Exhibit (p)(20)
WATERFALL ASSET MANAGEMENT, LLC
CODE OF ETHICS
June 2015
This Code of Ethics is the sole property of Waterfall Asset Management, LLC and must be returned to the Firm should an Employee’s association with the Firm terminate for any reason. The contents of this Code of Ethics are confidential. Employees may not reproduce, duplicate, copy, or make extracts from or abstracts of this Code of Ethics, or make it available in any form to non-employees without approval of the Firm’s Chief Compliance Officer.
TABLE OF CONTENTS
CHAPTER I: OVERVIEW |
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A. | GENERAL | 1-1 | ||||
B. | GUIDING PRINCIPLES & STANDARDSOF CONDUCT | 1-2 | ||||
CHAPTER II: PERSONAL SECURITY TRANSACTION POLICY & PROCEDURES |
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A. | PERSONAL SECURITY TRANSACTION POLICY | 2-1 | ||||
B. | PRE-CLEARANCE PROCEDURES | 2-1 | ||||
C. | RESTRICTED LIST | 2-2 | ||||
D. | REPORTABLE SECURITIES | 2-3 | ||||
E. | REPORTING | 2-3 | ||||
F. | EXCEPTIONSFROMREPORTING REQUIREMENT | 2-4 | ||||
G. | TRADINGAND REVIEW | 2-5 | ||||
H. | REPORTING VIOLATIONSAND REMEDIAL ACTION | 2-5 | ||||
I. | RIC REPORTING PROCEDURES | 2-6 | ||||
CHAPTER III: THE PREVENTION OF INSIDER TRADING |
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A. | INSIDER TRADING POLICY | 3-1 | ||||
B. | WHOISAN INSIDER? | 3-1 | ||||
C. | WHATIS MATERIAL INFORMATION? | 3-2 | ||||
D. | WHATIS NON-PUBLIC INFORMATION? | 3-2 | ||||
E. | CONFIDENTIALITY | 3-2 | ||||
F. | PENALTIESFORINSIDER TRADING | 3-4 | ||||
G. | INSIDER TRADING POLICIESAND PROCEDURES | 3-4 | ||||
H. | INTENTIONAL RECEIPTOF NONPUBLIC INFORMATIONABOUT PUBLIC ISSUERS | 3-5 | ||||
I. | RUMORS | 3-6 | ||||
CHAPTER IV: FIRM POLICIES AND PROCEDURES |
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A. | PAID CONSULTANT POLICIES & PROCEDURES | 4-1 | ||||
B. | SERVINGAS OFFICERS,TRUSTEESAND/OR DIRECTORSOF OUTSIDE ORGANIZATIONS | 4-2 | ||||
C. | DIVERSIONOF FIRM BUSINESSOR INVESTMENT OPPORTUNITY | 4-3 | ||||
D. | LOANS | 4-3 | ||||
E. | DEALINGSWITH GOVERNMENTOR INDUSTRY REGULATORS | 4-3 | ||||
F. | POLITICAL CONTRIBUTIONSAND PUBLIC OFFICE | 4-4 | ||||
G. | IMPROPER USEOF FIRM PROPERTY | 4-4 | ||||
H. | PROTECTIONOFTHE FIRM’S NAME | 4-4 | ||||
I. | EMPLOYEE INVOLVEMENTIN LITIGATIONOR PROCEEDINGS | 4-4 | ||||
J. | GIFTSAND ENTERTAINMENT | 4-4 | ||||
K. | TRAVEL EXPENSES | 4-5 | ||||
L. | DISCLOSURE | 4-5 | ||||
M. | RECORDKEEPING | 4-5 | ||||
N. | RESPONSIBILITIES | 4-6 |
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APPENDICES
APPENDIX A: | POLTICALAND CHARITABLE CONTRIBUTIONSAND PUBLIC POSITIONS POLICYAND PROCEDURE | |
APPENDIX B: | ELECTRONIC COMMUNICATIONSAND INTERNET USE POLICY |
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CHAPTER 1: OVERVIEW
Code of Ethics
Pursuant to Rule 204A-1 under the Investment Advisers Act of 1940, as amended, and Rule 17j-1 under the Investment Company Act of 1940, as amended.
A. | General |
The Code of Ethics is predicated on the principle that Waterfall Asset Management, LLC (the “Firm”) owes a fiduciary duty to its separately managed accounts, private investment funds (including investors in such funds) and the registered investment companies it advises or sub-advises (collectively, “Clients”). Accordingly, all officers, directors and employees of the Firm (the “Access Person(s)” or “Employee(s)”) must avoid activities, interests and relationships that run contrary (or appear to run contrary) to the best interests of Clients. In addition, the Firm may, on a case-by-case basis, determine to treat certain non-employees (e.g., consultants or service providers) as “Access Persons” for purposes of this Code, and such persons will be included in the definition of “Access Persons” herein.
At all times, the Firm will be mindful to:
• | Place client interests ahead of the Firm – As a fiduciary, the Firm will serve in its Clients’ best interests. In other words, neither the Firm nor Employees may benefit at the expense of Clients. |
• | Engage in personal investing that is in full compliance with the Firm’s Code of Ethics – Employees must review and abide by the Firm’s Personal Securities Transaction and Insider Trading Policies contained herein. |
• | Avoid taking advantage of your position – Employees must not accept investment opportunities, gifts or other gratuities from individuals seeking to conduct business with the Firm, or on behalf of an advisory Client, unless in compliance with the Gift Policy contained herein. |
• | Maintain full compliance with the Federal Securities Laws1 –Employees must abide by the standards set forth in Rule 204A-1 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Investment Company Act of 1940, as amended (the “Investment Company Act”) and other Federal Securities Laws, as pertinent. |
1 | The term “Federal Securities Laws” means theSecurities Act, theExchange Act, theSarbanes-Oxley Act of 2002, theInvestment Company Act, theAdvisers Act, Title V of the Gramm-Leach-Bliley Act, any rules adopted by the Securities and Exchange Commission (the “SEC”) under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted thereunder by the SEC or the Department of the Treasury. The term “Securities Act” means the Securities Act of 1933, as amended. The term “Exchange Act” means the Securities Exchange Act of 1934, as amended. The term “Investment Company Act” means the Investment Company Act of 1940, as amended. The term “Advisers Act” means the Investment Advisers Act of 1940, as amended. |
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Any questions with respect to the Firm’s Code of Ethics should be directed to the Chief Compliance Officer or his designee (“Chief Compliance Officer”). As discussed in greater detail below, Employees must promptly report any violations of the Code of Ethics to the Chief Compliance Officer. All reported Code of Ethics violations will be treated as being made on an anonymous basis.
B. | Guiding Principles & Standards of Conduct |
All Employees will act with competence, dignity and integrity, in an ethical manner, when dealing with Clients, the public, investors, prospective investors, third-party service providers and fellow Employees. The following set of principles frame the professional and ethical conduct that the Firm expects from its Employees:
• | Act with integrity, competence, diligence, respect, and in an ethical manner with the public, Clients, prospective clients and investors, colleagues in the investment profession, global capital markets participants and Employees; |
• | Place the integrity of the investment profession, the interests of Clients, and the interests of the Firm above one’s own personal interests; |
• | Adhere to the fundamental standard that Employees should not take inappropriate advantage of your position; |
• | Avoid or disclose any actual or potential material conflict of interest; |
• | Conduct all personal securities transactions in a manner consistent with this policy; |
• | Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities; |
• | Practice and encourage others to practice in a professional and ethical manner that will reflect favorably on the Employee and the profession; |
• | Promote the integrity of, and uphold the rules governing, capital markets; |
• | Maintain and improve one’s professional competence and strive to maintain and improve the competence of other investment professionals. |
• | Comply with applicable provisions of the federal securities laws. |
Employees must adhere to the foregoing principles and comply with the specific provisions and procedures of this Code of Ethics. Structuring transactions or behavior to achieve mere technical compliance with the Code of Ethics and related procedures will not shield any Employee from liability or other sanctions, up to and including termination of employment, that may result from conduct that violates a duty to clients of the Firm, applicable law or the specific provisions and procedures of this Code of Ethics.
