FOX ASSET MANAGEMENT INC.
Code of Ethics
Amended and Restated as of July 15, 2000
1. Purposes
(a) Fox Asset Management, Inc. (the "Firm") believes that adherence to the
highest ethical standards is an essential ingredient in maintaining the
continuing confidence of all of our clients and therefore the long-term success
of our business. While we must ultimately depend upon the integrity of our
employees in following the principle that clients' interests always come first,
our code of ethics is designed to provide safeguards to help assure that our
clients' interests come before the personal investment decisions of Firm
personnel. However, just as in our investments we prefer to own stocks in
companies in which the management also has a personal investment interest, we
believe that, subject to appropriate safeguards, personal investing by our
personnel in securities also purchased for client accounts can benefit clients
by aligning their financial interests and providing the shared experience of
specific stock market risks and opportunities. Therefore, the Firm adopts the
following standards of conduct to ensure strict compliance by employees of their
personal securities transactions involving portfolio securities purchased and
sold by the Firm for its clients.
(b) This code of ethics (the "Code") is intended to comply with Rule 17j-1
under the Investment Company Act of l940, as amended (the "Company Act"), which
requires the Firm to adopt a code of ethics containing provisions reasonably
necessary to prevent specified individuals from engaging in certain conduct. The
Code is also intended to comply with the provisions of Rule-204-2 of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), which requires
the Firm to maintain records of securities transactions in which certain of its
personnel have any Beneficial Ownership. As required by Section-204A of the
Advisers Act the Firm has adopted procedures that seek to prevent, detect and
impose sanctions against insider trading, which are attached as Exhibit-B.
(c) The Code is intended to ensure that the personal securities
transactions of persons subject to its provisions are conducted in accordance
with the following principles:
(i) A duty at all times to place first the interests of Clients (as defined
below in Section 2);
(ii) The requirement that all personal securities transactions be conducted
consistent with the Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's responsibility
and position of trust; and
(iii) The fundamental standard that employees of the Firm not take
inappropriate advantage of their positions.
(d) In addition to the specific prohibitions on certain personal securities
transactions as set forth below, all employees of the Firm and all members of
the Board of Directors of the Firm are prohibited, in connection with the
purchase or sale, directly or indirectly, by such persons of a Covered Security
from:
(i) acting in any manner to defraud any Client;
(ii) making to any Client or to a Designated Supervisory Person (each as
defined below) any untrue statement of a material fact or omitting to state to
such person a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
(iii) engaging in any act, practice or course of business which does or
could defraud or deceive any Client;
(iv) engaging in any manipulative practice with respect to any Client; or
(v) revealing to any other person (except in the normal course of his or
her duties on behalf of a Client) any information regarding securities
transactions by any Client or the consideration by any Client or the Firm of any
such securities transactions.
2. Definitions
The following definitions apply for purposes of the Code and Statement in
addition to the definitions contained elsewhere herein.
(a) "Beneficial Ownership" is interpreted in the same manner as in
determining whether a person is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 (i.e., the power to vote or direct the
disposition of a security) and includes ownership by any person who has or
shares a direct or indirect financial interest in a Security.
(b) "Client" means any person or entity, including an investment company,
for which the Firm serves as investment manager, adviser or sub-adviser.
(c) "Designated Supervisory Person" refers to J. Peter Skirkanich,
President or James P. O'Mealia, Managing Director, or George C. Pierides,
Managing Director or John R. Sampson, Managing Director.
(d) "Head of Trading" refers to Joseph V. Gugliuzzo, Head Trader.
(e) 'IPO' means an offering of securities registered under the Securities
Act of 1933 (the '1933 Act'), the issuer of which, immediately before the
registration, was not subject to the reporting requirements of the Securities
Exchange Act of 1934.
(f) 'Limited Offering' means an offering that is exempt from registration
under the 1933 Act.
(g) "Personal Account" refers to an account in which an individual subject
to the Code has any Beneficial Ownership and a brokerage account maintained by
or for:
(i) the individual's spouse (other than a legally separated or divorced
spouse) or minor children,
(ii) any person who resides with the individual, and
(iii) any other account (except a Client account) with respect to which the
individual has investment discretion.
