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Code of Ethics of
Spectrum Financial, Inc.
Print Version
I. INTRODUCTION
A. Fiduciary
Duty. This Code of Ethics has been adopted by
Spectrum Financial, Inc. (“SFI”), an investment adviser
registered under the Investment Advisers Act or 1940, as
amended, (the “Advisers Act”), in compliance with Rule
17j-1 under the Investment Company Act of 1940, as
amended. Capitalized terms used in this Code are
defined in Appendix 1 to this Code. All Appendices
referred to herein are attached to and are a part of
this Code.
This Code is
based on the principle that the officers, directors, and
employees (or persons having similar status or function)
of SFI have a fiduciary duty to place the interests of
the clients ahead of their own interests. The Code
applies to all Access Persons and focuses principally on
monitoring and reporting of personal transactions in
securities. Access Persons must avoid activities,
interests and relationships that might interfere with
making decisions in the best interests of the clients.
As
fiduciaries, Access Persons must at all times:
1.
Place the interests of the clients first. Access
Persons must scrupulously avoid serving their own
personal interests ahead of the interests of the
clients. An Access Person may not induce or cause
a client to take action, or not to take action, for
personal benefit, rather than for the benefit of the
client. For example, an Access Person would
violate this Code by causing a client to purchase a
Security he or she owned for the purpose of increasing
the price of that Security.
2.
Avoid taking inappropriate advantage of their positions.
Access Persons may not, for example, use their knowledge
of portfolio transactions to profit by the market effect
of such transactions. Receipt of investment
opportunities, prerequisites, or gifts from persons
seeking business with SFI or a client could call into
question the exercise of an Access Person's independent
judgment.
3.
Conduct all Personal Securities Transactions in full
compliance with this Code including the reporting
requirements. Doubtful situations should be
resolved in favor of the clients. Technical
compliance with the Code's procedures may not
automatically insulate from scrutiny any trades that
indicate an abuse of fiduciary duties.
B.
Appendices to the Code. The appendices to this
Code are attached to and are a part of the Code.
The appendices include the following:
1.
Definitions (Appendix 1),
2.
Contact Persons (Appendix 2),
3.
Certification of Compliance with Code of Ethics
(Appendix 3),
A. Personal Securities Holdings and Accounts Disclosure
Form (Appendix 3-A)
4.
Personnel Investment Compliance Form (Appendix 4)
5.
Initial Public Offering / Private Placement Clearance
Form (Appendix 5)
6.
Notification Letter (Appendix 6)
II. PERSONAL SECURITIES TRANSACTIONS
A. Prohibited
Transactions.
1.
Prohibited Securities Transactions. The following
Securities Transactions are prohibited and may not be
authorized by the Compliance Officer (or a designee)
absent exceptional circumstances. The prohibitions
apply only to the categories of Access Persons
specified.
(i)
Initial Public Offerings (Investment Personnel only).
Any purchase of Securities by Investment Personnel in an
initial public offering (other than a new offering of a
registered open-end investment company). However,
if authorized, the Compliance Officer may maintain a
record of the reasons for such authorization.
(ii) Pending
Buy or Sell Orders (Investment Personnel Only).
Any purchase or sale of Securities by Investment
Personnel on any day during which any client has a
pending “buy” or “sell” order in the same Security (or
Security Equivalent) until that order is executed or
withdrawn. (See II C. Blackout Period).
2.
Always Prohibited Securities Transactions. The
following Securities Transactions are prohibited and
will not be authorized under any circumstances.
(i)
Inside Information. Any transaction in a Security
while in possession of material nonpublic information
regarding the Security or the issuer of the Security.
(ii) Market
Manipulation. Transactions intended to raise,
lower, or maintain the price of any Security or to
create a false appearance of active trading.
(iii) Others.
Any other transactions deemed by the Compliance Officer
(or a designee) to involve a conflict of interest,
possible diversions of a corporate opportunity, or an
appearance of impropriety.
3.
Private Placements (Investment Personnel only).
Acquisition of Beneficial Interests in Securities in a
private placement by Investment Personnel is strongly
discouraged. The Compliance Officer (or a
designee) may give permission only after considering,
among other facts, whether the investment opportunity
should be reserved for a client and whether the
opportunity is being offered to the person by virtue of
the person's position as an Investment Person. If
a private placement transaction is permitted, the
Compliance Officer may maintain a record of the reasons
for such approval (see Appendix 5). Investment
Personnel who have acquired securities in a private
placement are required to disclose that investment to
the Compliance Officer when they play a part in any
subsequent consideration of an investment in the issuer
by a client, and the decision to purchase securities of
the issuer by a client must be independently authorized
by a Portfolio CEO with no personal interest in the
issuer.
