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SECURITY FUNDS
CODE OF ETHICS
SECTION 1 - LEGAL REQUIREMENTS
Rule 17j-1 of the Investment Company Act of 1940, as amended (the "Act")
provides that every registered investment company and the investment adviser and
principal underwriter of such investment company shall adopt a written code of
ethics containing provisions reasonably necessary to prevent its access persons
from engaging, in connection with the purchase or sale of a security held or to
be acquired by the registered investment company, in any of the following
prohibited practices:
(1) employing any device, scheme or artifice to defraud such registered
investment company;
(2) making to such registered investment company any untrue statement of a
material fact or omitting to state to such registered investment company
a material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading;
(3) engaging in any act, practice or course of business which operates or
would operate as a fraud or deceit upon a registered investment company;
or
(4) engaging in any manipulative practice with respect to such registered
investment company.
The Security Funds, Security Management Company, LLC ("SMC"), and Security
Distributors, Inc. ("SDI") have adopted this Code of Ethics to satisfy the
requirements of Rule 17j-1 of the Act. In addition, SMC adopts these procedures
with respect to its private investment advisory clients ("Private Accounts") as
a measure reasonably designed to prevent its access persons, with respect to
personal trading, from violating the antifraud provisions of the Investment
Advisers Act of 1940. Investment Advisers serving as Sub-Advisers to certain of
the Security Funds have their own code of ethics. Access persons of such
Sub-Advisers, including access persons that are also access persons of the
Funds, are subject to their employer's code of ethic and reporting requirements
in lieu of this Code. Certain terms used in this Code are defined in Appendix A
attached hereto.
SECTION 2 - FIDUCIARY PRINCIPLES
This Code of Ethics is based upon the principle that the access persons of the
Security Funds and of the Private Accounts have a fiduciary duty to the Funds,
Fund shareholders and to the Private Accounts to conduct their personal
securities transactions in a manner that does not interfere with Fund portfolio
or Private Account transactions or otherwise take unfair advantage of their
relationship with the Funds or the Private Accounts. Accordingly, access persons
shall:
(1) at all times place the interests of Fund shareholders and Private
Account clients first;
(2) conduct all personal securities transactions consistent with this Code
of Ethics and in such a manner as to avoid any actual or potential
conflict of interest or any abuse of their position of trust and
responsibility; and
(3) at all times avoid taking inappropriate advantage of their positions.
SECTION 3 - PROHIBITIONS
No access person shall purchase or sell, directly or indirectly, any securities
in which he or she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which he or she knows or should have known at
the time of such purchase or sale:
(1) is being considered for purchase or sale by one or more of the Funds or
Private Accounts;
(2) is being purchased or sold by one or more of the Funds or Private
Accounts; or
(3) is being offered in an initial public offering ("IPO").
The foregoing prohibitions do not apply to independent directors of the Funds,
unless such director knew or, in the ordinary course of fulfilling his or her
official duties as a director, should have known that the security was being
considered for purchase or sale by one or more of the Funds or was being
purchased or sold by one or more of the Funds.
With respect to purchases or sales of securities made or considered on behalf of
a Fund by a Sub-Adviser (other than SMC), the foregoing prohibitions shall not
apply, unless the access person knew, or should have known, that the security
was being considered for purchase or sale, or was being purchased or sold, by
one or more of the Funds.
Access persons shall not make more than 20 securities trades, including DE
MINIMIS transactions as defined below, in any calendar month.
Access persons may not PROFIT from the purchase and sale or sale and purchase of
the same (or equivalent) securities within 30 calendar days; provided that this
provision does not apply to transactions in options and futures. Any profits
made in connection with a transaction that violates this provision shall be
disgorged. An access person may apply to the President of SMC for an exemption
from this prohibition based upon hardship and may trade within the 30 calendar
day-period with the President's written approval. This prohibition is not
applicable to DE MINIMIS transactions.
Portfolio managers shall not receive any gift or other thing of more than DE
MINIMIS value from any person or entity that does business with or on behalf of
one or more of the Funds or the Private Accounts.
Portfolio managers, research analysts and traders of SMC shall not purchase or
sell a security during the period beginning seven (7) days before and ending
seven (7) days after a Fund or Private Account trades in that security. For the
traders and portfolio managers and research analysts for the equity Funds, the
seven-day blackout period applies to transactions of the Funds and Private
Accounts investing primarily in equity securities. For portfolio managers and
research analysts for the fixed income Funds, the seven-day blackout period
applies to transactions of the Funds and Private Accounts investing primarily in
fixed income securities. Any profits made by a portfolio manager, research
analyst or trader in connection with a transaction that violates this provision
shall be disgorged and paid to the Fund or Private Account as appropriate.
