IRIDIAN ASSET MANAGEMENT LLC
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000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000-0000
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CODE OF ETHICS
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and
I. CODE OF CONDUCT
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Effective as of January 15, 1997
Adopted July 1, 1996
Revised September 18, 1996
Revised January 15, 1997
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GENERAL BACKGROUND
Iridian Asset Management LLC is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Act"). As such, it and its employees
are subject to the Act and the rules and regulations promulgated thereunder. In
compliance with the Act, Iridian has adopted certain policies which are embodied
in its Code of Ethics and Code of Conduct.
All Iridian Personnel must adhere to the general principles as well as
comply with the specific provisions of the Code of Ethics and Code of
Conduct. Technical compliance with the Code of Ethics and Code of
Conduct and its procedures will not automatically prevent scrutiny of
trades that show a pattern of abuse of an individual's fiduciary
duties to Clients.
FAILURE BY ANY IRIDIAN PERSONNEL TO ADHERE TO THE CODE OF ETHICS AND CODE
OF CONDUCT COULD RESULT IN SEVERE CONSEQUENCES FOR BOTH XXXXXXX AND
IRIDIAN PERSONNEL.
All Iridian Personnel are required to read these Codes carefully. Iridian
Personnel will be asked to sign an affidavit acknowledging compliance with these
Codes, and to make certain disclosures and to provide certain information to the
Adviser on a periodic basis. If Iridian Personnel have any questions about these
Codes and the policies and procedures contained herein, please see the Chief
Compliance Officer.
DEFINITIONS
The following definitions are used in the Code of Ethics and Code of Conduct.
"ACT" means the Investment Advisers Act of 1940.
"ADVISER" means Iridian Asset Management LLC.
"BENEFICIAL OWNERSHIP" means (i) the sole or shared power, directly or
indirectly, to vote or dispose of the subject Securities or (ii) the
opportunity, directly or indirectly, to profit or share in any profit derived
from the purchase or sale of the subject Securities. "Beneficial Ownership"
includes, but is not limited to, ownership of Securities held by members of the
immediate family sharing the same household and other interests identified in
Rule 16al(a)(2) promulgated under the Securities Exchange Act of 1934. For these
purposes, "immediate family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, and includes
adoptive relationships.
"CLIENT" means any current client of the Adviser.
"CHIEF COMPLIANCE OFFICER" shall be the person designated on Schedule A.
"CODE" or "CODES" shall refer to the Code of Ethics and Code of Conduct of the
Adviser.
"EXCLUDED SECURITIES" include the following securities: (i) securities issued by
the United States government, (ii) short term debt securities which are
government securities within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, (iii) bankers' acceptances, (iv) bank certificates of
deposit, and (v) commercial paper.
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"IRIDIAN PERSONNEL" means all employees, whether full-time or part-time, of the
Adviser. Any provisions of this Code that apply directly to Iridian Personnel
apply equally to accounts in the names of other persons in which Iridian
Personnel have Beneficial Ownership.
"INVESTMENT PERSONNEL" means (i) Portfolio Managers and (ii) other Iridian
Personnel (including securities analysts and traders), who provide information
and advice to Portfolio Managers regarding Client investment decisions. A list
of Investment Personnel is attached as Schedule A. Any provisions of this Code
that apply directly to Personal Securities Transactions by Investment Personnel
apply equally to transactions in accounts in the names of other persons in which
the Investment Personnel have Beneficial Ownership.
"MANAGEMENT COMMITTEE" shall be comprised of those persons designated on
Schedule A.
"PERSONAL SECURITIES TRANSACTION(S)" means transactions in Securities for the
account(s) in the names of Iridian Personnel, or for accounts in which Iridian
Personnel have Beneficial Ownership.
"PORTFOLIO MANAGERS" means those Iridian Personnel entrusted with the direct
responsibility and authority to make investment decisions affecting any Client.
A list of Portfolio Managers is attached as Schedule A. Any provisions of this
Code that apply directly to Personal Securities Transactions by a Portfolio
Manager apply equally to transactions in accounts in the names of other persons
in which the Portfolio Manager has Beneficial Ownership.
"PURCHASE OR SALE OF A SECURITY" includes, among other things, the writing of an
option to purchase or sell a Security.