Notwithstanding the above, for purposes of this Code, neither Fox
Genesis-Balanced Fund, L.P. nor Fox Genesis-Large Cap Equity Fund, L.P nor Fox
Genesis-Small-Cap Fund, L.P. nor Navesink Partners, L.P. nor Edgewood Partners,
L.P. nor Ocean Partners, LLC shall be treated as a "Personal Account".
(h) "Covered Security" has the meaning set forth in Section-2(a)(36) of the
Company Act and includes any derivative of a security, commodities, options or
forward contracts, except that it shall not include shares of open-end
investment companies registered under the Company Act, direct obligations of the
Government of the United States, bankers' acceptances, bank certificates of
deposit, commercial paper, and high quality short term debt instruments,
including repurchase agreements.
(i) Purchase or sale of a Covered Security includes, among other things,
the writing of an option to purchase or sell a Covered Security.
(j) A Security is "Under Active Consideration" for purchase or sale when
such Security is subject to active analytical review in anticipation of
developing or refining an investment opinion or the Security in question may be
a candidate to be purchased or to be sold at or about at the current market
price on behalf of a Client as determined by the Head of Trading or by being
listed on the firm's Restricted List.
3. Prohibited Purchases and Sales
Personal Account securities transactions shall be effected in accordance
with the following provisions. No employee of the Firm:
(i) shall purchase or sell, any Security in which the employee has (or
after such transaction would have) any Beneficial Ownership unless such employee
obtains the prior written approval from a Designated Supervisory Person, to the
transaction. The Designated Supervisory Person (assuming that he has no personal
interest in the subject transaction) may approve the transaction if he concludes
that the transaction is not likely to have any adverse economic impact on a
Client or on a Client's ability to purchase or sell Securities of the same class
or other Securities of the issuer involved.
(ii) Request for preclearance must be made in writing by filling out and
signing the form entitled "Employee Request for Security Trade Approval," a copy
of which is attached. The signed approval form will be filed with the confirm
for the transaction and kept on file for five years by the Compliance
Department. Approval will not be granted by a Designated Supervisory Person
while there is a pending block purchase or sale order at or about the current
market price in that same Security for multiple clients.
(iii) Once a security is no longer Under Active Consideration for purchase
or sale by a Client, employees of the Firm may be permitted to buy or sell that
Security after a waiting period of two business days. The two day waiting period
may be waived, in the sole discretion of a Designated Supervisory Person, under
the following circumstances: (a)-if an order by an employee of the Firm to
purchase or sell a Security would represent less than 5% of the average daily
market trading volume for that Security for the preceding three months (as
determined and documented by the Head of Trading) and (b)-if the employee's
order is a sell order, all Client orders within the prior two business days have
been sell orders and no Client currently owns such Security. In the event a
decision is made to waive the waiting period, the basis of the decision must be
reflected in writing on the approval form.
(iv) At no time will Client and Firm employee orders for Securities be
commingled.
(v) Employees must obtain approval from a Designated Supervisory Person
before directly or indirectly acquiring Beneficial Ownership in any securities
in an IPO or in a Limited Offering.
4. Exempted Transactions
The requirements of Section-3(i) through (iv) of the Code and Statement do
not apply to:
(a) purchases or sales that are non-volitional on the part of either a Firm
employee or a Client or are pursuant to a dividend reinvestment plan; and
(b) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of the issuer's Securities, to the extent such
rights were acquired from such issuer, and sales of such rights so acquired.
5. Reporting
(a) All employees of the Firm must report to the Compliance Department the
information described in (i)-(iv) below with respect to transactions in any
Security in which such employee or the employee's family (including spouse,
minor children and adults living in the same household) has, or by reason of
such transaction acquires any Beneficial Ownership in the Security, within 10
days of the end of the calendar quarter in which such transactions took place.
(i) the date of the transaction, the title and the number of shares, and
the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other type
of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected.
