SHAPIRO CAPITAL MANAGEMENT
CODE OF ETHICS
The Code of Ethics and Insider Trading Policies and Procedures are designed to
protect the public from abusive trading practices and to maintain ethical
standards for access persons when dealing with the public. Management dictates
that these principles be diligently implemented and monitored. The Code of
Ethics imposes the following general obligations:
A. RESPONSIBILITY. It is the responsibility of all supervisory personnel to
ensure that SCM conducts its business with the highest level of ethical
standards and in keeping with its fiduciary duties to its clients.
B. DUTY TO CLIENTS. SCM has a duty to exercise its authority and
responsibility for the benefit of its clients, to place the interests of
its clients first, and to refrain from having outside interests that
conflict with the interests of its clients. SCM must avoid any
circumstances that might adversely affect or appear to affect its duty of
complete loyalty to its clients.
C. PROHIBITED ACTS.
1. Employing any device, scheme or artifice to defraud;
2. Making any untrue statement of a material fact;
3. Omitting to state a material fact necessary in order to make a statement,
in light of the circumstances under which it is made, not misleading;
4. Engaging in any fraudulent or deceitful act, practice or course of
business; or,
5. Engaging in any manipulative practices.
6. Fiduciary duties mandate suitable investment opportunities be presented
first to the Fund, Adviser, or employer and should not be exercised even
after full disclosure for personal benefit.
7. Front running, market manipulation and deceptive trading practices are
abusive techniques prohibited by these procedures and may result, in fines,
termination or legal action by third parties.
8. Access persons shall not engage in transactions that create a conflict of
interest including but not limited to inappropriately making decisions on
behalf of a Fund regarding securities or private placements personally
owned by the access person.
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D. CONFLICTS OF INTEREST. SCM has a duty to disclose potential and actual
conflicts of interest to their clients. All IARs and solicitors have a duty
to report potential and actual conflicts of interest to SCM. Gifts (other
than de minimis gifts) should not be accepted from persons or entities
doing business with SCM.
E. USE OF DISCLAIMERS. SCM shall not attempt to limit liability for willful
conduct or gross negligence through the use of disclaimers. [Text Box NCS1]
[NCS1 - The SEC's position is stated in the Auchinclos & Lawrence
No-Action Letter.]
F. SUITABILITY. SCM shall only recommend those investments that are suitable
for a client, based upon the client's particular situation and
circumstances.
G. DUTY TO SUPERVISE. ADVISERS ACT SECTION 203(E)(5) SCM is responsible for
ensuring adequate supervision over the activities of all persons who act on
its behalf. Specific duties include, but are not limited to:
1. Establishing procedures that could be reasonably expected to prevent and
detect violations of the law by its advisory personnel;
2. Analyzing its operations and creating a system of controls to ensure
compliance with applicable securities laws;
3. Ensuring that all advisory personnel fully understand SCM's policies and
procedures; and,
4. Establishing a review system designed to provide reasonable assurance that
SCM's policies and procedures are effective and are being followed.
H. PERSONAL SECURITIES TRANSACTIONS. ADVISERS ACT RULE 204-2
A. PURPOSE. The following procedures are designed to assist the Designated
Supervisor in detecting and preventing abusive sales practices such as
"scalping" or "front running" and to highlight potentially abusive "soft
dollar" or brokerage arrangements.
B. RESPONSIBILITY. The Designated Supervisor shall maintain current and
accurate records of personal securities transactions of its employees.
C. RECORD KEEPING REQUIREMENTS
1. SCM will require INITIAL HOLDINGS REPORT of access persons no later than 10
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days after becoming an access person. In addition, a ANNUAL HOLDINGS REPORT
of access persons will be maintained. The reports will state the name of
the broker-dealer and/or bank with whom the account was established. The
annual report must state number of shares and principal amount of all
securities owned by the employee and any account maintains with a
broker-dealer and/or bank.
2. SCM will require personal securities transactions reports of employees
including all brokerage transactions. In addition, Pre-clearance is
required on personal securities transactions INCLUDING BUT NOT LIMITED TO
IPO'S AND PRIVATE PLACEMENTS.
3. EXCEPTIONS. Exceptions to the record keeping requirements are as follows:
(a) Transactions effected in any account over which neither SCM nor its
IARs have any direct or indirect influence or control; and,
(b) Transactions that are direct obligations of the United States
government.