"SECURITY" means any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral trust certificate, pre-organization certificate or
subscription, transferable share, investment contract, voting trust certificate,
certificate of deposit for a security, fractional undivided interest in oil, gas
or other mineral rights, or, in general, any interest or instrument commonly
known as a "security," or any certificate or interest or participation in
temporary or interim certificate for, receipt for, guarantee of, or warrant or
right to subscribe to or purchase (including options) any of the foregoing. The
term "Security" shall not include "Excluded Securities."
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CODE OF ETHICS
STATEMENT OF PRINCIPLES
The Adviser has adopted this Code of Ethics and the accompanying procedures
and forms to govern personal securities investment activities by all Iridian
Personnel. Although this Code contains a number of specific standards and
policies, there are three key principles embodied throughout the Code.
o THE INTERESTS OF CLIENTS MUST ALWAYS BE PARAMOUNT.
Iridian Personnel have a legal, fiduciary duty to place the interests of
the Clients first. Although in many instances Iridian Personnel may own
securities and engage in Personal Securities Transactions in securities in which
Clients also may have an ownership interest, Iridian Personnel, in any decision
relating to their personal investments, must scrupulously avoid serving their
own interests ahead of those of any Client.
o IRIDIAN PERSONNEL MAY NOT TAKE INAPPROPRIATE ADVANTAGE OF THEIR
RELATIONSHIP TO OUR CLIENTS.
Iridian Personnel should avoid any situation (unusual investment
opportunities, perquisites, accepting gifts of more than token value from
persons seeking to do business with the Adviser or its Clients, ETC.) that might
compromise, or call into question, the exercise of their fully independent
judgment in the interests of Clients.
o ALL PERSONAL SECURITIES TRANSACTIONS SHOULD AVOID ANY ACTUAL,
POTENTIAL OR APPARENT CONFLICTS OF INTEREST.
Although all personal securities transactions by Iridian Personnel must be
conducted in a manner consistent with this Code, the Code itself is based upon
the premise that Iridian Personnel owe a fiduciary duty to Clients, and should
avoid any activity that creates an actual, potential or apparent conflict of
interest. Before entering into a personal securities transaction, Iridian
Personnel should ask themselves what effect it would have on their reputation -
and Xxxxxxx's - if the transaction were described on the front page of THE NEW
YORK TIMES or THE WALL STREET JOURNAL.
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PROHIBITED PURCHASES AND SALES OF SECURITIES
IN A PERSONAL SECURITIES TRANSACTION, PORTFOLIO MANAGERS MAY NOT:
Purchase or Sell a Security within seven calendar days before and after the
execution of a trade in the same Security. If the Adviser is engaged in a
trading program extending over several trading days, the prohibition on
trading by Portfolio Managers begins seven trading days prior to the first
Client transaction in that program, and ends seven trading days after the
last transaction in that program.
IN A PERSONAL SECURITIES TRANSACTION, PORTFOLIO MANAGERS AND INVESTMENT
PERSONNEL MAY NOT:
Acquire any Security in an initial public offering.
Profit in a Personal Securities Transaction from the purchase and sale, or sale
and purchase of the same or equivalent Securities within 60 calendar days
(a "Short-Term Trade"). This restriction does not apply to:
A Short-Term Trade involving Excluded Securities;
A Short-Term Trade for which express prior written approval has been received
from the Chief Compliance Officer of the Adviser;
A Short-Term Trade that is non-volitional on the part of Iridian Personnel; or A
Short-Term Trade resulting from an automatic dividend reinvestment plan.
Serve on the board of directors of a publicly traded company without prior
authorization from the Advisor based upon a determination that such service
would be consistent with the interests of the Clients. Investment personnel
that serve on such boards of directors are not permitted to participate in
any investment decisions made by the Advisor involving securities of a
company on whose board they serve. See VI.A.
Acquire any Security in a private offering without the prior written consent of
the Chief Compliance Officer. Furthermore, should written consent be given,
Investment Personnel are required to disclose such investment when
participating in the Adviser's subsequent consideration of an investment in
such issuer. In such circumstances, the Adviser's decision to purchase
securities of the issuer should be subject to an independent review by
Investment Personnel with no personnel interest in the issuer.
