunity
Investment Persons should not acquire a security that would be suitable
for a client without first considering whether to recommend or purchase that
security to or for the client's account.
E. Exceptions
Exceptions to the Code of Ethics may be granted in special circumstances.
Requests should be submitted in writing to the Compliance Officer. The Company's
Code of Ethics Committee (the "Ethics Committee"), which consists of the Chief
Executive Officer, the Chief Financial Officer, the Head Trader, and the
Compliance Officer, will review such requests on a case-by-case basis. The
Ethics Committee will grant the request only if the conduct involved does not
appear to present any material opportunity for abuse and the equities of the
situation strongly support an exception. The Company must maintain a written
record of the Ethics Committee's decision and the reasons for that decision.
IV. OTHER RESTRICTIONS
A. Service as Director
Employees may not serve on the Board of Directors of any public or private
company without prior written approval of the Compliance Officer or designee
(see Exhibit D). An Employee who is a director of a company may not participate
in investment decisions involving that issuer's securities.
B. Gifts
To ensure that Employees maintain high standards of integrity and conduct,
Employees may not accept any gift or gratuity, other than one that is nominal in
value (e.g., reasonably valued at an amount less than $100), from a person or
entity that does or seeks to do business with the Company. An employee who
receives a gift or gratuity of more than nominal value must notify the
Compliance Officer immediately. An employee
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may not give a gift or gratuity of more than nominal value to a person or entity
doing or seeking to do business with the Company.
Reasonable business meals and entertainment are not subject to the $100
limitation so long as the Employee and the giver (or recipient) are both
present.
V. OVERSIGHT
A. Review of Employee Transactions
The Head Trader and Compliance Officer are responsible for monitoring
personal securities trading for compliance with the Code of Ethics. On a
periodic basis (but at least monthly), the Head Trader and/or Compliance Officer
should review the statements and reports submitted pursuant to Section III
above. Any unusual trading activity or patterns of transactions and any
indications of violations of this Code of Ethics or the Company's Insider
Trading Policy should be brought to the attention of the Ethics Committee.
B. Sanctions
If the Ethics Committee determines that an Employee has violated the Code
of Ethics, the committee will take such remedial action as it deems appropriate.
Sanctions will vary but may include censure, limitation or prohibition of
personal trading, suspension, or termination of employment.
The Ethics Committee generally will impose the following sanctions
(although the committee may impose different or additional sanctions in its
discretion):
o If an Employee does not obtain preclearance or violates a trading
restriction, the Employee will be requested to reverse the transaction
in question and to disgorge any profits to the applicable client(s) or
to a charity selected by the Employee. Failure to comply with such a
request is grounds for dismissal.
o If an Employee does not submit an initial or annual holdings report on
a timely basis, the Employee will be barred from further personal
trading, will not be reimbursed for any expenses (e.g., travel,
education), and will not be compensated until the report is provided.
o If the Company does not receive duplicate statements for an Employee
Account or Related Account on a timely basis, the Employee will be
barred from further personal trading, will not be reimbursed for any
expenses (e.g., travel, education), and will not be compensated until
the Employee takes appropriate steps to ensure compliance with the Code
of Ethics. An occasional late or missing statement should not result in
a sanction provided that the Employee has given instructions to the
institution maintaining the Employee Account or Related Account in
accordance with Section III.B above.
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C. Board Reporting
Each year, the Compliance Officer will prepare, or supervise the
preparation of, a written report that describes any issues arising under the
Code of Ethics during that year. The report must address, at a minimum, any
material violation of these policies and procedures and any sanctions imposed in
response. In the report, the Company must certify that it has adopted procedures
reasonably necessary to prevent violations of its Code of Ethics. The report
must be provided to the Board of Directors of each Fund for its consideration.
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EXHIBIT A.
BROWN INVESTMENT ADVISORY
& Trust Company
BROWN ADVISORY INCORPORATED
EMPLOYEE TRANSACTION APPROVAL FORM
Employee Name:_____________________________
Name of Security:__________________________
Symbol:____________________________________
Buy or Sell:_______________________________
Maximum Number of Shares/
Principal Amount:________________________
Date:______________________________________
Custodian:_________________________________
Name of Employee Account or Related Account:__________________________
If the transaction described above is a purchase, does it involve the
acquisition of shares of an issuer in an initial public offering?
Yes______ No______
If the security named above is included in the Growth Equity Guide List, are you
aware of any rating change of the security (or an equivalent security) in the
past four business days or the intention of a Research Analyst to change the
rating in the next four business days?
Yes______ No______
Are you aware of any pending or contemplated trades in the security named above
(or an equivalent security) for any client of the Company?
Yes______ No______
Do you possess any material inside information regarding the security or issuer
of the security?