D. OTHER CONSIDERATIONS [Text Box Icon NCS2][NCS2 - See also, NASD
Interpretive Letter to Brian Hobbs, dated August 5, 1994 which clarifies
NASD Notice to Members 94-44 as to situations in which a IAR/RR maintains
discretionary trading authority, determines portfolio changes and
prepares trade instructions for customer accounts and charges the accounts
an asset-based fee.]
1. Notification of Reporting Obligation - Annual Certification
SCM will be responsible for notifying all access persons about their duty
to inform Compliance when they are establishing a brokerage account, so
that SCM may request duplicate confirmations and statements. Once informed
of the duty, an access person has a continuing obligation to provide such
information to SCM in a timely manner. Information compiled in SCM files is
available for SEC inspection or other regulatory authorities at any time.
Annually, SCM will prepare a written report for the Mutual Funds Boards
that:
- Describes any issues that have arisen under this Code of Ethics
or its procedures since the latest report, including information
about material Code of Ethics or procedure violations and
sanctions imposed in response to those violations; and
- Certifies to the Boards that the adopted Code of Ethics and its
procedures provide reasonably necessary measures to prevent
investment personnel from violating the Code and applicable
procedures.
2. ACKNOWLEDGEMENT. SCM requires that all IARs to acknowledge in writing that
they have reviewed and understand SCM's policy on personal securities
transactions.
INSIDER TRADING ADVISERS ACT SECTION 204A [Text Box Icon NCS3][NCS3 - See also,
Securities Exchange Act of 1934, Section 15(f); Insider Trading Sanctions Act
of 1984; and, Insider Trading and Securities Fraud Enforcement Act of 1988.]
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A. SUPERVISORY RESPONSIBILITY. The Designated Supervisor shall be responsible
for implementing, monitoring and enforcing SCM's policies and procedures
against insider trading.
B. SECTION 204A OF THE ADVISER ACT. SECTION 204A requires all investment
advisers to establish, maintain and enforce written procedures designed to
prevent the misuse of material, non-public information in violation of the
Securities and Exchange Act of 1934. This conduct is frequently referred to
as "insider trading."
C. DEFINITIONS
1. INSIDER. The term "insider" is broadly defined. It includes officers,
directors and employees of SCM. In addition, a person can be a "temporary
insider" if they enter into a special confidential relationship in the
conduct of a company's affairs and, as a result, are given access to
information solely for SCM's purposes. A temporary insider can include,
among others, SCM's attorneys, accountants, consultants, bank lending
officers, and the employees of such organizations. In addition, SCM may
become a temporary insider of a client it advises or for which it performs
other services. If a client expects SCM to keep the disclosed non-public
information confidential and the relationship implies such a duty, then SCM
will be considered an insider.
2. INSIDER TRADING. The term "insider trading" is not defined in federal
securities laws, but generally is used to refer to the effecting of
securities transactions while in possession of material, non-public
information (whether or not one is an "insider") or to the communication of
material, non-public information to others. While the law concerning
insider trading is not static, it is generally understood that the law
prohibits:
(a) Trading by an insider while in possession of material non-public
information;
(b) Trading by a non-insider (also called a "temporary insider") while in
possession of material non-public information, where the information
was either disclosed to the non-insider in violation of an insider's
duty to keep the information confidential or was misappropriated; and,
(c) Communicating material non-public information to others.
3. MATERIAL INFORMATION. The term "material information" is generally defined
as information that a reasonable investor would most likely consider
important in making their investment decisions, or information that is
reasonably certain to have a substantial effect on the price of a company's
securities, regardless of whether the information is related directly to
their business. Material information includes, but is not limited to:
dividend changes; earnings estimates; changes in previously released
earnings estimates; significant merger or acquisition proposals or
agreements; major litigation; liquidation problems; and, extraordinary
management developments.
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4. NON-PUBLIC INFORMATION. Information is non-public until it has been
effectively communicated to the marketplace. For example, information found
in a report filed with the SEC, or appearing in Dow Jones, Reuters Economic
Services, The Wall Street Journal or other publications of general
circulation would be considered public information.
D. SCM'S POLICY ON INSIDER TRADING
All officers, directors, employees and IARs are prohibited from
trading either personally or on behalf of others, on material
non-public information or communicating material non-public
information to others in violation of Section 204A. The Agreement
to Abide by the Written Policy of SCM on Insider Trading must be
read and signed by every officer, director, IAR and employee.
Covered persons should be informed that they should direct any
questions regarding SCM's policy on insider trading to the
Designated Supervisor.