PORTFOLIO MANAGERS, INVESTMENT PERSONNEL AND IRIDIAN PERSONNEL MAY NOT:
Execute a Personal Securities Transaction on a day during which the Adviser has
a pending "buy" or "sell" order in that Security, until the Adviser's order
is executed or withdrawn;
In any calendar year, receive a gift or anything else (for example, air fare,
hotel accommodations, etc.) with a value of more than $100 from any single
person or entity that does business with or on behalf of the Adviser (see
VI.B.) or
Execute a Personal Securities Transaction without the prior written
authorization of the Chief Compliance Officer of the Adviser.
III. EXEMPTED TRANSACTIONS
A. The provisions described above under Section II. A., B. and C.
captioned "Prohibited Purchases and Sales of Securities" do not apply
to:
1. Purchases or Sales of Excluded Securities;
2. Purchases or Sales of options contracts on a broad-based market
index;
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3. Purchases or Sales of Securities which are not eligible for
Purchase or Sale by the Adviser or not ordinarily Purchased or
Sold by the Adviser on behalf of its Clients, E.G., securities of
any investment company registered under the Investment Company
Act of 1940, Purchases or Sales of any Securities of an issuer
with a market capitalization (outstanding shares multiplied by
the current price per share) less than $500 million;
4. Purchases or Sales of any Securities in any transaction, or
series of transactions, involving 2000 shares or less in the
aggregate of an issuer with a market capitalization (outstanding
shares multiplied by the current price per share) greater than
$500 million if the Iridian Personnel had no prior knowledge of
transactions in such security by the Adviser, PROVIDED, HOWEVER,
THAT PRECLEARANCE IS STILL REQUIRED FOR THESE TRANSACTIONS;
5. Purchases or Sales of Securities effected in any account over
which Iridian Personnel has no direct or indirect influence or
control, or in any account of the Iridian Personnel which is
managed on a discretionary basis by a person other than such
Iridian Personnel and with respect to which such Iridian
Personnel does not in fact influence or control such
transactions;
6. Purchases or Sales of Securities which are non-volitional on the
part of Iridian Personnel (e.g., the receipt of stock dividends);
7. Purchases of Securities made as part of automatic dividend
reinvestment plans;
8. Purchases of Securities effected upon the exercise of rights
issued by an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from such
issuer, and sale of such rights so acquired; and
9. All other transactions contemplated by Iridian Personnel which
receive the prior approval of the Chief Compliance Officer in
accordance with the Adviser's preclearance procedures.
IV. PRECLEARANCE OF PERSONAL SECURITIES TRANSACTIONS
All Iridian Personnel wishing to engage in Personal Securities Transactions
which are not Exempted Transactions must obtain prior verbal authorization of
any such Personal Securities Transaction from the Chief Compliance Officer or
any Trader, or such other person or persons that the Chief Compliance Officer
may from time to time designate to make such authorizations. Personal Securities
Transactions which are not Exempted Transactions proposed to be engaged in by
the Chief Compliance Officer shall require prior verbal authorization of a
Trader or a member of the Management Committee.
If there are any questions about whether any Iridian Personnel may engage
in Personal Securities Transactions, such questions shall be resolved by the
Chief Compliance Officer. Any doubts shall be resolved in favor of refraining
from trading.
Any such verbal authorization of Personal Securities Transactions
which are not Exempted Transactions shall promptly be memorialized in
writing and submitted to the Chief Compliance Officer.
Any authorization so provided is effective until the close of business on
the third trading day after the authorization is granted. If an order for the
Personal Securities Transactions which are not Exempted Transactions is not
placed within that time period, a new authorization must be obtained. If the
order for the transaction is placed but not executed within that time period, no
new authorization is required unless the person placing the original order
amends the order in any manner.
V. TRANSACTION AND ACCOUNT POSITION REPORTING REQUIREMENTS
A. DISCLOSURE OF PERSONAL BROKERAGE ACCOUNTS. At the commencement of
employment, all Iridian Personnel are required to submit to the Chief
Compliance Officer the names and account numbers of all of their
personal brokerage accounts, brokerage accounts of members of their
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immediate families, and any brokerage accounts which they control or
in which they or an immediate family member has Beneficial Ownership.
Each of these accounts is required to furnish duplicate confirmations
and statements to the Adviser. The Chief Compliance Officer shall
review, or cause to be reviewed, each confirmation from such accounts
of Iridian Personnel.
B. ANNUAL REPORTING REQUIREMENTS. All Iridian Personnel are required to
disclose all personal Securities holdings upon commencement of
employment, and thereafter on a periodic basis. At the commencement of
employment and, thereafter, at the beginning of the first quarter of
each fiscal year, all Iridian Personnel are required to certify that
they have read and understand the Codes and that they have complied
with its requirements throughout the prior fiscal year.