Portfolio managers shall not serve on the boards of directors of publicly traded
companies, absent prior authorization from the President and Secretary of SMC
and the Funds' board of directors.
SECTION 4 - EXEMPTED TRANSACTIONS
The prohibitions of Section 3 of this Code shall not apply to:
(1) purchases or sales effected in any account over which the access person
has no direct or indirect influence or control;
(2) purchases or sales of securities which are not eligible for purchase or
sale by the Funds or Private Accounts;
(3) purchases or sales which are non-volitional on the part of either the
access person, the Funds or the Private Accounts, for example, gifts,
splits, tender offers, mergers, and stock dividends;
(4) purchases or sales which are made pursuant to a systematic investment
program;
(5) DE MINIMIS purchases or sales of securities (not including IPOs or
trades within the 7-day blackout period) in the following amounts per
calendar month:
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MARKET TOTAL TRANSACTIONS*
CAPITALIZATION OF SECURITY PER SECURITY PER MONTH
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Less than $1 billion Up to $10,000
$1 - $5 billion Up to $25,000
More than $5 billion Up to $50,000
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*Total transactions include all purchases and sales
of that security in a calendar month. Purchases and
sales are not netted. For example, a purchase of
$5,000 and a sale of $10,000 equal total
transactions of $15,000.
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(6) the purchase of securities in an initial public offering when the access
person is purchasing such securities pursuant to non-transferable
subscription rights; and
(7) the purchase or sale of exchange-traded funds that track an index,
including open-end investment companies and unit investment trusts, and
options and futures on broad based indices.
SECTION 5 - REPORTING PROCEDURES
Every access person shall report, not later than ten days after the end of the
calendar quarter in which the transaction was effected, the following
information with respect to transactions in any security in which such access
person has or by reason of such transaction acquires, any direct or indirect
beneficial ownership in the security:
(1) the date of the transaction, the title, the interest rate and maturity
date (if applicable), the number of shares, and the principal amount of
each security involved;
(2) the nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or through whom the
transaction was effected; and
(5) the date the report is submitted by the Access Person.
Any report required under Section 5 may contain a statement that the report
shall not be construed as an admission by the person making such report that he
or she has any direct or indirect beneficial ownership in the security to which
the report relates.
Such report is to be provided on the Quarterly Personal Security Transaction
Report, attached as Appendix B. In addition, upon commencement of employment,
and not later than ten days after employment, with SMC, SDI or the Funds, every
access person shall disclose all personal securities holdings by filing an
Initial Holdings Report with the Secretary of SMC. The personal securities
holdings shall be provided on the Initial Holdings Report form attached as
Appendix C.
Each access person shall provide annually to the Secretary of SMC an Annual
Holdings Report disclosing all securities in which he or she had any direct or
indirect beneficial ownership. Such disclosure is to be provided on the Annual
Holdings Report attached as Appendix D. The Annual Holdings Report shall be
provided on or before January 30th of each year, and the information in the
report must be current as of thirty days or less before submission to the
Secretary of SMC.
In addition to the foregoing reporting requirements, access persons shall direct
their broker to supply to the Secretary of SMC, on a timely basis, duplicate
copies of confirmations of all personal securities transactions.
These reporting requirements shall not apply to independent directors of the
Funds, except that such directors shall report any purchase or sale of a
security that he or she knew or, in the ordinary course of fulfilling his or her
official duties as a director, should have known was being considered for
purchase or sale by one or more of the Funds or was being purchased or sold by
one or more of the Funds.
Further, these reporting requirements SHALL apply to the exempted transactions
set forth in Section 4 above except those transactions effected for any account
over which such person does not have any direct or indirect influence or
control.
SECTION 6 - PRECLEARANCE OF TRANSACTIONS
All access persons shall, prior to executing personal securities transactions,
preclear such transactions on the "Pre-approval of Personal Securities
Transactions" form (attached as Appendix E hereto) with the Compliance
Administrator of SMC, or in his or her absence, the President or Secretary of
SMC. (Portfolio Managers are also required to complete the Portfolio Manager
Certification (see Appendix F) as part of obtaining pre-clearance of any
transaction.) The Compliance Administrator, President or Secretary shall review
the proposed transaction to ensure that it complies with the requirements set
forth in this Code of Ethics. If approved, he or she shall state on the
pre-approval form the rationale for approving any transaction in a private
placement security. Preclearance, once obtained, shall remain valid for three
business days following the date of the approval. The form evidencing such
approval shall be filed with the Secretary of SMC.