The Firm may advise or sub-advise U.S. investment companies registered under and subject to the regulation of the Investment Company Act (each, a “RIC”). Rule 17j-1 under the Investment Company Act makes it unlawful for any affiliated person of an investment adviser of a RIC in connection with the purchase or sale, directly or indirectly, by the person of a securities held or to be acquired by the RIC, to:
• | Employ any devise, scheme or artifice to defraud the RIC; |
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• | Make any untrue statement of a material fact to the RIC or omit to state a material fact necessary in order to make the statements made to the RIC, in light of the circumstances under which they are made, not misleading; |
• | Engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the RIC; or |
• | Engage in any manipulative practice with respect to the RIC. |
THE FIRM HAS ZERO TOLERANCE FOR RETALIATORY ACTIONS AND THEREFORE MAY SUBJECT OFFENDERS TO MORE SEVERE ACTION THAN SET FORTH IN THIS CODE OF ETHICS. IN ORDER TO MINIMIZE THE POTENTIAL FOR SUCH BEHAVIOR, ALL REPORTS OF CODE OF ETHICS VIOLATIONS WILL BE TREATED AS BEING MADE ON AN ANONYMOUS BASIS.
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CHAPTER 2: PERSONAL SECURITY TRANSACTION POLICY & PROCEDURES
A. | Personal Security Transaction Policy |
Note: The Firm uses the ComplianceScience Personal Trading Control Center (“PTCC”) on-line personal trading reporting and monitoring system to facilitate the compliance of the Firm and its Access persons with the Firm’s Personal Security Transaction Policy.
Access Persons may not purchase or sell any security in which the Access Person has a Beneficial Interest unless the Access Person has complied with the Personal Security Transaction Policy set forth below. Beneficial Interest or Ownership of securities means any person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the securities, including but not limited to: (i) a member of an Access Person’s “immediate family” (as defined below) living at an Employees residence; (ii) person whose financial affairs an Access Person “controls”, whether by contract, arrangement, understanding or by convention (such as a relative he or she traditionally advises with regard to investment choices, invests for or otherwise assists financially); (iii) an Investment Account or trust account over which an Employee has investment control or discretion; (iv) trust or other arrangement that names an Employee as a beneficiary; and (v) a partnership, corporation or other non-public entity of which an Access Person is a director officer partner or employee, or in which he owns 10% or more of stock, “a controlling interest as defined by securities law or over which the he exercises effective control”.
Access Persons are to comply with the applicable securities and similar laws and provisions of this Code. Access Persons are to review the Restricted List policy and all other Firm compliance policies relating to personal trading before executing any trade.
In addition, Access Persons are prohibited from purchasing asset-backed securities for an account in which he/she has a beneficial interest. Exceptions to this prohibition must be approved in advance by the Chief Compliance Officer.
B. | Pre-Clearance Procedures |
In cases in which necessary, pre-clearance may be sought by submitting a request to the Compliance Department (the “Compliance Department”) throughPTCC. The Access Person must receive approval from the Chief Compliance Officer before executing the transaction.
Access Persons shall request pre-clearance for all Private Placement Offerings and IPO trades in PTCC when seeking to trade in a Private Placement Offering or IPO. Once pre-clearance is granted to an Access Person, such Access Person may only transact in that Security for the remainder of the day or such other period of time as approved by the Chief Compliance Officer. If the Access Person wishes to transact in that security during any other day or period, he/she must again obtain pre-clearance for the transaction.
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With regard to an Access Person’s investment in a private investment fund managed by the Firm (each, a “Fund”), the Access Person shall not be required to obtain pre-approval from the Chief Compliance Officer for an investment or subscription to the Fund. Rather, the execution of the Fund’s subscription document shall serve as evidence of the Firm’s pre-clearance of the Employee’s investment in the Fund.
C. | Restricted List |
The Firm maintains a “Restricted List” of companies about which a determination has been made that it is prudent to resist trading activity. The Restricted List is available to Access Persons on PTCC. The Firm shall periodically circulate to Access Persons an updated list of “Restricted Securities.” No Access Person may disclose to any other person outside of the Firm the securities on the Restricted List, except as approved by the Chief Compliance Officer. Access Persons are to review the Restricted List before completing any trade. An issuer may be added to the Restricted List for several reasons, including, but not limited to: (a) the Firm currently has a 13D or 13G filing on file with the SEC (b) any related person of the Firm is an officer or director of the issuer and (c) any person or entity of the Firm has executed a confidentiality agreement to receive material nonpublic information or has obtained material non-public information.
As a general rule, trades will not be allowed for Clients (including any Funds), or for the personal accounts of Access Persons, in the securities of a company appearing on the Restricted List, except with approval of the Chief Compliance Officer. Similarly, any determination to remove a company from the Restricted List must be approved by the Chief Compliance Officer. Restrictions with regard to securities on the Restricted List are also considered to extend to options, rights or warrants relating to those securities and any securities convertible into those securities.
Permission, if given for trades in a Restricted List Security will be effective for 24 hours, unless otherwise specified. Additional trades of the same Restricted List security would have to be approved again. No trades will be permitted if such trades will disadvantage the clients’ interests, or where it is determined that the Firm has material, non-public information. Where an exception is granted, Employees receiving such permission are prohibited from further sale or purchase transactions unless permission is again obtained. Permission/exceptions will generally be conveyed using e-mail.
The Chief Compliance Officer shall maintain the Firm’s Restricted List and will have sole authority to add or remove an issuer from the Restricted List as deemed appropriate. The Chief Compliance Officer will periodically review the Restricted List to determine whether any security should be removed. Employees may also request that the Compliance Department review a name for removal. The Chief Compliance Officer will seek appropriate confirmation from the Employee(s) requesting removed and/or having the factual support for justifying the removal.
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Trades by Access Persons are reviewed against the Restricted List through PTCC. The Chief Compliance Officer will review the weekly trade blotter against the Restricted List.
D. | Reportable Securities |
Each Access Person is required to submit through PTCC an initial list setting forth each brokerage account (and other account that is used as a brokerage account) name, account number and the name of each firm through which transactions are directed which respect to all accounts in which the Access Person may have a Beneficial Ownership (the “Account(s)”). An Access Person is not required to disclose accounts held at a mutual fund and employer-sponsored vehicles, such as 401(k) accounts, unless such account allows for the purchase of individual securities. Each Access Person is responsible to report any changes in this account list via PTCC.
The Firm requires Access Persons to periodically certify to their reportable securities on PTCC (See theReporting section) regarding transactions and holdings inany security (including, without limitation, partnership interests and limited liability company interests in private investment funds), except that Access Persons are not required to report the following exempted securities:
• | Transactions and holdings in direct obligations of the United States government; |
• | Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; |
• | Shares issued by money market funds; |
• | Shares issued by open-end funds other than Reportable Funds;1 |
• | Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are Reportable Funds; and |
• | Interests in state specific Section 529 Plans. |
E. | Reporting |
In order to maintain compliance with Rule 204A-1 under the Advisers Act and Rule 17j-1 under the Investment Company Act, the Firm must collect three reports from Access Persons that include transaction and holding information regarding the personal trading activities of the Access Persons. The reports, as described in further detail below, are: (i) Initial Holdings Reports; (ii) Annual Holdings Reports; and (iii) Quarterly Transaction Reports. All Access Person reporting, as further discussed below will be captured via PTCC.