Yes______ No______
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For Investment Personnel:
Are you aware of any trades of the security named above (or an equivalent
security) in the past 4 business days or of the intention of any portfolio
manager to trade the security named above (or an equivalent security) within the
next 4 business days for an investment entity managed by the Company?
Yes______ No_____
Have you purchased or sold the security named above (or an equivalent security)
in any Employee Account or Related Account within the past 60 days?
Yes_____ No_____
--------------------------------------------------------------------------------
Approved_____
Disapproved____ Reason:_________________________________________________
_______________________ __________________________
(Date) (Signature)
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EXHIBIT B.
BROWN INVESTMENT ADVISORY
& Trust Company
BROWN ADVISORY INCORPORATED
Initial/Annual Holdings Report
Name: _______________________________
Date: ______________________________
I hereby certify that I have read, understand and have complied with the
memorandum entitled: Code of Ethics. Furthermore, I certify that this form and
the attached statements represent a complete list of my securities holdings.
1. Provided below is a description of all Employee Accounts and Related
Accounts, as described in these procedures, which I maintain or in
which I have any direct or indirect Beneficial Interest.
PLEASE ATTACH A COPY OF THE MOST RECENT STATEMENT FOR ALL ACCOUNTS LISTED
Broker/Dealer or Bank
Account Name Account Number where securities are custodied
------------ -------------- ------------------------------
------------ -------------- ------------------------------
------------ -------------- ------------------------------
------------ -------------- ------------------------------
------------ -------------- ------------------------------
------------ -------------- ------------------------------
------------ -------------- ------------------------------
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2. Provided below is a description of securities in which I have any
direct or indirect Beneficial Interest (Attached statements are
acceptable).
Share/
Name of Class Unit Principal Amount
Issuer of Securities Amount (If Debt Security)
------------- ------------- ------ ------------------
------------- ------------- ------ ------------------
------------- ------------- ------ ------------------
------------- ------------- ------ ------------------
------------- ------------- ------ ------------------
------------- ------------- ------ ------------------
3. I have acquired securities in the following private placement
transactions during the calendar year.
Name of Date of
Issuer Transaction Nature of Transaction
------ ----------- ---------------------
------ ----------- ---------------------
------ ----------- ---------------------
------ ----------- ---------------------
------ ----------- ---------------------
------ ----------- ---------------------
------ ----------- ---------------------
------------------- --------------------------------
(Date) (Signature)
--------------------------------------------------------------------------------
Reviewed by:
Name:________________________________
Signature:___________________________
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EXHIBIT C.
BROWN INVESTMENT ADVISORY
& Trust Company
REQUEST FOR APPROVAL OF PRIVATE SECURITIES TRANSACTION
The undersign requests approval of the following securities transaction:
Issuer:_______________________________________________________
Is Issuer a publicly traded company? Yes__ No__
Buy:___ Sell:___ Anticipated Date of Transaction:___________________
Description of Securities:___________________________________________________
Number of Shares/Units:__________________ Cost/Proceeds_________________
Name of person from whom I propose to purchase or to whom I propose to sell:
________________________________________________________________________________
Is this person a client of the Firm? Yes____ No_____
If yes, what is the nature of the client relationship between that person and
the firm?
________________________________________________________________________________
To your knowledge, is this investment being offered to others? Yes___ No____
Are you providing any service or advice to this Issuer? Yes___ No____
If yes, please describe the service or advice:__________________________________
________________________________________________________________________________
____________________________________
(Name of Person Requesting Approval)
____________________ ____________________________________
(Date) (Signature)
-------------------------------------------------------------------------------
I have reviewed and ___approved ___ disapproved this request for permission to
engage in the private securities transaction described. In connection with this
request, I have the following comments:
________________________________________________________________________________
________________________________________________________________________________
______________________ __________________________________
(Date) (Compliance Officer)
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EXHIBIT D.
BROWN INVESTMENT ADVISORY
& Trust Company
REQUEST FOR APPROVAL FOR SERVICE AS DIRECTOR
Employee Name:_______________________________
Company with which you wish to become a director:
Name:___________________________________________________________________
Address:________________________________________________________________
Nature of Business:_____________________________________________________
Is the company publicly traded?_________________________________________
Is the company a client of the Company?__________________________________
Will you be compensated for your services and if so how much?__________________
State the nature and extent of your financial interest, if any, in the
organization:__________________________________________________________________
_______________________________________________________________________________
------------------------------------------------------------------------------
I have reviewed and ___approved ___ disapproved this request for permission to
serve on the board of directors for the above company. In connection with this
request, I have the following comments:
_______________________________________________________________________________
_______________________________________________________________________________
_____________________ ______________________________
(Date) (Compliance Officer)
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