The requirement to preclear transactions shall not apply to independent
directors of the Funds, except that such a director shall preclear any
transactions in securities that he or she knows or, in the ordinary course of
fulfilling his or her official duties as a director, should know are being
considered for purchase or sale by one or more of the Funds or are being
purchased or sold by one or more of the Funds. The requirement to pre-clear
transactions shall not apply to the exempted transactions set forth in Section
4.
SECTION 7 - SANCTIONS
The Secretary of SMC shall review the above-referenced quarterly "Personal
Securities Transaction Reports" submitted by access persons to determine whether
any violations of the policy have occurred. If a violation is found to have
occurred, whether intentionally or unintentionally, the violator will be placed
on probation for a period of twelve (12) months. Repeated violations of the
policy will constitute grounds for further disciplinary action or, possibly,
termination of employment.
SECTION 8 - ANNUAL REPORT TO FUNDS' BOARD OF DIRECTORS
The Secretary of SMC shall on an annual basis provide a written report to the
Funds' board of directors concerning the operation of this Code of Ethics. Such
report shall:
(1) certify to the Board that SMC and SDI have adopted procedures pursuant
to Rule 17j-1 reasonably necessary to prevent access persons from
violating this Code of Ethics;
(2) summarize existing procedures concerning personal investing and any
changes made during the preceding year;
(3) describe any issues arising under the Code of Ethics, including
information about material violations and sanctions imposed during the
past year; and
(4) identify any recommended changes in existing restrictions or procedures
based upon the Funds' experience under their Code of Ethics, evolving
industry practices and developments in applicable laws or regulations.
SECTION 9 - APPROVAL BY THE BOARD OF DIRECTORS
The foregoing Code of Ethics has been reviewed and approved by the Security
Funds Board of Directors and is approved pursuant to Rule 17j-1 under the
Investment Company Act of 1940.
SECTION 10 - ANNUAL CERTIFICATION
SMC, SDI and the Funds consider compliance with this Code of Ethics an important
part of the fiduciary duty of the Funds' and the Private Account's access
persons. Accordingly, access persons will be required to certify annually that
they have read and understand the Code of Ethics; recognize that they are
subject thereto; have complied with the requirements of the Code of Ethics; and
have disclosed or reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of the code.
I have read and understand the foregoing Security Funds Code of Ethics and have
complied, and will comply in the future, in all respects with the requirements
of the Code.
Signed: ______________________________
Name: ______________________________ Dated: ______________________________
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APPENDIX A
DEFINITIONS
Important terms used in this Code of Ethics are defined below:
The term "access person" means any employee of: (1) Security Management Company,
LLC ("SMC") or the Security Funds ("the Funds") who, in connection with his or
her regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security, or whose functions relate to the
making of any recommendations with respect to such purchases or sales; (2) all
officers and directors of SMC and the Funds; (3) any director or officer of
Security Distributors, Inc. ("SDI") who in the ordinary course of his or her
business makes, participates in, or obtains information regarding the purchase
or sale of securities for the Funds or whose functions or duties relate to the
making of any recommendations to such investment company with respect to such
purchases or sales; and (4) any natural person who both (i) controls, as that
term is defined in Section 2(a)(9) of the Act, SMC or the Funds and (ii) obtains
information concerning recommendations made to the Funds with regard to the
purchase or sale of a security.
The term "beneficial ownership" means securities held by: (a) your spouse, minor
children or relatives who share the same house with you; (b) an estate for your
benefit; (c) a trust, of which (i) you are a trustee or you or members of your
immediate family have a vested interest in the income or corpus of the trust,
(ii) you own a vested beneficial interest, or (iii) you are the settlor and you
have the power to revoke the trust without the consent of all the beneficiaries;
(d) a partnership in which you are a partner; (e) a corporation (other than with
respect to treasury shares of the corporation) of which you are an officer,
director or 10 percent stockholder; (f) any other person if, by reason of
contract, understanding, relationship, agreement or other arrangement, you
obtain therefrom benefits substantially equivalent to those of ownership; or (g)
your spouse or minor children or any other person, if, even though you do not
obtain therefrom the above-mentioned benefits of ownership, you can vest or
revest title in yourself at once or at some future time. A beneficial owner of a
security also includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares
voting power and/or investment power with respect to such security. Voting power
includes the power to vote, or to direct the voting of such security, and
investment power includes the power to dispose, or to direct the disposition of
such security. A person is the beneficial owner of a security if she or he has
the right to acquire beneficial ownership of such security at any time within
sixty (60) days.
The term "security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest, option or participation in
any profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call,
straddle, option or privilege entered into on a national securities exchange
relating to foreign currency or, in general, any interest or instrument commonly
known as a security, or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or warrant or
right to subscribe to or purchase, any of the foregoing, provided, however, that
security shall not mean securities issued by the Government of the United
States, bankers' acceptances, bank certificates of deposit, commercial paper and
high quality short-term debt instruments, including repurchase agreements,
shares of registered open-end investment companies ("mutual funds"), variable
annuity contracts and variable life insurance policies.