1 | Rule 204A-1(e)(9) of the Advisers Act defines a Reportable Fund as the following: (i) Any fund for which you serve as an adviser as defined in section 2(a)(20) of the Investment Company Act of 1940 (i.e., in most cases you must be approved by the fund’s board of directors before you can serve); or (ii) Any fund whose investment adviser or principal underwriter controls you, is controlled by you, or is under common control with you. For purposes of this section,controlhas the same meaning as it does in section 2(a)(9) of the Investment Company Act of 1940. Please note that shares of any RIC advised or sub-advised by the Firm are reportable securities. |
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Initial and Annual Holdings Reports
New Access Persons are required to report securities holdings, including exempt securities, and Accounts not later than 10 days after an individual becomes an Access Person. This information must be current as of a date not more than 45 days prior to the date the person becomes an Access Person.
Access Persons are also required to certify via PTCC to his/her complete list of securities and Accounts on an annual basis. The report shall be current as of December 31st of such year.
Quarterly Transaction Reports
Access Persons shall be required to report all securities transactions that they have made in securities Accounts during the quarter, as well as any new securities Accounts that they have opened during the quarter. In order to fulfill this reporting requirement, Access Persons will have the option to submit Account information via PTCC and the Compliance Department will instruct theirbroker-dealers to send to duplicate trade confirmations and/or brokerage account statements not later than thirty (30) days after the end of each calendar quarter to the Compliance Department or directly via PTCC. If an Access Person’s trades do not occur through a broker-dealer (e.g., purchase of a private investment fund), such transactions shall be reported separately on the Quarterly Transaction Report via PTCC. At the end of each quarter Access Persons will certify as to their reportable securities that have been entered automatically or manually by the Access Person into PTCC.
ACCESS PERSONS ARE REMINDED THAT TRANSACTIONS IN PRIVATE INVESTMENT FUNDS SHOULD BE INCLUDED IN THE QUARTERLY TRANSACTION REPORT.
ACCESS PERSONS ARE REMINDED THAT THEY MUST ALSO REPORT TRANSACTIONS AND ACCOUNTS OF MEMBERS OF THE ACCESS PERSON’S IMMEDIATE FAMILY INCLUDING SPOUSE, CHILDREN AND OTHER MEMBERS OF THE HOUSEHOLD IN ACCOUNTS OVER WHICH THE ACCESS PERSON HAS DIRECT OR INDIRECT INFLUENCE OR CONTROL.
F. | Exceptions from Reporting Requirements |
There are limited exceptions from certain of the three reporting requirements noted above. Specifically, an Access Person is not required to submit:
1) | The Quarterly Reporting Form (Securities) for any transactions effected pursuant to an automatic investment plan. |
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2) | Any of the three reports (i.e., Quarterly Reporting Form, Initial Reporting Forms and Annual Reporting Forms) with respect to securities held in securities accounts over which the Access Person had no direct or indirect influence or control. Note, however, that the Chief Compliance Officer may request that an Access Person provide documentation to substantiate that the Access Person has no direct or indirect influence or control over the securities account (e.g., investment advisory agreement, etc.). |
The Chief Compliance Officer will determine on a case-by-case basis whether an account qualifies for either of the aforementioned exceptions.
G. | Trading and Review |
The Firm’s Personal Security Transaction Policy is designed to not only ensure its technical compliance with Rule 204A-1 and Rule 17j-1, but also to mitigate any potential material conflicts of interest associated with Access Persons’ personal trading activities. Accordingly, the Firm will closely monitor Access Persons’ investment patterns to detect the following abuses, among others:
• | Trading in companies included on the Restricted List; |
• | Front-running client accounts, which is a practice generally understood to be Access Persons personally trading ahead of Clients. |
Access Persons are encouraged not to engage in short-term trades of mutual fund shares, so as to avoid even the appearance of market timing activities.
The Chief Compliance Officer’s designee will monitor via PTCC the Chief Compliance Officer’s personal securities transactions for compliance with the Personal Security Transaction Policy.
The Firm conducts periodic reviews of Access Person reports via PTCC. Record of such review is required to be kept to evidence the periodic reviews conducted. Should the Firm discover that an Access Person is personally trading contrary to the policies set forth above, the Access Person shall meet with the Chief Compliance Officer to review the facts surrounding the transactions.
H. | Reporting Violations and Remedial Actions |
The Firm takes the potential for conflicts of interest caused by personal investing very seriously. As such, the Firm requires its Employees to promptly report any violations of the Code of Ethics to the Chief Compliance Officer. The Firm’s senior management is aware of the potential matters that may arise as a result of this requirement and shall take action against any Employee that seeks retaliation against another for reporting violations of the Code of Ethics.
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If any violation of the Firm’s Personal Security Transaction Policy is determined to have occurred, the Chief Compliance Officer may impose sanctions and take such other actions, including, without limitation, requiring that the trades in question be reversed, requiring the disgorgement of profits or gifts, issuing a letter of caution or warning, issuing a suspension of personal trading rights or suspension of employment (with or without compensation), imposing a fine, making a civil referral to the Securities Exchange Commission (the “SEC”), making a criminal referral, and/or terminating employment for cause or any combination of the foregoing. All sanctions and other actions taken shall be in accordance with applicable employment laws and regulations. Any profits or gifts forfeited shall be paid to the applicable Client(s), if any, or given to a charity, as the Chief Compliance Officer shall determine is appropriate.
No Employee shall participate in a determination of whether he or she has committed a violation of the Code of Ethics or in the imposition of any sanction against himself or herself.
I. | RIC Reporting Procedures |
On a periodic basis, but not less than annually, the Chief Compliance Officer shall provide a written report to each RIC’s management and the board of directors/trustees of the RIC (the “Board”) setting forth (1) a description of any issues arising under the Code of Ethics or underlying procedures since the last report to the Board, including, but not limited to, information about material violations of the Code of Ethics or underlying procedures and sanctions imposed in response to the material violations, and (2) a certification on behalf of the Firm that the Firm has adopted procedures reasonably necessary to prevent Employees from violating the Code of Ethics. The Board is then required to consider the annual written report.
In the event of a material change toSection C. Personal Security Transaction Policyof this Code of Ethics, the Chief Compliance Officer shall inform each RIC’s chief compliance officer of such change and ensure that the change is approved by each RIC’s Board no later than six months after the change is adopted.
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CHAPTER 3: THE PREVENTION OF INSIDER TRADING
A. | Insider Trading Policy |
Section 204A of the Advisers Act requires every investment adviser to establish, maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such investment adviser’s business, to prevent the misuse of material non-public information by such investment adviser or any person associated with such investment adviser. In accordance with Section 204A, the Firm has instituted procedures to prevent the misuse of material non-public information.
The Firm forbids any Access Person from trading, either personally or on behalf of others, while aware of material non-public information or communicating material non-public information to others in violation of Rule 10b-5 promulgated under the Securities Exchange Act of 1934 and Insider Trading and Securities Fraud Enforcement Act of 1988. This conduct is frequently referred to as “insider trading.”
The term “insider trading” is not clearly defined in federal or state securities laws, but generally is used to refer to the use of material non-public information to trade in securities (whether or not one is an “insider”) or to communications of material non-public information to others for trading. While the law concerning insider trading is not static, it is generally understood that the law prohibits:
• | Trading by an insider who is aware of material non-public information at the time of the trade; |
• | Trading by a non-insider who is aware of material non-public 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, |
• | Communicating material non-public information to others. |
The elements of insider trading and penalties for such unlawful conduct are discussed below. If, after reviewing this Policy or its application to a particular transaction, you have any questions you should consult the Chief Compliance Officer and/or his designee(s).
B. | Who is an Insider? |
The term “insider” is broadly defined and generally refers to anyone who is in possession of material, non-public information. It includes officers, directors and employees of a company and may include friends, family members and other persons who may have acquired the information directly or indirectly from an insider. 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.
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C. | What is Material Information? |
Trading on non-public information is not a basis for liability unless the information is material. While there is no absolute standard for “materiality,” “material information” generally includes information that a reasonable investor would consider relevant in making investment decisions and information that is reasonably certain to have a substantial effect on the price of a company’s securities, regardless of whether the information is related directly to the company’s business. The test for materiality does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to act on such information, but rather it need only be demonstrated that the disclosure of such a fact “would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” Information can be material even if it was not the reason that the investor decided to buy, sell or hold securities.