(b) Any such report may contain a statement that the report is not to be
construed as an admission by the person making the report that he or she has any
direct or indirect Beneficial Ownership in the Security to which the report
relates.
(c) All employees must direct their brokers to submit to the Compliance
Department a duplicate copy of the confirmation of each personal Securities
transaction in such Personal Account and a copy of the employee's monthly or
quarterly statements for the account.
(d) The Compliance Department shall maintain the reports required by
paragraph(a) above and such other records, if any, as are required by Rule
17j-1 under the Company Act and Rule 204-2 under the Advisers Act. All reports
furnished pursuant to this Section will be kept confidential, subject to the
rights of inspection by a Designated Supervisory Person, the Securities and
Exchange Commission or other regulatory bodies and by other third parties
pursuant to applicable law.
(e) All employees shall, within 10 days of their commencement of employment
with the Firm, and annually thereafter, submit a statement to the Compliance
Department listing all of the (i) Covered- Securities in which the employee has
any Beneficial Ownership, (ii)-business activities in which the employee has a
significant role and (iii)-the names of any brokerage firms or banks where the
employee maintains an account and the date the account was established. The
statement must be current as of a date no more than 30 days before the statement
is submitted. Statements under this Section shall carry the date when submitted
to the Compliance Department.
(f) An employee shall not be required to submit reports with respect to
transactions effected for, and Covered Securities held in any personal account
over which the employee has no direct or indirect influence or control.
(g) Each person subject to the Code and Statement must certify annually
that he or she has read and understands the Code and Statement, recognizes that
he or she is subject thereto and has complied with its provisions and disclosed
or reported all personal securities transactions required to be disclosed or
reported by the Code and Statement. Such certificates and reports are to be
given to the Compliance Department.
6. Prohibited Purchases and Sales For Non-Employee Directors of the Firm of
the Fund
(a) The requirements described in Section 3 (i) - (iv) above, shall be
applicable to directors of the Firm who are not employees of the Firm if such
director had actual knowledge that during the 15-day period preceding or
following a purchase or sale of a Security in the director's Personal Account
such Security was Under Active Consideration for purchase or sale by a Client.
7. Sanctions
Upon learning of a violation of the Code, the Firm, with the advice of a
Designated Supervisory Person, may impose such sanctions as it deems
appropriate, including, among other things, censure, suspension or termination
of service. Individuals subject to the Code and Statement who fail to comply
with the Code and Statement may also be violating the federal securities laws or
other federal and state laws. Any such person who is suspected of violating the
Code should be reported immediately to a Designated Supervisory Person or the
Compliance Department.
8. Recordkeeping
(a) The Compliance Department shall keep the following records:
(i) a copy of each Code that is in effect, or at any time within the past
five years was in effect, maintained in an easily accessible place;
(ii) a record of any violation of the Code and of any action taken as a
result of the violation, maintained in an easily accessible place for at least
five years after the end of the fiscal year in which the violation occurs;
(iii) a copy of each report made by employees maintained for at least five
years after the end of the fiscal year in which the report is made, the first
two years in an easily accessible place;
(iv) a record of all persons currently or within the past five years, who
are or were required to make reports or who are or were responsible for
reviewing these reports, maintained in an easily accessible place;
(v) a copy of every report required by Section 9 of the Code must be
maintained for at least five years after the end of the fiscal year in which it
is made, the first two years in an easily accessible place; and
(vi) a copy of all preclearance approvals, for at least five years after
the fiscal year in which the approval is granted.
9. Administration of the Code
(a) A Designated Supervisory Person shall be responsible for approving
preclearance requests.
(b) The Compliance Department shall be responsible for reviewing reports of
securities holdings, brokerage confirmations and periodic statements to
determine whether all employees are complying with the Code.
(c) The Compliance Department shall inform employees of their reporting and
other obligations under the Code.
(d) The Compliance Department shall maintain a current list of all
employees subject to the Code.
(e) The Compliance Department shall periodically report to the President of
the Firm regarding the administration of the Code.