C. QUARTERLY REPORTING REQUIREMENTS. All Iridian Personnel shall report
to the Adviser the following information with respect to transactions
in any Security in which such person has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership in
the Security:
The date of the transaction, the title and the number of shares, and the
principal amount of each Security involved;
The nature of the transaction (I.E., purchase, sale or any other type of
acquisition or disposition);
The price at which the transaction was effected; and
The name of the broker, dealer or bank with or through whom the transaction was
effected.
Such reports shall be made no later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected.
For Iridian Personnel, such reports will be deemed to be made if the
executing broker provides to the Chief Compliance Officer, on a timely basis,
duplicate copies of confirmations of all Personal Securities Transactions and
copies of periodic statements for all securities accounts.
Not later than 10 days after the end of each calendar quarter, all Iridian
Personnel are required to certify, in writing, that they have reported all
Personal Securities Transactions required to be disclosed or reported pursuant
to the requirements of this Code of Ethics. In addition, all Iridian Personnel
are required to certify, in writing, that they have reported all Outside
Interest and Outside Activities required to be disclosed or reported pursuant to
the requirements of the Code.
Any such report 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.
Iridian Personnel need not make such a report with respect to transactions
effected for any account in which they may have Beneficial Ownership, but over
which they do not have any direct or indirect influence or control (for example,
a blind trust).
VI. OUTSIDE INTERESTS AND OUTSIDE ACTIVITIES.
A. OUTSIDE INTERESTS.
1. No Iridian Personnel shall accept employment outside the Adviser,
part-time or
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otherwise, without first obtaining the written approval of the
Management Committee. Furthermore, no Iridian Personnel may
accept a position as a director or officer of any corporation,
public or private, or as a general partner of any partnership, or
similar position with a similar entity (e.g., charitable
organization, trust, limited liability company or limited
partnership) without the prior approval of the Management
Committee.
B. OUTSIDE ACTIVITIES.
1. OUTSIDE PERSONS. The Adviser understands that Iridian Personnel, in
the course of performing their duties, will develop relationships in
the investment community with others, including, but not limited to,
corporate executives, securities analysts and research personnel,
brokers and traders (collectively, "Outside Persons").
2. DISCLOSURE. On a quarterly basis, all Iridian Personnel must disclose
to the Chief Compliance Officer any outside activity with any Outside
Person which is paid for or sponsored by the Outside Person, setting
forth the identity of the Outside Person and the relationship to the
Adviser and Iridian Personnel, and the activity conducted. From time
to time, the nature of any outside activity with an Outside Person
will be reviewed and more specific policies and guidelines may be
established.
3. PROHIBITED ACTIVITIES. While an occasional guest of an Outside Person
at a meal or sporting event may be acceptable in certain
circumstances, it would not be appropriate at any time to accept air
fare, hotel or other accommodations, etc. from any Outside Person, or
to accept personal gifts with a value of more than $100 in any
calendar year from any single person or entity that does business with
or on behalf of the Adviser. Usual or customary promotional items
received from Outside Persons or food items consumed on the premises
are not required to be reported.
VII. CONFIDENTIAL STATUS OF THE ADVISER'S PORTFOLIO
The current portfolio positions of the Adviser must be kept confidential.
If non-public information regarding the portfolio should become known to any
Iridian Personnel, whether in the line of duty or otherwise, he or she should
not reveal it to anyone unless it is properly part of his or her work to do so.
If anyone is asked about the Adviser's portfolio or whether a security has been
bought or sold, his or her reply should be that this is an improper question and
that this answer does not mean that the Adviser has bought, sold or retained the
particular security.
VIII. ENFORCEMENT AND PENALTIES
The Chief Compliance Officer shall review each confirmation and brokerage
statement describing Personal Securities Transactions by Iridian Personnel. The
confirmations and brokerage statements shall be compared to the transactions of
the Adviser. If a transaction appears to be in violation of the Code, the
transaction will be reported to the Management Committee.
If a Portfolio Manager executes a Personal Securities Transaction within
seven calendar days before or after the execution of a trade in the same
Security by the Adviser, and receives a price more favorable than that received
by any Client, the Portfolio Manager will be required to make a charitable
contribution to a charity selected by the Adviser in the amount of the aggregate
price difference of the Personal Securities Transaction.