Information that officers, directors, employees, and other associated persons 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, liquidity problems, and extraordinary management developments concerning public issuers. This list is not exhaustive and, depending upon the circumstances, other information can be “material.” Information concerning the Firm’s holdings or transactions on behalf of clients may also be material non-public information. You should always treat information as “material” if you have any reason to believe that it may be important. When in doubt call the Chief Compliance Officer or the designee for advice.
D. | What is Non-Public Information? |
Information is non-public until it has been effectively communicated to the investment community in general by the issuer of the securities through recognized channels. For example, information found in a report filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or other publications of general circulation would be considered public information.
E. | Confidentiality |
Information regarding advice furnished by the Firm to its Clients, nonpublic data furnished to the Firm by any Client, work product of the Firm’s investment and trading staffs and other proprietary data and information concerning the Firm (including, but not limited to, its investment positions, assets under management, buy and sell programs, performance record and former, existing and potential clients), is the exclusive property of the Firm.
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Notwithstanding the foregoing, the Firm and its Employees owe certain fiduciary duties to its Clients. From time to time, and in accordance with such fiduciary duties, Employees may deem it to be in the best interest of Clients to disclose proprietary information relating to the Firm and/or the Funds to other market professionals including: senior executives of both publicly traded and private companies, other hedge fund managers, investment bankers, research analysts, sales traders, paid consultants and other unaffiliated third parties (collectively, “other market professionals”).
The aforementioned policies with regard to the restriction and prohibition on the disclosure of the Firm’s proprietary information are not in any way intended to prevent the following types of activities, among others, that may be undertaken by the Firm’s Employees from time to time (and that the Chief Compliance Officer has determined are appropriate) in order to fulfill the Firm’s fiduciary duty to act in the best interest of the Funds:
• | Discussion of general market events and the merits of investing in specific securities with other market professionals; |
• | Attendance at idea dinners with other market professionals |
• | Speaking with current and/or former employees of public companies that Clients are invested in and/or where the Firm is contemplating an investment; |
• | Attendance at industry events (e.g. broker-dealer sponsored conferences) to gain access to the management of companies that Clients are invested in and/or where the Firm is contemplating investments for Clients; and |
• | Retention of other market professionals to provide general and specific market advice with regard to investing in securities and other investments. |
Employees in possession of the Firm’s proprietary information may not use it for the benefit of any person other than the Firm and its Clients. However, Employees are reminded that any use of the Firm’s proprietary information must be carried out in accordance with the Firm’s Code of Ethics and is subject to theWaterfall Asset Management Electronic Communications and Internet Use Policy, which is attached hereto asAppendix B.
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F. | Penalties for Insider Trading |
The U.S. securities laws impose potentially onerous civil and criminal penalties on persons who improperly obtain or use material, non-public information in connection with a purchase or sale of securities, including disclosing such information to others to enable those persons to trade in stock of the applicable company. A person can be subject to some or all of the penalties described below even if he or she does not personally benefit from the activities surrounding the violation. Possible penalties include: civil injunctions; treble damages; disgorgement of profits; jail sentences and fines of up to three times the profit gained or loss avoided, whether or not the person actually benefited financially.
In addition to the penalties imposed directly upon the person making the illegal trade, civil and criminal penalties for illegal use of inside information can also be imposed upon the officers and directors of a company for failing to prevent corporate employees from engaging in such securities law violations. The U.S. securities laws provide that any “controlling person,” which includes employers, directors, executive officers and principal stockholders, may be liable for civil penalties if the controlling person both (i) knew or recklessly disregarded the fact that the employee was likely to engage in a violation and (ii) failed to take appropriate steps to prevent that violation before it occurred. Separate penalties may be imposed on the Firm or its senior officers for failure to supervise employees who engage in insider trading.
A violation of the Firm’s Insider Trading Policy can also be expected to result in serious sanctions by the Firm, including dismissal of the persons involved.
G. | Insider Trading Policy Procedures |
The following procedures have been established to assist Access Persons in avoiding insider trading. Failure to follow these procedures may result in dismissal, regulatory sanctions and criminal penalties.
Identify Inside Information
Before trading or making investment recommendations for yourself or others, including Clients managed by the Firm, in the securities of a company about which you may have potential insider information, ask yourself the following questions:
1. | Is the information you have material? Is this information that a reasonable investor would consider relevant in making an investment decision? Is this information that would substantially affect the market price of the securities if generally disclosed? Would this information have been viewed by a reasonable investor as having significantly altered the total mix of available information? |
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2. | Is the information non-public? To whom has this information been provided? Has the information been effectively communicated to the market place by being published in publications of general circulation? Has the information been provided pursuant to an expectation of confidentiality? Is the source of the information under a duty to maintain its confidentiality? |
Dealing with Inside Information
If, after consideration of the above, you believe the information is material and non-public, and received outside the ordinary course (e.g., the issuer is a public company and information is not received pursuant to a confidentiality or other applicable agreement) or if further questions arise as to whether you believe the information is material and non-public, the following procedures shall be followed:
1. | Report the matter immediately to the General Counsel, or his designee. |
2. | Do not discuss the information in public places where it can be overheard such as elevators, restaurants and airports. |
3. | Do not read confidential documents in public places or discard them where they can be retrieved by others. |
4. | Do not purchase, sell or recommend securities on behalf of yourself or others, including accounts managed by the Firm. |
5. | Do not communicate the information inside or outside of the Firm (including to family members and friends) other than to the Legal/Compliance Department of the Firm. |
6. | Refrain from responding if any inquiry is addressed to you concerning your potential knowledge of inside information until after consulting the Legal/Compliance Department. |
7. | After the Legal/Compliance Department has reviewed the issue, you will be instructed as to the proper course of action to take. |
H. | Intentional Receipt of Nonpublic Information about Public Issuers |
In certain circumstances the Firm may intentionally obtain nonpublic information about public issuers. For example, the Company might be provided with nonpublic information in connection with certain types of debt investments. The Firm might also be invited to participate in a private offering of a public equity (a “PIPE”). The Firm’s receipt of such nonpublic information about an issuer may limit the Company’s ability to trade in that issuer’s public securities, therefore the General Counsel, in consultation with the applicable Employees, must carefully consider the benefits and limitations of receiving such nonpublic information. Employees should consult with the General Counsel before gaining access to documents or databases, or engaging in conversations, that are expected to yield nonpublic information. The General Counsel will oversee the implementation of procedures designed to prevent improper transactions involving related publicly traded securities.
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I. | Rumors |
Creating or passing false rumors with the intent to manipulate securities prices or markets may violate the antifraud provisions of Federal Securities Laws. Such conduct is contradictory to the Firm’s Code of Ethics, as well as the Company’s expectations regarding appropriate behavior of its Employees. Employees are prohibited from knowingly circulating false rumors or sensational information that might reasonably be expected to affect market conditions for one or more securities, sectors, or markets, or improperly influencing any person or entity.
This policy is not intended to discourage or prohibit appropriate communications between Employees and other market participants and trading counterparties. Employees should consult with the General Counsel regarding questions about the appropriateness of any communications.
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CHAPTER 4: FIRM POLICIES & PROCEDURES
A. | Paid Consultant Policies and Procedures |
While it is currently not the policy of the Firm to engage in such activities, if in the future, as part of the research and investment process, Employees conduct calls or meetings with paid consultants referred by third parties, the following procedures shall be followed with regard to such contact and interaction with paid consultants:
Procedures
1. | Prior to the commencement of a phone call or meeting with a paid consultant where it is anticipated that substantive information will be discussed, the Employee must inform such consultant that: |
(i) the Firm actively invests in the public securities markets, (ii) the purpose of speaking with such consultant is to obtain his/her independent insight as it relates to a particular industry, sector or company and (iii) such consultant should not share any material non-public information or confidential information that he/she may have a duty to keep confidential or that you otherwise should not disclose. The Employee should also confirm with such consultant that he/she will not be violating any agreement, duty or obligation such consultant may have with any employer or other institution.