An "independent director" is a director who is not an "interested person" of the
Funds as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940.
A security "is being considered for purchase or sale" when a recommendation to
purchase or sell a security has been made and communicated and, with respect to
the person making the recommendation, when such person seriously considers
making such a recommendation.
Security Funds include the following funds and their series: SBL Fund, Security
Cash Fund, Security Equity Fund, Security Income Fund, Security Growth and
Income Fund, Security Municipal Bond Fund, and Security Ultra Fund.
The term "systematic investment program" means any program to purchase or sell
securities in predetermined amounts (calculated on the basis of shares or
dollars) at specified time intervals, for example contributions to a 401(k) or
profit sharing plan.
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APPENDIX B
QUARTERLY PERSONAL SECURITY TRANSACTION REPORT
CALENDAR QUARTER ENDED _________________
REPORT DATE:_______________
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INTEREST
TITLE AND RATE AND NAME OF BROKER,
NUMBER OF DATE AND PRICE MATURITY DEALER, OR
SHARES OF NATURE OF AT WHICH TOTAL DATE (IF BANK HANDLING
SECURITY TRANSACTION EFFECTED PRICE APPLICABLE) TRANSACTION
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This report is filed pursuant to and in accordance with Rule 204-2 under the
Investment Advisor's Act of 1940.
To the best of my knowledge and belief the foregoing schedule accurately and
completely lists all of the security transactions which took place during the
quarter indicated in which I had direct or indirect beneficial ownership.
BY MY TYPED SIGNATURE AND SBG EMPLOYEE NUMBER SHOWN BELOW, I CERTIFY THAT I AM
THE PERSON STATED AND THE PERSONAL SECURITIES TRANSACTION INFORMATION REPORTED
IS TRUE AND CORRECT FOR THE CALENDAR QUARTER STATED.
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Employed By Typed Signature Associate Number
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APPENDIX C
INITIAL HOLDINGS REPORT
REPORT DATE:_________________
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NAME OF ANY BROKER(S), DEALER(S),
TITLE OF NUMBER PRINCIPAL OR BANK(S) WITH WHOM MY SECURITIES
SECURITY OF SHARES AMOUNT ARE MAINTAINED AS OF THE DATE BELOW
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This report is filed pursuant to and in accordance with Rule 204-2 under the
Investment Advisor's Act of 1940.
To the best of my knowledge and belief the foregoing schedule accurately and
completely lists all of the security holdings indicated in which I had direct or
indirect beneficial ownership as of _____________, the date I became an Access
Person as defined under the Code of Ethics.
BY MY TYPED SIGNATURE AND SBG EMPLOYEE NUMBER SHOWN BELOW, I CERTIFY THAT I AM
THE PERSON STATED AND THE INITIAL HOLDINGS INFORMATION REPORTED IS TRUE AND
CORRECT.
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Employed By Typed Signature Associate Number
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APPENDIX D
ANNUAL PERSONAL HOLDINGS REPORT
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TITLE OF NUMBER NAME OF ANY BROKER, DEALER, OR BANK
SECURITY OF SHARES TOTAL PRICE WITH WHOM MY SECURITIES ARE MAINTAINED
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This report is filed pursuant to and in accordance with Rule 204-2 under the
Investment Advisor's Act of 1940.
To the best of my knowledge and belief the foregoing schedule accurately and
completely lists all of the security holdings indicated in which I had direct or
indirect beneficial ownership as of ______________.
BY MY TYPED SIGNATURE AND SBG EMPLOYEE NUMBER SHOWN BELOW, I CERTIFY THAT THE
INFORMATION REPORTED ON THIS FORM IS TRUE AND CORRECT.
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Date Employed By Typed Signature Associate Number
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[DATE]
[DEALER ADDRESS]
Subj: Account Number _________
Dear Sir or Madam:
I am an access person of Security Management Company ("SMC"), an investment
adviser registered with the Securities and Exchange Commission. SMC has adopted
a Code of Ethics as required by Rule 17j-1 under the Investment Company Act of
1940. As an access person, I am subject to SMC's Code of Ethics, which requires
that I arrange to have my broker send duplicate confirmations of my personal
securities transactions to SMC. Accordingly, please provide duplicate
confirmations of any securities transactions for the above-referenced account
to:
Amy J. Lee, Secretary
Security Management Company, LLC
700 S.W. Harrison Street
Topeka, Kansas 66636-0001
If you have any questions concerning this matter, please contact me at
(785) _____-______.
Sincerely,