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Portfolio Managers or Investment Personnel who profit from a Short-Term
Trade will be required to make a charitable contribution to a charity selected
by the Adviser in the amount of the profit made.
The Adviser may take additional action, as described below.
IX. DUTIES AND POWERS OF THE ADVISER
The Management Committee of the Adviser shall determine the appropriate
response of the Adviser, taking into account all of the facts and circumstances
of the apparent violation. If a violation has, in fact, occurred, the Management
Committee shall, in its sole discretion, impose any one or more of the following
penalties:
1. Letter of censure to the person or persons involved;
2. Fines, in amounts to be determined by the Management Committee,
to be paid by the person or persons involved;
3. Suspension of employment of the person or persons involved; or
4. Termination of employment of the person or persons involved.
The Management Committee also may require such Iridian Personnel to
resign from any Outside Interests, and to return to an Outside Person the value
of the Outside Activity returned.
The Management Committee also may impose any penalty it deems
appropriate upon any person that has engaged in a course of conduct which,
although in technical compliance with the Code, shows a pattern of abuse by that
person of his or her fiduciary duties to Clients.
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CODE OF CONDUCT
I. XXXXXXX XXXXXXX AND SECURITIES FRAUD ENFORCEMENT ACT PROCEDURES
As a registered investment adviser under the Act, the Adviser must
establish and implement procedures designed to prevent xxxxxxx xxxxxxx
and securities fraud.
As prescribed by the Code of Ethics, each Iridian Personnel is required to
notify the Chief Compliance Officer of where his or her personal brokerage
accounts are maintained. This is done when the Iridian Personnel is hired and
when there is a change in this information. It is the responsibility of all
Iridian Personnel to notify promptly the Chief Compliance Officer of any changes
in his or her personal accounts.
Personal accounts are any accounts in the name of Iridian Personnel and any
accounts of family members in which the Iridian Personnel has a financial
interest or for which the Iridian Personnel has a Beneficial Interest.
Each Iridian Personnel is required to obtain prior approval on any
transactions effected in his or her personal accounts as set forth in the
preclearance procedures adopted by the Adviser.
Trades effected in all personal accounts will be reviewed periodically. The
purpose of these reviews will be to ensure that no violations of securities laws
have occurred. In this regard, all Iridian Personnel should keep the following
in mind when making personal investment decisions:
o Trading on inside information is illegal.
o Trading based on knowledge that large orders will be executed for
Clients (frontrunning) is considered manipulative and is illegal.
If any Iridian Personnel believes that he or she is in possession of
material inside information, he or she must notify the Chief Compliance Officer
immediately.
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II. MEMORANDUM ON XXXXXXX XXXXXXX
This memorandum explains procedures adopted by the Adviser to prevent
xxxxxxx xxxxxxx.
READ IT CAREFULLY. XXXXXXX XXXXXXX IS ILLEGAL AND PUNISHABLE BY FINES AND
IMPRISONMENT.
THIS MEMORANDUM EXPLAINS THE CONDUCT PROHIBITED BY THE LAW OF XXXXXXX
XXXXXXX. IT IS MEANT TO BE A GUIDELINE - AS THE LAW OF XXXXXXX XXXXXXX DEVELOPS,
OTHER ACTIVITIES MAY FALL WITHIN THE SCOPE OF THE XXXXXXX XXXXXXX LAWS.
READ THIS MEMORANDUM CAREFULLY. ALL IRIDIAN PERSONNEL WILL BE ASKED TO
SIGN A STATEMENT AFFIRMING THAT HE OR SHE HAS READ THIS CODE AND THAT HE OR SHE
UNDERSTANDS ITS CONTENTS AND WILL ABIDE BY THE PROCEDURES BEING ESTABLISHED.
NEW EMPLOYEES WILL BE ASKED TO SIGN SUCH A STATEMENT AT THE TIME THEY
JOIN THE ADVISER. BY SIGNING THIS STATEMENT, EACH IRIDIAN PERSONNEL ALSO AFFIRMS
THAT HE OR SHE WILL MAINTAIN THE CONFIDENTIALITY OF INFORMATION CONCERNING THE
ADVISER'S TRADING AND OTHER ACTIVITIES OF THE ADVISER AND ITS CLIENTS. IF
IRIDIAN PERSONNEL HAVE ANY QUESTIONS ABOUT WHAT CONDUCT IS PROHIBITED BY THE LAW
OF XXXXXXX XXXXXXX, CONTACT THE CHIEF COMPLIANCE OFFICER IMMEDIATELY.