2. | If the Employee believes that there is a high or increased risk that material non-public or confidential information could be discussed during a call or meeting with a paid consultant (e.g., call with the senior executive of a public company), then the Employee will ask the Chief Compliance Officer or his designee to participate in the call or meeting. |
3. | Employees are prohibited from discussing information about the company that employs the paid consultant. |
4. | Employees are required to keep notes (electronic or hard copy) of their discussions with paid consultants. Notes should, at a minimum, include the following information: |
a. | Date of discussion |
b. | Name of employee |
c. | Name of Paid Consultant |
d. | Referred by (e.g., GLG, Vista, etc.) |
e. | Summary of the discussion(s) |
5. | In the event that the Firm or its Employees learn or have reason to suspect that they have been provided with a) confidential or material |
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non-public information and/or b) information that a consultant furnishes to the Firm or its Employees in violation of a duty of trust or confidence to any person, then the Chief Compliance Officer shall immediately notify the research group that provided access to such respective consultant. In addition, depending upon the facts and circumstances of each situation, the Chief Compliance Officer may solicit the advice of outside counsel as it relates to a particular issue and/or decide to restrict both the firm and its Employees from trading in the securities of a particular issuer(s). |
On a periodic and as needed basis the General Counsel shall seek to obtain information from its research groups (i.e. notes) in order to assist with the monitoring of communications and control of interactions between Employees and the paid consultants. The notes will be periodically reviewed by the Chief Compliance Officer, or his designee(s).
B. | Serving as Officers, Trustees and/or Directors of Outside Organizations |
Employees may, under certain circumstances, be granted permission to serve as directors, trustees or officers of outside organizations after submitting such Outside Business Affiliations pre-clearance request via PTCC or directly to the Chief Compliance Officer. These organizations can include public or private corporations, partnerships, charitable foundations and other not-for-profit institutions. Employees may also receive compensation for such activities. Employees are not required to seek pre-clearance via PTCC if such officer role or directorship is connected with an investment made in the course of the Companies advisory activities.
At certain times, the Firm may determine that it is in its Clients’ best interests for an Employee(s) to serve as an officer or on the board of directors of an outside organization. For example, a company held in Clients’ portfolios may be undergoing a reorganization that may affect the value of the company’s outstanding securities and the future direction of the company. Service with organizations outside of the Firm can, however, raise regulatory issues and concerns, including conflicts of interest and access to material non-public information. As an outside board member or officer, an Employee may come into possession of material non-public information about the outside company or other public companies.
Similarly, the Firm may have a business relationship with the outside organization or may seek a relationship in the future. In those circumstances, the Employee must not be involved in the decision to retain or hire the outside organization.
Employees are prohibited from engaging in outside activities without the prior approval of the Chief Compliance Officer. Approval will be granted on a case-by-case basis, subject to proper resolution of potential conflicts of interest. Outside activities will be approved only if any conflict of interest issues can be satisfactorily resolved.
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C. | Diversion of Firm Business or Investment Opportunity |
No Employee may acquire, or receive personal gain or profit from, any business opportunity that comes to his or her attention as a result of his or her association with the Firm and in which he or she knows the Firm might be expected to participate or have an interest, without disclosing in writing all necessary facts to the Chief Compliance Officer, offering the particular opportunity to the Firm, and obtaining written authorization to participate from the Chief Compliance Officer.
Any personal or family interest of an Employee in any Firm business activity or transaction of the Firm must be immediately disclosed to the Chief Compliance Officer. For example, if an Employee becomes aware that a transaction being considered or undertaken by the Firm may benefit, either directly or indirectly, an Employee or an immediate family member thereof, the Employee must immediately disclose this possibility to the Chief Compliance Officer.
D. | Loans |
No Employee may borrow from or become indebted to any person, business or company having business dealings or a relationship with the Firm, except with respect to customary personal loans (e.g., home mortgage loans, automobile loans, lines of credit, etc.), unless the arrangement is disclosed in writing and receives prior approval from the General Counsel. No Employee may use the Firm’s name, position in a particular market or goodwill to receive any benefit on loan transactions without the prior express written consent of the General Counsel.
E. | Dealings with Government and Industry Regulators |
The Firm forbids payments of any kind by it, its Employees or any agent or other intermediary to any government official, self-regulatory official, commercial, corporation or other similar person or entity, within the United States or abroad, for the purpose of obtaining or retaining business, or for the purpose of influencing favorable consideration of any application for a business activity or other matter. This policy covers all types of payments, even to minor government officials and industry regulators, regardless of whether the payment would be considered legal under the circumstances. This policy encourages Employees to avoid even the appearance of impropriety in their dealings with industry and government regulators and officials.
It is expected and required that all Employees fulfill their personal obligations to governmental and regulatory bodies. Those obligations include the filing of appropriate federal, state and local tax returns, as well as the filing of any applicable forms or reports required by regulatory bodies.
All Employees are required to cooperate fully with management in connection with any internal or independent investigation and any claims, actions, arbitrations, litigations,
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investigations or inquiries brought by or against the Firm. Employees are expected, if requested, to provide the Firm with reasonable assistance, including, but not limited to, meeting or consulting with the Firm and its representatives, reviewing documents, analyzing facts and appearing or testifying as witnesses or interviewees or otherwise. For additional information you may refer to Chapter 3(E) of the Compliance Manual.
F. | Political Contributions and Public Office |
The making of political contributions and payments by the Firm and its Access Person, as well as making any charitable donations with the intention of influencing such charities to become clients of the Firm, is subject to theWaterfall Asset Management Political and Charitable Contributions and Public Positions Policy and Procedure, which is attached hereto asAppendix A.
G. | Improper Use of Firm Property |
No Employee may utilize property of the Firm or utilize the services of the Firm or Employees, for his or her personal benefit or the benefit of another person or entity, without approval of the General Counsel. For this purpose, “property” means both tangible and intangible property, including the Firm and employee funds, premises, equipment, supplies, information, business plans, business opportunities, confidential research, intellectual property or proprietary processes, and ideas for new research or services.
H. | Protection of the Firm’s Name |
Employees should at all times be aware that the Firm’s name, reputation and credibility are valuable assets and must be safeguarded from any potential misuse. Care should be exercised to avoid the unauthorized use of the Firm’s name in any manner that could be misinterpreted to indicate a relationship between the Firm and any other entity or activity.
I. | Employee Involvement in Litigation or Proceedings |
Employees must advise the General Counsel immediately if they become involved in or threatened with litigation or an administrative investigation or proceeding of any kind, are subject to any judgment, order or arrest, or are contacted by any regulatory authority.
J. | Gifts and Entertainment |
Employees’ Receipt of Business Meals, Tickets to Sporting Events and Other Entertainment– Employees may attend business meals, sporting events and other entertainment events at the expense of a giver, provided that the expense is reasonable, not lavish or extravagant in nature. Employees are responsible for using their best judgment in determining “lavish” or “extravagant.” Employees should report and submit any request to pre-clear his/her attendance at such events to the Chief Compliance Officer via PTCC.
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Employees’ Receipt of Gifts – Employees must report their intent to accept gifts over $500 (either one single gift, or in aggregate on an annual basis) to the Chief Compliance Officer by submitting such report via PTCC. Reasonable gifts received on behalf of the Company shall not require reporting. Examples of reasonable gifts include holiday gift baskets and lunches brought to the Firm’s offices by service providers.
The Firm’s Gift Giving Policy – The Firm and its Employees are prohibited from giving gifts that may be deemed as excessive, and must obtain approval from the Chief Compliance Officer to give all gifts in excess of $500 to any Client, prospective client or any individual or entity that the Firm is seeking to do business with.