(f) The Compliance Department shall submit a written report annually to the
Board of Directors of any Fund for which the Firm acts as investment advisor (i)
describing any issues arising under the Code since the last such report,
including, but not limited to, information about material violations of the Code
and sanctions imposed in response to the material violations; and (ii)
certifying that the Firm has adopted procedures reasonably necessary to prevent
its employees from violating the Code.
EXHIBIT A
Personal Transaction Pre-Approval Report
This note is to indicate that I, _________________________, intend to
BUY/SELL __________________ shares of ___________________________ in my personal
account as of ____________________. The account number
_____________________________ and the account is Domiciled
___________________________________.
Signed, Approved by,
__________________________________ _____________________________
The actual execution was ____________________ shares BOUGHT / sold @
$___________ per share as of __________________________.
EXHIBIT B
FOX ASSET MANAGEMENT INC.
POLICIES FOR PREVENTING INSIDER TRADING
SECTION I. POLICY STATEMENT ON INSIDER TRADING
A. Introduction
Fox Asset Management, Inc. (the "Firm") seeks to foster a reputation for
integrity and professionalism. That reputation is a vital business asset. The
confidence and trust placed in us by investors in accounts managed by the Firm
is something we should value and endeavor to protect. To further that goal, this
Policy Statement implements procedures to deter the misuse of material,
nonpublic information in securities transactions.
Trading securities while in possession of material, nonpublic information
or improperly communicating that information to others may expose you to
stringent penalties. Criminal sanctions may include a fine of up to $1,000,000
and/or ten years imprisonment. The Securities and Exchange Commission can
recover the profits gained or losses avoided through the violative trading,
impose a penalty of up to three times the illicit windfall and issue an order
permanently barring you from the securities industry. Finally, you may be sued
by investors seeking to recover damages for insider trading violations.
Regardless of whether a government inquiry occurs, the Firm views seriously
any violation of this Policy Statement. Such violations constitute grounds for
disciplinary sanctions, including dismissal.
B. Scope of the Policy Statement
This Policy Statement is drafted broadly; it will be applied and
interpreted in a similar manner. This Policy Statement applies to securities
trading and information handling by directors, officers and employees of the
Firm including family members, and extends to activities within and outside
their duties at the Firm.
The law of insider trading is unsettled; an individual legitimately may be
uncertain about the application of the Policy Statement in a particular
circumstance. Often, a single question can forestall disciplinary action or
complex legal problems. You should direct any questions relating to the Policy
Statement to J. Peter Skirkanich, President or James P. O'Mealia, Managing
Director, or George C. Pierides, Managing Director or John R. Sampson, Managing
Director. You also must notify The Compliance Department immediately if you have
any reason to believe that a violation of the Policy Statement has occurred or
is about to occur.
C. Policy Statement on Insider Trading
The Firm forbids any officer, director or employee from trading, either
personally or on behalf of others, including accounts managed by the Firm, on
material nonpublic information or communicating material nonpublic information
to others in violation of the law. This conduct is frequently referred to as
"insider trading." Every officer, director and employee must read and retain
this policy statement. Any questions regarding the Firm's policy and procedures
should be referred to a Designated Supervisory Person or the Compliance
Department.
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material nonpublic information to
trade in securities (whether or not one is an "insider") or to communications of
material nonpublic 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 nonpublic
information, or
b. trading by a non-insider, while in possession of material nonpublic
information, where the information either was disclosed to the non-insider in
violation of an insider's duty to keep it confidential or was misappropriated,
or
c. communicating material nonpublic information to others.
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If, after reviewing this policy statement, you have any
questions you should consult a Designated Supervisory Person or the Compliance
Department.
D. Who is an Insider?
The concept of "insider" is broad. It includes officers, directors and
employees of a company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, the Firm may become a temporary insider of a
company it advises or for which it performs other services. According to the
Supreme Court, the company must expect the outsider to keep the disclosed
nonpublic information confidential and the relationship must at least imply such
a duty before the outsider will be considered an insider.
E. What is Material Information?
Trading on insider information is not a basis for liability unless the
information is material. Information is "material" when there is a substantial
likelihood that a reasonable investor would consider it important in making his
or her investment decisions, or if it is reasonably certain to have a
substantial effect on the price of a company's securities. Information that
officers, directors and employees should consider material 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.