B.
Exemptions.
1.
The following Securities Transactions are exempt from
the restrictions set forth in Section II.A.
(i)
Mutual Funds. Securities issued by any registered
open-end investment companies;
(ii) No
Knowledge. Securities Transactions where neither
the Access Person nor an Immediate Family member knows
of the transaction before it is completed (for example,
Securities Transactions effected for an Access Person by
a trustee of a blind trust or discretionary trades
involving an investment partnership or investment club
in which the Access Person is neither consulted nor
advised of the trade before it is executed);
(iii) Certain
Corporate Actions. Any acquisition of Securities
through stock dividends, dividend reinvestments, stock
splits, reverse stock splits, mergers, consolidations,
spin-offs, or other similar corporate reorganizations or
distributions generally applicable to all holders of the
same class of Securities;
(iv) Rights.
Any acquisition of Securities through the exercise of
rights issued by an issuer pro rata to all holders of a
class of its Securities, to the extent the rights were
acquired in the issue; and
(v)
Miscellaneous. Any transaction in the following:
(a) bankers’ acceptances, (b) bank certificates of
deposit, (c) commercial paper, (d) high quality
short-term debt, including repurchase agreements, (e)
Securities that are direct obligations of the U.S.
Government, and (f) other Securities as may from time to
time be designated in writing by the Compliance Officer
on the grounds that the risk of abuse is minimal or
non-existent.
C. Blackout Period
1.
Purchases or sales of Securities by Investment Personnel
are permitted before/after a one calendar day “blackout
period” of the purchase or sale of the same Securities
(or Securities Equivalent) by SFI for the clients.
The “blackout period” will pertain to any purchase or
sale of a security in excess of $10,000. For example, if
SFI does client trades in a Security on day one, day two
is the first day the Investment Personnel may trade that
Security for an account in which he or she has a
beneficial interest. If SFI Investment Persons owns a
security that SFI may trade they will receive a
Notification Letter (Appendix 6) so they are aware of
the need to inform Compliance prior to a sale of their
security. Prior to purchasing a security whose
proposed cost basis would be in excess of $10,000,
Investment Personnel have the responsibility to inform
Compliance so the need for a “blackout period” can be
determined.
2.
Application to Commodities, Futures, Options on Futures
and Options on Broad-Based Indices. Commodities,
futures (including currency futures and futures on
securities comprising part of a broad-based, publicly
traded market based index of stocks) and options on
futures are not subject to the one-day blackout and
prohibited transaction provisions, but are subject to
transaction reporting.
III. REPORTING REQUIREMENTS
A. Reporting
Requirements for all Access Persons
1.
New Access Person or New Securities Account: Any person
who becomes an Access Person of SFI must submit within
10 days of becoming an Access Person Appendix 3-A
Personal Securities Holdings and Accounts Disclosure
Form to the Compliance Officer for all Securities
accounts and securities (open-end mutual funds, bank
certificates of deposit, and US Government bonds are
exempt from reporting) that he or she holds in such
accounts in which that Access Person (or Immediate
Family member) has Beneficial Interest.
Every Access Person who establishes a Securities account
(that may invest in stocks or bonds) during the quarter
in which that Access Person (or Immediate Family member)
has Beneficial Interest must submit a Personal
Securities and Accounts Disclosure Report (see Appendix
3-A) to the Compliance Officer. This report must
be submitted to the Compliance Officer within 30 days
after the completion of each calendar quarter.
2.
Annual Reporting Requirements: Every Access Person must
submit annually a Personal Securities Holdings and
Accounts Disclosure Form (mutual funds, bank
certificates of deposit, and US Government bonds do not
need to be reported) in which that Access Person (or
Immediate Family member) has Beneficial Interest.
The information in the statement must be current as of a
date no more than 45 days before the statement is
submitted. The Form should be submitted to the
Compliance Officer by January 31 following the end of
the calendar year.
3.
Quarterly Reporting Requirements: Every Access
Person and members of his or her Immediate Family must
arrange for the Compliance Officer to receive a
Personnel Investment Compliance Form (Appendix 4).