Gifts Given to Taft-Hartley Funds – Employees are reminded that notwithstanding this policy, since the Firm manages Taft-Hartley Clients, any gratuity provided by the Firm to labor unions or union representatives that have an “interest” in the Taft-Hartley Clients in excess of $250 per fiscal year are required to be reported in PTCC and Department Labor Form LM-10 within 90 days following the end of the Firm’s fiscal year. Accordingly, the Firm will monitor all gratuities as discussed and make the appropriate filings on DOL Form LM-10.
K. | Travel Expenses |
Employees may charge to the Firm normal and reasonable travel and travel-related expenses incurred for the Firm’s business purpose, as further outlined in the Firm’s Travel & Entertainment Policy. Such expenses may include meals and incidentals, travel costs (air, train, etc.), lodging expenses, business phone calls and other miscellaneous travel-related expenses. When incurring such expenses, Employees must use reasonable judgment and generally be aware of escalating travel costs. While the Firm has not prescribed limits on such expenses, the Firm may reiterate its policy with Employees as necessary.
L. | Disclosure |
The Firm shall describe its Code of Ethics in Part 2A of Form ADV and, upon request, furnish Clients with a copy of the Code of Ethics. All Client requests for the Firm’s Code of Ethics shall be directed to the Chief Compliance Officer.
M. | Recordkeeping |
The Firm shall maintain records, for a period of five years after the end of the fiscal year in which the report is made or the information is provided, in the manner and to the extent set forth below, which records shall be available for appropriate examination by representatives of regulatory authorities or the Firm’s management.
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• | A copy of this Code of Ethics and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; |
• | A record of any material violation of this Code of Ethics and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; |
• | A record of all written acknowledgements (annual certifications) as required by the Manual for each person who is currently, or with the past five years was, an Access Person of the Firm. |
• | A copy of each report made pursuant to this Code of Ethics by an Access Person, including any information provided in lieu of reports, shall be preserved by the Firm for at least five years after the end of the fiscal year in which the report is made or the information is provided, the first two years in an easily accessible place; |
• | A list of all persons who are, or within the past five years have been, required to make reports pursuant to this Code of Ethics, or who are or were responsible for reviewing these reports, shall be maintained in an easily accessible place; |
• | The Firm shall preserve a record of any decision, and the reasons supporting the decision, to approve the acquisition of any Private Placement or IPO by Access Persons for at least five years after the end of the fiscal year in which the approval is granted, the first two years in an easily accessible place. |
• | A copy of each annual (or, if pertinent, other periodic) written report made to the Board of any RIC advised or sub-advised by the Firm. |
N. | Responsibilities |
The Chief Compliance Officer and/or his designee(s) will be responsible for administering the Code of Ethics, subject to oversight by the Company’s General Counsel. All questions regarding the policy should be directed to the Chief Compliance Officer. All Access Persons must acknowledge their receipt and understanding of the Code of Ethics upon commencement of he/she becoming an Access Person via PTCC.
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APPENDIX A
WATERFALL ASSET MANAGEMENT, LLC
POLITICAL AND CHARITABLE CONTRIBUTIONS AND PUBLIC POSITIONS
June 2015
Summary
All political contributions and payments by Waterfall Asset Management, LLC (the “Firm” or “Waterfall”) and its employees and covered associates are subject to the prior approval of the Chief Compliance Officer. In addition, the Firm and its employees and covered associates are expressly prohibited from making any charitable donations with the intention of influencing such charities to become clients of the Firm (including, without limitation, as investors of any of its investment funds).
Individuals that wish to make any political contributions or payments may complete and submit a Political Contribution Pre-clearance request to the Chief Compliance Officer via PTCC or submit to the Compliance Department-Compliance@waterfallam.com.
Background
Individuals may have important personal reasons for seeking public office, supporting candidates for public office, or making charitable contributions. However, such activities could pose risks to an investment adviser. For example, federal and state “pay-to-play” laws have the potential to significantly limit an adviser’s ability to manage assets and provide other services to government-related clients or fund investors (collectively, “Clients”).
Rule 206(4)-5 of the Investment Advisers Act of 1940, as amended (the “Pay-to-Play Rule”) limits political contributions to state and local government officials, candidates, and political parties by:
• | Registered investment advisers; |
• | Advisers with fewer than fifteen clients that would be required to register with the U.S. Securities and Exchange Commission (“SEC”) but for the “private advisor” exemption provided by Section 203(b)(3) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”); |
• | Firms that solicit clients or investors on behalf of the types of advisers described above; and |
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• | “Covered associates” (as defined below) of the entities listed above. |
The Pay-to-Play Rule defines “contributions” broadly to include gifts, loans, the payment of debts, and the provision of any other thing of value. Rule 206(4)-5 of the Advisers Act also includes a provision that prohibits any indirect action that would be prohibited if the same action was done directly.
Restrictions on the Receipt of Advisory Fees
The Pay-to-Play Rule prohibits the receipt of compensation from a government entity for advisory services fortwo years following a contribution to any official of that “government entity”.1 This prohibition also applies to “covered associates” of the adviser.
A “covered associate” of an adviser is defined to include:
• | Any general partner, managing member or executive officer, or other individual with a similar status or function; |
• | Any employee that solicits a government entity for the adviser, as well as any direct or indirect supervisor of that employee; and |
• | Any political action committee controlled by the adviser or by any person that meets the definition of a “covered associate.” |
However, there is an exception available for contributions from natural persons of $150 per election, or $350 per election if the contributor is eligible to vote in the election. An exception is also available for otherwise prohibited contributions that are returned, so long as the contribution in question is less than $350, is discovered within four months of being given, and is returned within 60 days of being discovered. The exception for returned contributions is available no more than twice per calendar year for advisers with 50 or fewer employees; advisers with more than 50 employees can rely on this exception three times per calendar year. However, an adviser cannot rely on the exception for returned contributions more than once for any particular employee, irrespective of the amount of time that passes between returned contributions.
The restrictions on contributions and payments imposed by Rule 206(4)-5 can apply to the activities of individuals for the two years before they became covered associates of an investment adviser. However, for covered associates who are not involved in soliciting clients or investors, the look-back period is six months instead of two years.
1 | A government entity means any state or political subdivision of a state, including (i) any agency, authority, or instrumentality of the state or political subdivision, (ii) a pool of assets sponsored or established by the state of political subdivision or agency, (iii) a plan or program of a government entity; and (iv) officer, agents or employees of the state or political subdivision or agency. |
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Restrictions on Payments for the Solicitation of Clients or Investors
The Pay-to-Play Rule prohibits the compensation of any person to solicit a government entity unless the solicitor is an officer or employee of the adviser, or unless the recipient of the compensation (i.e., solicitation fee) is another registered investment adviser or a registered broker/dealer.
However, a registered investment adviser will be ineligible to receive compensation for soliciting government entities if the adviser or its covered associates made, coordinated, or solicited contributions or payments to the government entity during the prior two years.
Restrictions on the Coordination or Solicitation of Contributions
The Pay-to-Play Rule prohibits an adviser and its covered associates from coordinating or soliciting any contribution or payment to an official of the government entity, or a related local or state political party.
Guidance Regarding Bona-Fide Charitable Contributions
In Political Contributions by Certain Investment Advisers, Advisers Act Release No. 3043 (July 1, 2010) the SEC indicated that charitable donations to legitimate not-for-profit organizations, even at the request of an official of a government entity, would not implicate Rule 206(4)-5.