IGNORANCE OF THE LAW IS NO EXCUSE.
A. TRADING BY IRIDIAN PERSONNEL
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The Adviser has adopted procedures to ensure that Iridian Personnel do
not trade on inside information.
Iridian Personnel have been instructed to arrange for daily
confirmations and monthly statements for all securities accounts to be sent to
the Chief Compliance Officer. Whenever Iridian Personnel open new accounts,
Iridian Personnel must arrange for the daily confirmations and monthly
statements for these accounts to be sent to the Chief Compliance Officer.
Employment of any Iridian Personnel may be terminated if it is determined that
he or she has not complied with this procedure.
In addition, Iridian Personnel must arrange for the daily
confirmations and monthly statements for any account in which Iridian Personnel
own an interest to be sent to the Chief Compliance Officer. Iridian Personnel
may be deemed to own an interest in someone else's account if Iridian Personnel
share in the profits earned in the other account have discretion over the
account or have any other financial interest in the other account. Iridian
Personnel should contact the Chief Compliance Officer if he or she has any
questions about whether Iridian Personnel own an interest in someone else's
account. Iridian Personnel must also arrange for the daily confirmations and
monthly statements for the securities accounts of his or her spouse and children
and other persons who live with Iridian Personnel to be sent to the Chief
Compliance Officer.
B. WHAT TO DO IF YOU LEARN INSIDE INFORMATION
It is not illegal to learn inside information. It is only illegal to
trade on such information. If any Iridian Personnel thinks that he or she may
have learned inside information, he or she must contact immediately the Chief
Compliance Officer or, in his absence, any member of the Management Committee.
UNTIL YOU SPEAK WITH THE CHIEF COMPLIANCE OFFICER OR, IN HIS ABSENCE, ANY MEMBER
OF THE MANAGEMENT COMMITTEE, DO NOT
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TRADE ON THE INFORMATION OR DISCUSS THE POSSIBLE INSIDE INFORMATION WITH ANY
OTHER PERSON.
If the Chief Compliance Officer concludes that such Iridian Personnel
may in fact have learned inside information, procedures will be established so
that other Iridian Personnel do not learn the inside information.
C. INVESTIGATIONS OF SUSPICIOUS TRADING
It is possible that the Exchanges, the NASD and the SEC may request
information from the Adviser concerning suspicious trading. Iridian Personnel
may be asked to sign a sworn affidavit affirming that, at the time of such
trading, he or she did not have any inside information about the securities in
questions. Employment of such Iridian personnel may be terminated if he or she
refuses to sign such an affidavit or cooperate with any such investigation. The
Adviser may submit these affidavits to the SEC.
D. THE ADVISER'S TRADING ACTIVITIES ARE CONFIDENTIAL
It is the duty of each Iridian Personnel to maintain the
confidentiality of information concerning the Adviser's trading. This
confidential information includes the Adviser's and its Clients' securities
positions, the timing and magnitude of trades, its trading plans and any
internally prepared analysis of particular securities or of the markets. Iridian
Personnel should take every practicable step you can to preserve the
confidentiality of this confidential information. For example:
1. Don't discuss confidential matters in elevators, hallways,
restaurants, airplanes, taxicabs or any place where you can be
overheard.
2. Don't gossip.
3. Don't read confidential documents in public places or discard
them where they can be retrieved by others.
4. Don't carry confidential documents in elevators, hallways, ETC.,
in an exposed manner.
5. Beware of the carrying quality of conversations conducted on
speaker telephones, in offices, on car or airplane telephones, on
cellular phones, ETC.
Obviously, a list such as this can only be suggestive. It is
the responsibility of each Iridian Personnel to take
whatever practicable steps are appropriate to preserve the
confidentiality of confidential information.
The Adviser has a vital interest in the integrity of the securities
markets. Xxxxxxx xxxxxxx destroys that integrity. The Adviser is committed to
preventing xxxxxxx xxxxxxx and may terminate the employment of any Iridian
Personnel who engages in this illegal practice.