Material information does not have to relate to a company's business, but
may also relate to the market for a company's securities. For example, in
Carpenter v. U.S., 108 U.S. 316 (1987), the Supreme Court considered as material
certain information about the contents of a forthcoming newspaper column that
was expected to affect the market price of a security. In that case, a Wall
Street Journal reporter was found criminally liable for disclosing to others the
dates that reports on various companies would appear in the Journal and whether
those reports would be favorable or not.
No simple "bright line" test exists to determine when information is
material; assessments of materiality involve a highly fact-specific inquiry. For
this reason, you should direct any questions about whether information is
material to a Designated Supervisory Person or the Compliance Department.
F. Contacts with Public Companies.
For the Firm, contacts with public companies represent an important part of
our research efforts. The Firm may make investment decisions on the basis of the
firm's conclusions formed through such contacts and analysis of
publicly-available information. Difficult legal issues arise, however, when, in
the course of these contacts, a Firm's employee or other person subject to this
Policy Statement becomes aware of material, nonpublic information. This could
happen, for example, if a company's Chief Financial Officer prematurely
discloses quarterly results to an analyst or an investor relations
representative makes a selective disclosure of adverse news to a handful of
investors. In such situations, the Firm must make a judgment as to its further
conduct. To protect yourself, our clients and the Firm, you should contact a
Designated Supervisory Person or the Compliance Department immediately if you
believe that you may have received material, nonpublic information.
G. Tender Offers.
Tender offers represent a particular concern in the law of insider trading
for two reasons. First, tender offer activity often produces extraordinary
gyrations in the price of the target company's securities. Trading during this
time period is more likely to attract regulatory attention (and produces a
disproportionate percentage of insider trading cases). Second, the SEC has
adopted a rule which expressly forbids trading and "tipping" while in possession
of material, nonpublic information regarding a tender offer received from the
tender offeror, the target company or anyone acting on behalf of either. Firm
employees and others subject to this Policy Statement should exercise particular
caution any time they become aware of nonpublic information relating to a tender
offer.
H. What is Nonpublic Information?
Information is nonpublic until it has been effectively communicated to the
market place. One must be able to point to some fact to show that the
information is generally public. 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.
I. Bases for Liability
i. Fiduciary Duty Theory
In 1980, the Supreme Court found that there is no general duty to disclose
before trading on material nonpublic information, but that such a duty arises
only where there is a fiduciary relationship. That is, there must be a
relationship between the parties to the transaction such that one party has a
right to expect that the other party will disclose any material nonpublic
information or refrain from trading. Chiarella v. U.S., 445-U.S. 22 (1980).
In Dirks v. SEC, 463 U.S. 646 (1983), the Supreme Court stated alternate
theories under which non-insiders can acquire the fiduciary duties of insiders:
they can enter into a confidential relationship with the company through which
they gain information (e.g., attorneys, accountants), or they can acquire a
fiduciary duty to the company's shareholders as "tippees" if they are aware or
should have been aware that they have been given confidential information by an
insider who has violated his fiduciary duty to the company's shareholders.
However, in the "tippee" situation, a breach of duty occurs only if the
insider personally benefits, directly or indirectly, from the disclosure. The
benefit does not have to be pecuniary, but can be a gift, a reputational benefit
that will translate into future earnings, or even evidence of a relationship
that suggests a quid pro quo.
ii. Misappropriation Theory
Another basis for insider trading liability is the "misappropriation"
theory, where liability is established when trading occurs on material nonpublic
information that was stolen or misappropriated from any other person. In U.S. v.
Carpenter, supra, the Court found, in 1987, a columnist defrauded The Wall
Street Journal when he stole information from the Journal and used it for
trading in the securities markets. It should be noted that the misappropriation
theory can be used to reach a variety of individuals not previously thought to
be encompassed under the fiduciary duty theory.