Applicability of Rule 206(4)-5 to Different Types of Advisory Products and Services Being Offered
The Pay-to-Play Rule applies equally to:
• | Advisers that directly manage the assets of a government entity (such as in a separate account); |
• | Advisers that manage assets of a government entity in a private fund (such as a hedge fund, private equity fund, etc.); and |
• | Advisers that manage a registered investment company (such as a mutual fund) that is an investment option of a plan or program of a government entity. |
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Risks
In developing these policies and procedures, Waterfall considered the material risks associated with its employees’ and covered associates’ (collectively, “Employees”) political contributions. This analysis includes risks such as:
• | Employees make political contributions that limit Waterfall’s ability to attract or retain government related Clients; |
• | The Firm hires or promotes an individual into a role that meets the definition of a “covered associate” without considering the individual’s past political contributions; |
• | The Firm inadvertently violates “pay-to-play” regulations, or other applicable laws, because it is unaware of Employees’ political contributions; |
• | The Firm or its Employees make charitable contributions that pose actual or apparent conflicts of interest; and |
• | Employees hold public offices that pose actual or apparent conflicts of interest. |
Policies and Procedures
Political Contributions
Political contributions by the Firm or its Employees to politically connected individuals or entities with the intention of influencing such individuals or entities for business purposes are strictly prohibited.
If an Employee or any affiliated entity is considering making a political contribution to any state or local government entity, official, candidate, political party, or political action committee, the potential contributor must submit a pre-clearance request via PTCC from the Chief Compliance Officer Political Contribution Pre-clearance form. The Chief Compliance Officer will consider whether the proposed contribution is consistent with restrictions imposed by Rule 206(4)-5, and to the extent practicable, the Chief Compliance Officer will seek to protect the confidentiality of all information regarding each proposed contribution.
The Chief Compliance Officer will meet with any individuals who are expected to become “covered associates” to discuss their past political contributions. The review will address the prior six months for potential covered associates who will have no involvement in the solicitation of Clients; contributions for all other potential covered associates will be reviewed for the past two years.
Employees may make contributions to national political candidates, parties, or action committees without seeking pre-clearance. Employees are cautioned to ensure that national political candidates do not currently hold state or local political office. However, Employees must use good judgment in connection with all contributions and should consult with the Chief Compliance Officer if there is any actual or apparent question about the propriety of a potential contribution.
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Any political contribution by the Firm, rather than its Employees, must be pre-cleared by the Chief Compliance Officer, irrespective of the proposed amount or recipient of the contribution. The Chief Compliance Officer will maintain a record of approved contributions in PTCC in accordance with the requirements of the Pay-to-Play Rule.
Solicitation Arrangements
The Firm will only compensate third parties for referrals of Clients or Investors that are affiliated with government entities if the solicitor is an eligible “regulated person,” as defined by Rule 206(4)-5 under the Advisers Act, and if the solicitor and its covered associates have not made any disqualifying contributions during the past two years.
The Chief Compliance Officer is responsible for reviewing the eligibility of all solicitation arrangements that involve, or are expected to involve, government entities.
Charitable Donations
Donations by the Firm or Employees to charities with the intention of influencing such charities to become Clients are strictly prohibited. Notify the Chief Compliance Officer if you perceive an actual or apparent conflict of interest in connection with any charitable contribution, or if you believe that the contribution could give an appearance of impropriety.
Public Office
Employees must obtain written pre-approval from the Chief Compliance Officer prior to running for any public office. Employees may not hold a public office if it presents any actual or apparent conflict of interest with the Firm’s business activities.
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APPENDIX B
All Access persons will certify to the below Electronic Communication and Internet Use Policy via PTCC as part of their Initial Code of Ethics Registration.
ELECTRONIC COMMUNICATIONSAND INTERNET USE POLICY
WATERFALL ASSET MANAGEMENT
June 2015
Background
The Firm has adopted the Electronic Communications Policy and Procedures (the “EPolicy”) to comply with federal and state securities laws, including Rule 204-2 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The E-Policy was designed to ensure that the Firm implements reasonable procedures to monitor Employees’ use of the Internet and electronic communications, including without limitation, e-mail.
All software, files, e-mail messages, and voice mail messages on the Firm’s computers, network, and communications systems are the property of the Firm. These resources are made available by the Firm to facilitate your ability to do your job efficiently and productively. To that end, the Firm’s members, officers, directors, and employees (the “Employees”) are to use computers, software, phone systems and Internet access for the benefit of the Firm and its clients. In addition, all the Firm-related software, files, e-mail messages (including e-mail correspondence to and from clients) on personal computers, PDAs and similar sources must be maintained in accordance with the Advisers Act and this E-Policy.
The use of the Internet and various means of electronic communication presents challenges for investment advisers regarding the retention of documents that are required to be maintained under the Advisers Act. In addition, the U.S. Securities and Exchange Commission (the “SEC”) and other regulatory agencies have concerns surrounding the implementation of appropriate physical, electronic and procedural safeguards to protect the privacy of client and/or investor information. Also, the use of the Internet and e-mail exposes an adviser’s systems to infiltration by computer viruses, which are sophisticated and dangerous, and which, by their nature, attack randomly.
Policy
This E-Policy applies to all electronic communications, including e-mail. Employees are reminded that the Firm requires Employees to act with integrity, competence, dignity, and in an ethical manner when dealing with the public, clients, prospects, their employer, and their fellow Employees. An Employee’s use of the Firm’s e-mail, computer, Internet and PDA is held to the same standard as all other business communications, including compliance with our anti-discrimination and anti-harassment policies. The Firm expects its Employees to use good judgment in their use of these systems.
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As noted above, electronic communications systems, particularly the Internet and internal and external e-mail, are resources of importance for both regulators and our Clients. Given the vast accessibility of these technologies, it is quite easy to overlook the significant risks associated with their use. Thus, all Employees must take great care in using the Internet and in communicating with business associates just as one would when using print or any other media. The Internet is a public forum as opposed to a private or secure network. One should always assume that nothing written in an e-mail communication is private.
The Firm encourages the use of e-mail and the Internet because they make communications more efficient and effective. However,e-mail and Internet service are the property of the Firm, and their purpose is to facilitate the Firm’s business. Every Employee has a responsibility to maintain and enhance the Firm’s public image and to use e-mail and access to the Internet in a productive manner. To ensure that all Employees are responsible, the following guidelines have been established for using e-mail and the Internet. Any use of e-mail or the Internet in violation of these guidelines is not acceptable and may be cause for corrective action, including termination.
Procedures
A. | Correspondence. Any written electronic communications sent by an Employee to clients, customers, service providers, another Employee, or any other party, including e-mail and fax should be treated in the same manner and with the same care as letters or other official communications on Firm’s letterhead. In addition, such communications may be subject to the recordkeeping requirements under the Advisers Act, which generally mandates that such documentation be maintained by an adviser for a period of five years from the end of the fiscal year in which the communication was created – the first two years in the office of the adviser. Investor or client complaints that are received by an Employee via e-mail must immediately be forwarded to the General Counsel. |
B. | Electronic Mail. Employees must take great care in preparing and sending both internal and external e-mails. Certaine-mails that are sent to more than one person (including clients, prospective clients, etc.) may be considered by the SEC to be advertisements that are subject to the advertising rules under the Advisers Act. Thus, the same care should be taken in creating an e-mail as that which is taken when creating a new promotional piece. |
In order to comply with the requirement that all Employee e-mails be maintained in accordance with the recordkeeping rules under the Advisers Act, the Firm will archive and retain all of the e-mails that are sent and received by all Employees.
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Employees are generally prohibited from using public e-mail services from their Firm computer (desktop or laptop) for business use. Employees are permitted to make reasonable personal use of their Firm e-mail account to send or receive personal e-mails. However, such use should not interfere with the Firm’s business activities or involve a meaningful amount of Employee’s time or the Firm’s resources. As always, all e-mail, whether business or personal, must be appropriate in both tone and content. Employees acknowledge that the Firm and its authorized agents have the right to access and obtain all e-mails, including personal e-mails that Employees send or receive through the Firm’s computers. Employees acknowledge that all of their e-mails may be subject to, at any time and without notice to Employee, monitoring and review by the Firm and/or its authorized agents as permitted or required by law. Employees expressly consent to such monitoring and review by the Firm and/or its authorized agents of all e-mails.