All copies must be received no later than 30 days after
the end of the calendar quarter. Each confirmation
or statement must disclose the following information:
(i)
the date of the transaction;
(ii)
the title (and interest rate and maturity date, if
applicable)
(iii)
the number of shares and principal amount
(iv)
the nature of the transaction (e.g., purchase, sale);
(v)
the price of the Security; and
(vi)
the name of the broker, dealer or bank through which the
trade was affected.
Exempted from this report are all investments held or
managed by SFI.
B.
Exemptions, Disclaimers and Availability of Reports
1.
A Securities Transaction involving the following
circumstances or Securities are exempt from the
Reporting Requirements discussed above: (1)
neither the Access Person nor an Immediate Family Member
had any direct or indirect influence or control over the
transaction; (2) Securities directly issued by the U.S.
Government; (3) bankers’ acceptances; (4) bank
certificates of deposit; (5) commercial paper; (6) high
quality short-term debt instruments, including
repurchase agreements; (7) shares issued by open-end
mutual funds; and (8) other Securities as may from time
to time be designated in writing by the Compliance
Officer on the grounds that the risk of abuse is minimal
or non-existent.
In addition,
no Access Person of SFI shall be required to make a
Quarterly Transaction Report where such report would
duplicate information recorded pursuant to Rule 204-2(a)
of the Investment Advisers Act of 1940.
2.
Disclaimers. Any report of a Securities
Transaction for the benefit of a person other than the
individual in whose account the transaction is placed
may contain a statement that the report should not 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.
3.
Availability of Reports. All information supplied
pursuant to this Code may be made available for
inspection to the Board of Directors of SFI, the
Compliance Officer, any party to which any investigation
is referred by any of the foregoing, the SEC, any
self-regulatory organization of which SFI is a member,
any state securities commission, and any attorney or
agent of the foregoing.
IV. FIDUCIARY DUTIES
A.
Confidentiality. Access Persons are prohibited
from revealing information relating to the investment
intentions, activities or portfolios of the clients
except to persons whose responsibilities require
knowledge of the information.
B.
Gifts. The following provisions on gifts apply to
all Investment Personnel.
1.
Accepting Gifts. On occasion, because of their
position with SFI or the clients, Investment Personnel
may be offered, or may receive without notice, gifts
from clients, brokers, vendors, or other persons not
affiliated with such entities. Acceptance of
extraordinary or extravagant gifts is not permissible.
Any such gifts must be declined or returned in order to
protect the reputation and integrity of SFI and
the clients. Gifts of a nominal value (i.e., gifts
whose reasonable value is no more than $100 a year), and
customary business meals, entertainment (e.g., sporting
events), and promotional items (e.g., pens, mugs,
T-shirts) may be accepted.
If an
Investment Person receives any gift that might be
prohibited under this Code, the Investment Person must
inform the Compliance Officer.
2.
Solicitation of Gifts. Investment Personnel may
not solicit gifts or gratuities.
3.
Giving Gifts. Investment Personnel may not
personally give any gift with a value in excess of $100
per year to persons associated with securities or
financial organizations, including exchanges, other
member organizations, commodity firms, news media, or
clients of SFI.
C.
Corporate Opportunities. Access Persons may not
take personal advantage of any opportunity properly
belonging to SFI or the clients. This includes,
but is not limited to, acquiring Securities for one's
own account that would otherwise be acquired for a SFI
client.
D. Undue
Influence. Access Persons may not cause or attempt
to cause any SFI client or Fund to purchase, sell or
hold any Security in a manner calculated to create any
personal benefit to the Access Person. If an
Access Person or Immediate Family member stands to
benefit materially from an investment decision for, SFI
clients which the Access Person is recommending or
participating in, the Access Person must disclose to
those persons with authority to make investment
decisions for SFI (or, if the Access Person in question
is a person with
authority to make investment decisions for SFI , to the
Compliance Officer) any Beneficial Interest that the
Access Person (or Immediate Family member) as in that
Security or a Security Equivalent, or in the issuer
thereof, where the decision could create a material
benefit to the Access Person (or Immediate Family
member) or the appearance of impropriety. The
person to whom the Access Person reports the interest,
in consultation with the Compliance Officer, must
determine whether or not the Access Person may be
restricted in making investment decisions.
E.
Service as a Director. No Investment Person may
serve on the board of directors of a publicly-held
company (not including public non-profits) absent prior
written authorization by the Compliance Officer.