J. Penalties for Insider Trading
Penalties for trading on or communicating material nonpublic information
are severe, both for individuals involved in such unlawful conduct and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
civil injunctions
treble damages
disgorgement of profits
jail sentences
fines for the person who committed the violation o up to three time the
profit gains or loss avoided, whether or not the person actually benefited, and
fines for the employer or other controlling person of up to the greater of
$1,000,000 or three times the amount of the profit gains or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by the Firm, including dismissal of the persons
involved.
SECTION I. PROCEDURES TO IMPLEMENT FIRM POLICY
The following procedures have been established to aid the officers,
directors and employees of the Firm in avoiding insider trading, and to aid the
Firm in preventing, detecting and imposing sanctions against insider trading.
Every officer, director and employee of the Firm must follow these procedures or
risk serious sanctions, including dismissal, substantial personal liability and
criminal penalties. If you have any questions about these procedures you should
consult a Designated Supervisory Person or the Compliance Department.
Identifying Insider Information
Before trading for yourself or others, including accounts managed by the
Firm, in the securities of a company about which you may have potential inside
information, ask yourself the following questions:
i. Is the information material? Is this information that an investor would
consider important in making his or her investment decisions? Is this
information that would substantially affect the market price of the securities
if generally disclosed?
ii. Is the information nonpublic? To whom has this information been
provided? Has the information been effectively communicated to the marketplace
by being published in Reuters, The Wall Street Journal or other publications of
general circulation?
If, after consideration of the above, you believe that the information is
material and nonpublic, or if you have questions as to whether the information
is material and nonpublic, you should take the following steps:
i. Report the matter immediately to a Designated Supervisory Person or the
Compliance Department.
ii. Do not purchase or sell the securities on behalf of yourself or others,
including accounts managed by the Firm.
iii. Do not communicate the information inside or outside the Firm, other
than to a Designated Supervisory Person or the Compliance Department.
iv. After a Designated Supervisory Person or the Compliance Department has
reviewed the issue, you will be instructed to continue the prohibitions against
trading and communication, or you will be allowed to trade and communicate the
information.
K. Personal Securities Trading.
No officer, director or employee of the Firm is permitted to purchase or
sell a security in a Personal Account as defined in Section 2 of the Firm's Code
of Ethics which is Under Active Consideration (as defined in Section 2 of the
Firm's Code of Ethics) for purchase or sale, until a reasonable time has lapsed
following the completion of transactions in that security. Any questions as to
whether sufficient time has passed after the transaction by the Firm clients
should be directed to the Head Trader, a Designated Supervisory Person or the
Compliance Department, prior to any director, officer, employee effecting a
transaction in a Personal Account in that security. The determination of whether
sufficient time has passed will be made in accordance with the criteria outlined
in Section 3 of the Firm's Code of Ethics.
All officers, directors and employees of the Firm shall submit to the
Compliance Department, a report of every securities transaction in which they,
their families (including the spouse, minor children and adults living in the
same household as the officer, director or employee), have a beneficial
interest. All reports shall be submitted within ten days of the end of the
calendar quarter in which the transactions took place and shall include the name
of the security, date of the transaction, quantity, price and broker-dealer
through which the transaction was effected. The requirement may be satisfied by
sending duplicate confirmations of such trades.
L. High-Risk Trading Activities.
Certain high-risk trading activities, if used in the management of Firm
officers', directors' or employees' personal trading portfolios are risky not
only because of the nature of the securities transactions themselves, but also
because of the potential that action necessary to close out the transaction may
become prohibited during the pendency of the transactions. Examples of such
activities include short sales of common stock and trading in derivative
instruments such as option contracts to purchase ("call") or sell ("put")
securities at certain predetermined prices. Firm officers, directors and
employees should understand that short sales and trading in derivative
instruments involve special risks--derivative instruments, for example,
ordinarily have greater price volatility than the underlying security. The
fulfillment of the obligations owned by each officer, director and employee to
the Firm may heighten those risks. For example, if the Firm becomes aware of
material, nonpublic information about the issuer of the underlying securities,
the Firm personnel may find themselves "frozen" in a position in a derivative
security. The Firm will not bear any losses resulting in personal accounts
through the implementation of this Policy Statement.