C. | Privileged Emails. When corresponding via e-mail with its legal counsel, the Firm will consider that such e-mails may be subject to SEC review. E-mails in which the Firm seeks to exert the attorney-client privilege may be marked by including the phrase, “Privileged and Confidential” in the subject line of the e-mail. Notwithstanding the foregoing, legal privilege is not applicable on a wholesale basis or simply because the Firm wants it to be. Including the words “Privileged and Confidential” does not automatically confer privileged status. |
D. | Instant Messaging and Chat Rooms. Instant allows one user to communicate with another one in real time. A “chat room” differs from instant messaging as several users have the ability to communicate with one another in real time. |
Employees are prohibited from using an instant message platform that has not been approved by the Firm.
E. | Prohibited Communications. The Firm’s e-mail and Internet access may not be used for transmitting, retrieving or storing any communications of a discriminatory or harassing nature, or materials that are obscene or sexually explicit. Harassment of any kind is prohibited. No messages with derogatory or inflammatory remarks about an individual’s race, age, disability, religion, national origin, physical attributes or sexual preference, or any messages containing abusive, profane or offensive language shall be transmitted, retrieved or stored through the Firm’s e-mail or Internet system. Electronic media may also not be used for any other purpose which is illegal or against the Firm’s policies or contrary to the Firm’s best interest. The Firm generally prohibits Employees from using its electronic facilities to do any of the following: |
• | Download or transmit harassing, discriminatory, pornographic, obscene, violent, defamatory, offensive, derogatory or otherwise unlawful, inappropriate or unprofessional images or materials; |
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• | Transmit externally any documents marked “For Internal Distribution Only” or forward any e-mail automatically to an outside e-mail account; |
• | “Hack” or attempt to gain unauthorized access to computers or databases, tamper or interfere with electronic security mechanisms, misrepresent a user’s identity (e.g., spoofing”) or disseminate intentionally any viruses or other destructive programs; |
• | Transmit chain letters, unapproved mass solicitations or any other form of unsolicited e-mail/SPAM for non-Firm approved purposes; |
• | Solicitation of non-company business or any use of the Firm’s e-mail or Internet for personal gain; or |
• | To prevent computer viruses from being transmitted through the Firm’s e-mail/Internet system, employees should not download, install, or execute any unauthorized software. |
F. | Electronic Delivery of Regulatory Documents. The electronic delivery of investment adviser regulatory documents, including, among other things, an adviser’s Form ADV and privacy policy, must be made in accordance with the three elements of Notice, Access, and Evidence of Delivery as discussed more fully below. |
Notice - Information provided electronically (i.e., on the Firm’s website or in an e-mail sent by an Employee to a client) provides notice to the Firm’s clients that they have received something important.
Access - Those who are provided with electronic documents should have access comparable to that of a paper document. The use of a particular medium (i.e., Internet website or e-mail) should not be so burdensome that intended recipients cannot effectively access the information provided. Persons to whom information is sent electronically must have an opportunity to retain the information through the selected medium (i.e., recipient should be able to either download or print information delivered electronically such that they can maintain a permanent record).
Evidence of Delivery - When providing documents electronically, one must have reasonable assurance that such documents have been actually delivered. In order to evidence satisfaction of delivery obligations advisers may: 1) obtain the client or investor’s informed consent, 2) obtain evidence the client or investor has actually received the document (i.e., return receipt), or 3) disseminating information via fax.
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In order to satisfy the requirements with respect to the electronic delivery of regulatory documents, the Firm may: 1) include a provision in the client or investor’s contract (or ensure that it is in the client’s custodial agreement) where the client could sign-off on their approval to receive documents (i.e., custodian statements) in electronic format; or 2) send such documents with “return-receipt” and “read” function so that you know he/she has received and opened the email. Employees should refer to SEC Interpretive Release IA-1562 which discusses this issue in more detail -http://www.sec.gov/rules/concept/33-7288.txt.
G. | Security. The Internet is not a secure environment. Files and e-mail can be intercepted and read by technically savvy Internet users, including the Firm’s competitors. All Employees should attempt to limit the amount of confidential, classified, or proprietary information that is transmitted electronically to only that which is absolutely necessary and required to conduct one’s job. |
H. | Reporting Problems. If sensitive Firm information is lost, disclosed to unauthorized parties or suspected of being lost or disclosed, Employees shall immediately notify the General Counsel. In addition, the General Counsel should be notified if any unauthorized use of the Firm’s information systems has taken place, or is suspected of taking place. Similarly, when passwords or other system access control mechanisms are lost, stolen, or disclosed, or suspected of being lost, stolen, or disclosed, the General Counsel should be notified immediately. All unusual system behavior, such as missing files, frequent systems crashes, misrouted messages and the like should be reported immediately to the applicable IT staff as one of these issues may indicate a computer virus infection or similar Security problem. |
I. | Monitoring and Surveillance Program. In order to ensure compliance with this E-Policy, the Firm reserves the right, subject to applicable law, to monitor (which includes, without limitation, the right to access, disclose, record or review) for any purpose, all communications delivered via the Firm’s electronic communications resources and all communications, information or materials created or stored on the Firm’s network computer systems or on an Employee’s personal computer. Thus, Employees should be mindful that their e-mails may be reviewed on a random basis by the Firm or its authorized agents. At any time, the Firm may require an Employee to provide it with any of their electronic access codes or passwords. The Firm will also conduct periodic tests to determine their electronic retention capabilities. The Firm intends to keep documentary evidence of such testing. |
The Firm may monitor the electronic communications of Employees for any purposes, including without limitation: regulatory requirements, investigating possible Employee theft or espionage, monitoring work flow, retrieving missing business data in an Employee’s absence, reviewing and evaluating Employee performance, ensuring that the Firm’s systems are used for legitimate purposes and not for the transmittal of discriminatory or offensive messages, finding illegal
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software installed on an Employee’s computer, ensuring that Employees are either not using the Firm’s equipment and resources for personal purposes, or complying with any state, federal or international laws or legal process, including without limitation, responding to subpoenas, court orders for surveillance or similar requests.
J. | Bloomberg. In addition, the Firm captures required electronic communications through Bloomberg. |
Employee Consent and Non-Compliance with the E-Policy
Your consent and compliance with this E-Policy is a term and condition of your employment. Failure to abide by this E-Policy or to consent to any interception, monitoring, copying, reviewing or downloading of any communications or files is grounds for discipline, up to and including suspension or dismissal, at the discretion of management. In any situation where you are unsure about the application of this E-Policy, please discuss the situation confidentially with the General Counsel.
Confidentiality
All reports and any other information filed with the Firm pursuant to this E-Policy shall be treated as confidential, except that the same may be disclosed to the Firm’s management, any regulatory or self-regulatory authority or agency upon its request, or as required by law or court or administrative order.
Responsibilities
The General Counsel and designees are responsible for overseeing and implementing this policy. Employees should contact the General Counsel if they have any questions.
Communications
Employees are responsible for the content of all text, audio or image that they place or send over the Firm’s e-mail/Internet system. All external communications sent by employees via the Firm’s e-mail/Internet system must not disclose any confidential or proprietary information about the Firm. Any messages or information sent by an employee to another individual outside of the Firm’s office via an electronic network (e.g., bulletin board, on-line service or Internet) reflect on the image of the Firm. While some users include personal “disclaimers” in electronic messages, the messages may still be tied to the Firm. In that regard, no e-mail or other electronic communications may be sent which hides the identity of the sender or represents the sender as someone else or someone from another company.
Copyright Issues
Employees using the Firm’s e-mail/Internet system may not transmit copyrighted materials belonging to any outside entities. All employees obtaining access to another
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companies’ or individual’s materials must respect all copyrights and may not copy, retrieve, modify or forward copyrighted materials, except with permission of the owner, with the exception of a single copy being accessed for reference only. Failure to observe copyright or license agreements may cause the Firm to incur liability. Employees should contact the General Counsel if they have any questions.
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