This authorization may rarely, if ever, be granted and,
if granted, normally may require that the affected
Investment Person be isolated, through a “Chinese Wall”
or other procedures, from those making investment
decisions related to the issuer on whose board the
person sits.
V. COMPLIANCE WITH THIS CODE OF ETHICS
A. Compliance
Officer Review
1.
Investigating Violations of the Code. The
Compliance Officer is responsible for investigating any
suspected violation of the Code and shall report the
results of each investigation to the CEO of SFI.
The CEO of SFI together with the Compliance Officer is
responsible for reviewing the results of any
investigation of any reported or suspected violation of
the Code. Any violation of the Code by an Access
Person will be reported to the Boards of Directors of
SFI no less frequently than each regular quarterly
meeting.
2.
Annual Reports. The Compliance Officer should
review the Code at least once a year, in light of legal
and business developments and experience in implementing
the Code, and should report to the Boards of Directors
of SFI:
(i)
Summarizing existing procedures concerning personal
investing and any changes in the procedures made during
the past year;
(ii)
Identifying any violation requiring significant remedial
action during the past year; and
(iii) Identifying
any recommended changes in existing restrictions or
procedures based on its experience under the Code,
evolving industry practices, or developments in
applicable laws or regulations.
B.
Remedies.
1.
Sanctions. If the Compliance Officer and the CEO
of SFI determine that an Access Person has committed a
violation of the Code following a report of the
Compliance Officer, the Compliance Officer and the CEO
of SFI may impose sanctions and take other actions as
they deem appropriate, including a letter of caution or
warning, suspension of personal trading rights,
suspension of employment (with or without compensation),
fine, civil referral to the SEC, criminal referral, and
termination of the employment of the violator for cause.
The Compliance Officer and the CEO of SFI also may
require the Access Person to reverse the trade(s) in
question and forfeit any profit or absorb any loss
derived there from. The amount of profit shall be
calculated by the Compliance Officer and the CEO of SFI
and shall be forwarded to a charitable organization
selected by the Compliance Officer and the CEO of SFI.
The Compliance Officer and the CEO of SFI may not review
his or her own transaction.
2.
Sole Authority. The Compliance Officer and the CEO
of SFI have sole authority, subject to the review set
forth in Section V.B.3 below, to determine the remedy
for any violation of the Code, including appropriate
disposition of any monies forfeited pursuant to this
provision. Failure to promptly abide by a
directive to reverse a trade or forfeit profits may
result in the imposition of additional sanctions.
3.
Review. Whenever the Compliance Officer and the
CEO of SFI determine that an Access Person has committed
a violation of this Code that merits remedial action,
they may report no less frequently than quarterly to the
Board of Directors of SFI, information relating to
the investigation of the violation, including any
sanctions imposed. The Board of Directors of
SFI may modify such sanctions as it deems appropriate.
The Board of Directors of SFI and the Compliance
Officer and the CEO of SFI shall have access to all
information considered by the Compliance Officer in
relation to the case. The Compliance Officer may
determine whether or not to delay the imposition of any
sanctions pending review by the applicable Board.
4.
Notification. For material violations of the Code
by an Access Person involving a client, the CEO of
SFI shall inform the board of directors of such
violation in a timely manner.
C.
Exceptions to the Code. Although exceptions to the
Code may rarely, if ever, be granted, the Compliance
Officer may grant exceptions to the requirements of the
Code on a case by case basis if the Compliance Officer
finds that the proposed conduct involves negligible
opportunity for abuse. All such exceptions must be
in writing and must be reported as soon as practicable
to the Board of Directors of SFI at its next
regularly scheduled meeting after the exception is
granted.
D. Compliance
Certification. Each current Access Person and each
newly-hired Access Person shall certify that he or she
has received, read and understands the Code by executing
the Certification of Compliance with the Code of Ethics
form (see Appendix 3). In addition, annually all
Access Persons may be required to re-certify on such
form (see Appendix 3) that they have read and understand
the Code, that they have complied with the requirements
of the Code, and that they have reported all Securities
Transactions required to be disclosed or reported
pursuant to the requirements of this Code.
E.
Inquiries Regarding the Code. The Compliance
Officer should answer any questions about the Code or
any other compliance-related matters.
Amended July 26, 2007
(Adopted as of June 22, 2004)
Appendix 1
DEFINITIONS
“Access
Person” means any director, officer, employee, or
Advisory Person of SFI.
