John Dutemple, President & Chief Compliance Officer has approved a new Code of Conduct for the firm and its Covered Persons effective November 7, 2015.
The major change accommodates the use of exchange traded funds and notes (ETF, ETN) based primarily on futures and/or options of volatility indexes. Specifically:
- Exclusion of these instruments from 24 hour advanced trade posting requirements
- Exclusion of these instruments from the 60 day holding period requirement
These instruments are not exempt from quarterly reporting.
PURPOSE OF THE ADVANCED POSTING REQUIREMENT
The purpose of the advanced posting requirement is to allow clients to evaluate and, if they decide it is in their best interests, trade before the firm's Covered Persons enter the market with their trades.
In the case of individual stocks, trading by Covered Persons may reveal information about their evaluation of the company or the price of its stock. In the case of mutual funds or ETFs, it may signal the Covered Person's conclusions about the relative value of the market or sector represented by that fund or ETF.
Advanced posting requirements let clients trade on that revealed, now public, information before the Covered Person.
PURPOSE OF THE 60 DAY HOLDING PERIOD REQUIREMENT
The firm's stated investment philosophy is that of long-term investment, not trading. The 60 day holding period is designed to support that philosophy and to foster thoughtful entry into an investment position.
THE FINANCIAL INSTRUMENTS BEING EXEMPTED FROM THESE REQUIREMENTS
These exchange traded funds and notes are designed to track public volatility indexes. The indexes themselves tend to increase in more volatile markets, usually falling markets, and decrease in stable markets. Thus, the financial instruments in question serve as a partial hedge in falling markets, albeit at a cost in rising markets.
These instruments do not represent an ownership interest in any company. Because the instruments owned by these funds may be leveraged and because the underlying indexes move quickly in price, we have determined the time constraints imposed by our previous Code of Conduct are impractical for the legitimate use of these financial instruments.
Additionally, we feel the use of these instruments does not signal information about the markets or any particular company and, as such, does not invalidate the purpose of the advance posting requirement.
Finally, we have made a minor change clarifying that this blog is included as a valid forum for Covered Persons posting proposed trades.
Please let us know if you have any questions or if you would like a copy of our new Code of Conduct.
Labels: Code of Conduct