E. Conduct Prohibited by the Law of Xxxxxxx Xxxxxxx
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This section is intended to provide information and guidance
concerning xxxxxxx xxxxxxx, which has become an enforcement priority of the
Securities and Exchange Commission and the Department of Justice. THIS SECTION
IS A GUIDELINE - AS THE LAW OF XXXXXXX XXXXXXX DEVELOPS, OTHER ACTIVITIES MAY
FALL WITHIN THE SCOPE OF THE XXXXXXX XXXXXXX LAWS. If any Iridian Personnel does
not understand the following summary or have any questions about the conduct
prohibited by the law of xxxxxxx xxxxxxx, please contact the Chief Compliance
Officer.
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1. THE BASIC PRINCIPLE: Disclose or Refrain.
Although xxxxxxx xxxxxxx law has become increasingly complex, the
prohibition against xxxxxxx xxxxxxx is simple: if you are in possession of
"inside" information you must either publicly disclose the information or
refrain from trading. The essence of the prohibition against xxxxxxx xxxxxxx is
this principle of "disclose refrain."
2. WHAT CONSTITUTES INSIDE INFORMATION.
Since the disclose or refrain obligation applies only to "inside"
information, it is important to recognize what constitutes "inside" information.
Simply, it is information which is (i) material, (ii) non-public, and (iii) the
use of which for trading purposes would create a breach of duty.
(a) MATERIAL INFORMATION. Information is material if there is a
substantial likelihood that a reasonable investor would consider
it important in deciding how to act. Several rules of thumb can
be helpful in assessing whether information is material. First,
information that, when disclosed, is likely to have a direct
effect on a stock's price should be treated as material. Examples
include information concerning impending tender offers,
significant earnings swings and other major corporate events.
Additionally, the decision to trade on non-public information can
itself be evidence of the information's materiality.
(b) NON-PUBLIC INFORMATION. INFORMATION IS NON-PUBLIC WHEN IT HAS NOT
BEEN DISSEMINATED IN A MANNER MAKING IT AVAILABLE TO INVESTORS
GENERALLY. INFORMATION IS PUBLIC ONCE IT HAS BEEN PUBLICLY
DISSEMINATED, SUCH AS WHEN IT IS REPORTED ON THE DOW XXXXX BROAD
TAPE, AND INVESTORS HAVE HAD A REASONABLE TIME TO REACT TO THE
INFORMATION. ONCE THE INFORMATION HAS BECOME PUBLIC, IT MAY BE
TRADED ON FREELY.
(c) DISCLOSURE BREACHING A DUTY. GENERALLY, A VIOLATION OF THE
XXXXXXX XXXXXXX PROHIBITION OCCURS WHEN A PERSON VIOLATES A DUTY
OWED EITHER TO THE PERSON ON THE OTHER SIDE OF THE TRANSACTION OR
TO A THIRD PARTY BY TRADING ON THE INFORMATION. THIS DUTY MAY
TAKE ONE OF SEVERAL FORMS, WHICH INCLUDE BUT ARE NOT LIMITED TO
THE FOLLOWING. AS LAW OF XXXXXXX XXXXXXX DEVELOPS OTHER
ACTIVITIES MAY FALL WITHIN THE SCOPE OF THE LAW.
(i) CORPORATE FIDUCIARIES. FIDUCIARIES, SUCH AS CORPORATE
DIRECTORS AND OFFICERS, OWE A DUTY NOT TO USE THEIR
POSITIONS TO TAKE ADVANTAGE OF THE HOLDERS OF THE
CORPORATION'S SECURITIES.
(ii) TEMPORARY INSIDERS. IN ADDITION TO TRADITIONAL INSIDERS
(DIRECTORS AND OFFICERS), UNDERWRITERS, ACCOUNTANTS, LAWYERS
AND CONSULTANTS, AS WELL AS OTHER PERSONS WHO HAVE ENTERED
INTO
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SPECIAL RELATIONSHIPS OF CONFIDENCE WITH A CORPORATION, ARE
ALSO CONSIDERED TO BE INSIDERS AND COME WITHIN THE DISCLOSE
OR REFRAIN PROHIBITION.
(iii) RELATIONSHIP WITH THE MARKET. CERTAIN PERSONS WHO ENTER
INTO SPECIAL OBLIGATIONS OF TRUST AND CONFIDENCE WITH
PURCHASERS AND SELLERS IN THE MARKET ARE ALSO CONSIDERED
INSIDERS. THESE INSIDERS INCLUDE INVESTMENT ADVISERS, MARKET
MAKERS AND SEC EMPLOYEES.