M. Restricting Access to Material Nonpublic Information
Information in your possession that you identify as material and nonpublic
may not be communicated to anyone, including persons within the Firm, except as
provided in paragraph 1 above. In addition, care should be taken so that such
information is secure. For example, files containing material nonpublic
information should be sealed; access to computer files containing material
nonpublic information should be restricted, and conversations containing such
information, if appropriate at all, should be conducted in private (for example
not by cellular telephone), to avoid potential interception.
N. Resolving Issues Concerning Insider Trading
If, after consideration of the items set forth in paragraph 1, doubt
remains as to whether information is material or nonpublic, or if there is any
unresolved question as to the applicability or interpretation of the foregoing
procedures, or as to the propriety of any action, it must be discussed with a
Designated Supervisory Person or the Compliance Department before trading or
communicating the information to anyone.
O. Acknowledgment
I have read and understand the foregoing procedures and will comply in all
respects with such procedures. I understand that any violation of the Policy
Statement may lead to sanctions, including dismissal.
NAME _________________________
DATE _________________________
SECTION II.
SUPERVISORY PROCEDURES
The roles of Head Trader, a Designated Supervisory Person or the Compliance
Department are critical to the implementation and maintenance of the Firm policy
and procedures against insider trading. Supervisory Procedures can be divided
into two classifications--prevention of insider trading and detection of insider
trading.
Prevention of Insider Trading
To prevent insider trading, the Firm should:
i. distribute and review the Firm's policy and procedures with new
employees and periodically review them with existing directors, officers and
employees
ii. answer questions regarding the Firm's policy and procedures
iii. resolve issues of whether information received by an officer, director
or employee of the Firm is material and nonpublic
iv. review on a regular basis and update as necessary the Firm's policy and
procedures
v. when it has been determined that an officer, director or employee of the
Firm has material nonpublic information
a. implement measures to prevent dissemination of such information, and
b. if necessary, restrict officer, directors and employees from trading the
securities.
vi. promptly review and either approve or disapprove, in writing, each
request of an officer, director or employee for clearance to trade in specified
securities.
vii. maintain and distribute a list of restricted securities to all company
employees which indicates any securities which are not allowed to be purchased
or sold during this restricted period.
P. Detection of Insider Trading
To detect insider trading, a Designated Supervisory Person or the
Compliance Department should:
i. Monitor trading activities of Firm employees through review of
duplicates of confirmations and customer statements provided by any NASD Member
broker-dealer with whom the employee has an account.
ii. Coordinate the review of such reports with other appropriate officers,
directors or employees of the Firm.
iii. Promptly investigate all reports of any possible violations of the
Firm's Policy and Procedures to Detect and Prevent Insider Trading.
Q. Special Reports
Promptly, upon learning of a potential violation of the Firm's Policy and
Procedures to Detect and Prevent Insider Trading, a Designated Supervisory
Person or the Compliance Department should prepare a written report providing
full details and recommendations for further action which may include any or all
of the following:
i. the name of particular securities involved, if any,
i. the date(s) a Designated Supervisory Person or the Compliance Department
learned of the potential violation and began investigating,
ii. the accounts and individuals involved,
iii. actions taken as a result of the investigation, if any, and
iv. recommendations for further action.
R. General Reports to Management and/or the Board of Directors
On an as-need or periodic basis, it may be useful for a Designated
Supervisory Person or the Compliance Department to prepare a written report to
the management and/or the Board of Directors of the Firm setting forth some or
all of the following:
i. a summary of existing procedures to detect and prevent insider trading,
ii. a summary of changes in procedures made in the last year,
iii. full details of any investigation since the last report (either
internal or by a regulatory agency) of any suspected insider trading, the
results of the investigation and a description of any changes in procedures
prompted by any such investigation,
iv. an evaluation of the current procedures and a description of
anticipated changes in procedures, and
v. a description of the Firm's continuing educational program regarding
insider trading, including the dates of such programs since the last report to
management.
S. Annual Reports
On an annual basis, the Management Committee will re-evaluate the current
policies and procedures in place.