“Advisory
Person” means (1) any employee of SFI (or of any company
in a control relationship with such companies) 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 by SFI, or
whose functions relate to the making of any
recommendation with respect to such purchases or sales,
and (2) any natural person in a control relationship to
such companies who obtains information concerning the
recommendations made to SFI clients with respect to the
purchase and sale of securities by SFI or the clients.
“Beneficial
Interest” means the opportunity, directly or indirectly,
through any contract, arrangement, understanding,
relationship or otherwise, to profit, or share in any
profit derived from, a transaction in the subject
Securities. An Access Person is deemed to have a
Beneficial Interest in Securities owned by members of
his or her Immediate Family. Common examples of
Beneficial Interest include joint accounts, spousal
accounts, UTMA accounts, partnerships, trusts and
controlling interests in corporations. Any
uncertainty as to whether an Access Person has a
Beneficial Interest in a Security should be brought to
the attention of the Compliance Officer. Such
questions may be resolved in accordance with, and this
definition shall be subject to, the definition of
“beneficial owner” found in Rules 16a-1(a)(2) and (5)
promulgated under the Securities Exchange Act of 1934,
as amended.
“Client”
means any retail client of Spectrum Financial, Inc. as
well as any operational “back office” clients contracted
to service sub-advisors to mutual funds .
“Code” means
this Code of Ethics, as it may be amended from time to
time.
“Compliance
Officer” means the Compliance Officer of SFI and the
persons designated in Appendix 2, as such, Appendix
shall be amended from time to time.
“Immediate
Family” of an Access Person means any of the following
persons who reside in the same
household as the Access Person:
child
grandparent
son-in-law
stepchild
spouse
daughter-in-law
grandchild
sibling
brother-in-law
parent
mother-in-law
sister-in-law
stepparent
father-in-law
Immediate Family includes adoptive relationships and any
other relationship (whether or not recognized by law)
which the Compliance Officer determines could lead to
the possible conflicts of interest, diversions of
corporate opportunity, or appearances of impropriety
which this Code is intended to prevent.
“Initial
Public Offering” is an offering of securities registered
under the Securities Act of 1933, as amended, by an
issuer who immediately before the registration of such
securities was not subject to the reporting requirements
of sections 13 or 15(d) of the Securities Exchange Act
of 1934, as amended.
“Investment
Personnel” and “Investment Person” mean (1) employees of
SFI (or of any company in a control relationship to such
companies) who, in connection with his or her regular
functions or duties, makes or participates in making
recommendations regarding the purchase or sale of a
security, or (2) any natural person who controls SFI and
who obtains information concerning recommendations made
to SFI clients regarding the purchase and sale of
securities by SFI clients. References to
Investment Personnel include Portfolio CEOs.
“1940 Act”
means the Investment Company Act of 1940, as amended.
“Private
Placement” means a limited offering exempt from
registration pursuant to Rules 504, 505 or 506 or under
Section 4(2) or 4(6) of the Securities Act of 1933, as
amended.
“Portfolio
CEO” means a person who has or shares principal
day-to-day responsibility for managing the portfolio of
a SFI client or a client.
“SEC” means
the Securities and Exchange Commission.
“Security”
includes stock, notes, bonds, debentures, and other
evidences of indebtedness (including loan participations
and assignments), limited partnership interests,
investment contracts, and all derivative instruments of
the foregoing, such as options and warrants.
“Security” does not include futures and options on
futures, but the purchase and sale of such instruments
are nevertheless subject to the reporting requirements
of the Code. Security does not include direct
obligations of the U.S. Government; banker’s
acceptances; bank certificates of deposit; commercial
paper; short term debt instruments, money market funds,
shares issued by open-end investment companies including
Mutual Funds, and Unit Investment Trusts as these all
appear to present little opportunity for the type of
improper trading that the access person reports are
designed to uncover.
“Security
Equivalent” means any Security issued by the same entity
as the issuer of a subject Security, including options,
rights, stock appreciation rights, warrants, preferred
stock, restricted stock, phantom stock, bonds, and other
obligations of that company or security otherwise
convertible into that security. Options on
securities are included even if, technically, they are
issued by the Options Clearing Corporation or a similar
entity.
“Securities
Transaction” means a purchase or sale of Securities in
which an Access Person or a member of his or her
Immediate Family has or acquires a Beneficial Interest.
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