(iv) MISAPPROPRIATION: THEFT OF INFORMATION. VIRTUALLY ANYONE - A
FINANCIAL PRINTER, A NEWSPAPER REPORTER, OR A NON-ATTORNEY
EMPLOYED BY A LAW FIRM - CAN BECOME SUBJECT TO THE DISCLOSE
OR REFRAIN PROHIBITION MERELY BY OBTAINING MATERIAL
NON-PUBLIC INFORMATION BY UNLAWFUL MEANS OR BY LAWFULLY
OBTAINING SUCH INFORMATION AND ILLEGALLY CONVERTING IT. IN
ESSENCE, THE MISAPPROPRIATION THEORY PROHIBITS A THIEF FROM
PROFITING FROM STOLEN INFORMATION.
(v) TIPPEES. A TIPPEE IS A PERSON WHO RECEIVES A "TIP." HE IS
CONSIDERED AN INSIDER AND SUBJECT TO THE DISCLOSE OR REFRAIN
PROHIBITION IN TWO SETS OF CIRCUMSTANCES.
1. DERIVATIVE LIABILITY. UNDER DERIVATIVE LIABILITY, A
TIPPEE ESSENTIALLY STANDS IN THE SHOES OF THE INSIDER
FOR PURPOSES OF THE XXXXXXX XXXXXXX PROHIBITION. TO BE
LIABLE AS A TIPPEE THERE MUST BE A BREACH OF DUTY BY
THE ORIGINAL INSIDER IN DISCLOSING THE INFORMATION TO
THE TIPPEE AND THE TIPPEE MUST KNOW, OR HAVE REASON TO
KNOW, OF THIS BREACH. THE CHAIN OF TIPPEE LIABILITY CAN
EXTEND FROM ONE TIPPEE TO ANOTHER SO LONG AS EACH
SUCCESSIVE TIPPEE IS AWARE OF THE ORIGINAL VIOLATOR'S
BREACH.
2. LIABILITY UNDER RULE 14e-3. There is a special SEC rule
relating to tippee liability for information relating
to tender offers. Rule 14e-3 imposes the disclose or
refrain prohibition upon any person, including a
tippee, who is in possession of material non-public
information relating to a tender offer if (i) the
bidder has taken a "substantial step" towards the
commencement of a tender offer, and (ii) the person in
possession of the information knows or has reason to
know the information was acquired from the bidder, the
target or their agents. Under this rule a duty does not
have to be breached by the person providing the
information for a tippee to be held liable. However, to
be liable for xxxxxxx xxxxxxx, the tippee must be aware
that the bidder, target or one of their agents is the
ultimate source of the information.
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F. LAWFUL USE OF PUBLIC INFORMATION
Although xxxxxxx xxxxxxx is illegal, the federal securities laws
permit a trader to make use of information that is publicly available. Also, the
prohibition against xxxxxxx xxxxxxx does not punish sound market analysis and
legitimate trading practices.
For example, it is legal to use your superior skills in analyzing
public information to make profitable trades. It also is legal to trade on
market rumors if the source of the information is unknown and you have no reason
to believe that the source is an insider.
The law does not require that all traders in the market have equal
access to all information. However, when a person breaches a duty by disclosing
material non-public information, the law prohibits and severely punishes (civil
and criminal remedies include disgorgement of profits, treble damages, fines and
imprisonment) trading on that information.
G. CONCLUSION
Xxxxxxx xxxxxxx is a serious matter and it is important to be able to
recognize what constitutes impermissible trading. Again, if you have any doubt
whether a particular practice is permissible consult with the Chief Compliance
Officer as soon as possible and before you act.
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SCHEDULE A
As of 4/1/00
Portfolio Managers:
------------------
Xxxxx X. Xxxxx
Xxxxxx X. Xxxx
Investment Personnel:
--------------------
Security Analysts:
-----------------
Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxxxxx
Traders:
-------
Xxxxxxxx X. Xxxxxx
Xxxxxxxx XxXxxxx
Xxxxxx X. Xxxxxxx
Management Committee:
--------------------
Xxxxx X. Xxxxx
Xxxxxx X. Xxxx
Xxxxxxx X. Xxxxxxx
Xxxxx X. Xxxxx
Chief Compliance Officer:
------------------------
Xxxxxxx X. Xxxxxxx
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