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This Code of Ethics is intended to be utilized by all Tarheel
Advisors, LLC personnel in the conduct of Tarheel Advisors, LLC
business.
The Investment Company Act of 1940, the Investment Advisers Act
of 1940 and the rules adopted under these Acts prohibit certain
investment advisers and “access persons” of these advisers from
engaging in fraudulent and manipulative practices with respect
to managed investment companies and other clients.
The rules also require that each registered adviser adopt and
promulgate a code of ethics designed reasonably to prevent
“access persons” from engaging in the prohibited practices. The
code is to be reviewed and approved at least annually by the
board of directors of each managed fund and copies of each
version are to be preserved for at least five years. SEC Rule
204A-1 requires every investment adviser registered or required
to be registered under
section 203
of the Act to establish, maintain and enforce a written code of
ethics that, at a minimum, includes:
1. A standard (or standards) of business conduct that the
adviser requires of each supervised person, which standard must
reflect the adviser’s fiduciary obligations and those of its
supervised persons;
2. Provisions requiring the supervised persons to comply with
applicable federal securities laws;
3. Provisions that require all “access persons” to report, and
the firm to review, their personal securities transactions and
holdings periodically as provided in the Rule;
4. Provisions requiring supervised persons to report any
violations of the code of ethics promptly to the chief
compliance officer or, provided the chief compliance officer
also receives reports of all violations, to other persons
designated in the code of ethics; and
5. Provisions requiring the firm to provide each supervised
person with a copy of the code of ethics and any amendments, and
requiring the supervised persons to provide the firm with a
written acknowledgment of their receipt of the code and any
amendments.
The Chief Compliance Officer is responsible for overseeing the
Code of Ethics where applicable, providing any revisions and
implementing its provisions. This oversight shall at a minimum
include the following on a regular basis:
-Reviewing Access Persons’ personal securities reports
-Assessing whether Access Persons are following required
internal procedures
-Evaluating transactions to identify any prohibited practices
-Assessing relative performance of personal accounts vs.
customer accounts.”
-Each employee and associated person
must date and sign the Acknowledgment
on the last page of this Code of Ethics and return a copy of the
signed Acknowledgment to the CCO.
In addition, each employee or Associated Person must take
personal responsibility to report promptly to the Chief
Compliance Officer any suspected violations of this Code of
Ethics where applicable.
Tarheel Advisors, LLC is required to include in Schedule F of
Form ADV Part II a reference to this Code of Ethics and that a
copy of the Code of Ethics will be delivered to the recipient of
Part II ADV upon request addressed to the CCO.
1.1 In General
1.1.1 Standards of Business Conduct ; “Supervised Persons”
Federal and state securities laws and regulations make it clear
that registered investment advisers and their employees, have a
fiduciary duty to their clients with respect to the advice and
management services provided. This is often expressed as the
“prudent man rule.” A fiduciary is to approach his or her
client’s affairs with the same prudence as would be used in the
management of his or her own. Fiduciaries are expected to place
the interests of the client before their own. Fiduciaries cannot
withhold material information from a client that would affect
the client’s investment decision.
1.1.2 Compliance With Securities Laws is Mandatory
Federal and state antifraud statutes set forth a number of basic
principles which underpin the enforcement of ethical principles
in adviser administration. Thus neither an adviser nor any
employee may:
-Employ any device, scheme or artifice to defraud a client;
-Make any untrue statement of material fact or material omission
in communications to clients or the public; or Engage in any
act, practice or course of business that operates or would
operate as a fraud or deceit upon a client.
Non- compliance with the provisions of this Code of Ethics
where applicable will not be tolerated.
1.1.3
Ethics Requirements Under State Securities Laws
The legal regulatory structure does not require every adviser to
be state registered.
However, state “anti-fraud” and ethics laws and regulations
continue to apply to each adviser doing business in the state.
Accordingly, attention needs to be paid to the ethics
requirements of each state where Tarheel Advisors, LLC is doing
business. State securities administrators have their own code
of ethics. In April, 2004 the North American Security
Administrators Association (NASAA) updated its Statement of
Policy Concerning Unethical Business Practices of Investment
Advisers (Statement). The Statement is used by a number of state
securities administrators in evaluating the ethics of regulated
advisers. The Statement identifies a number of specific
practices which the state administrators define as unethical:
Recommending to a client to whom supervisory, management or
consulting services are provided the purchase, sale or exchange
of any security without reasonable grounds to believe that the
recommendation is suitable for the client on the basis of
information furnished by the client after reasonable inquiry
concerning the client's investment objectives, financial
situation and needs, and any other information known by the
investment adviser.
Exercising any discretionary power in placing an order for the
purchase or sale of securities for a client without obtaining
written discretionary authority from the client within ten (10)
business days after the date of the first transaction placed
pursuant to oral discretionary authority, unless the
discretionary power relates solely to the price at which, or the
time when, an order involving a definite amount of a specified
security shall be executed, or both.
Inducing trading in a client's account that is excessive in size
or frequency in view of the financial resources, investment
objectives and character of the account in light of the fact
that an adviser in such situations can directly benefit from the
number of securities transactions effected in a client's
account. The rule appropriately forbids an excessive number of
transaction orders to be induced by an adviser for a "customer's
account."
Placing an order to purchase or sell a security for the account
of a client without authority to do so.
Placing an order to purchase or sell a security for the account
of a client upon instruction of a third party without first
having obtained a written third-party trading authorization from
the client.
Borrowing money or securities from a client unless the client is
a broker-dealer, an affiliate of the investment adviser, or a
financial institution engaged in the business of loaning funds.
Loaning money to a client unless the investment adviser is a
financial institution engage in the business of loaning funds
or the client is an affiliate of the investment adviser.
To misrepresent to any advisory client, or prospective advisory
client, the qualifications of the investment adviser or any
employee of the investment adviser, or to misrepresent the
nature of the advisory services being offered or fees to be
charged for such service, or to omit to state a material fact
necessary to make the statements made regarding qualifications,
services or fees, in light of the circumstances under which they
are made, not misleading.
Providing a report or recommendation to any advisory client
prepared by someone other than the adviser without disclosing
that fact. (This prohibition does not apply to a situation where
the adviser uses published research reports or statistical
analyses to render advice or where an adviser orders such a
report in the normal course of providing service.)
Charging a client an unreasonable advisory fee.
Failing to disclose to clients in writing before any advice is
rendered any material conflict
of interest relating to the adviser or any of its employees
which could reasonably be expected to impair the rendering of
unbiased and objective advice including:
a. Compensation arrangements connected with advisory services
to clients which are in addition to compensation from such
clients for such services;
and
b. Charging a client an advisory fee for rendering advice when a
commission for executing securities transactions pursuant to
such advice will be received by the adviser or its employees.
Guaranteeing to a client that a specific result will be
achieved (gain or no loss) with advice, which will be rendered.
Publishing, circulating or distributing any advertisement which
does not comply with Rule 206 (4)-1 under the Investment
Advisers Act of 1940.
Disclosing the identity, affairs, or investments of any client
unless required by law to do so, or unless consented to by the
client.
Taking any action, directly or indirectly, with respect to
those securities or funds in which any client has any beneficial
interest, where the investment adviser has custody or possession
of such securities or funds when the adviser's action is subject
to and does not comply with the requirements of Rule 102(e)(1)-1
and any subsequent amendments.
1.2 Reporting Personal Securities Transactions
The SEC Rules require reporting and monitoring of the investment
activities of the firm’s employees. When investment advisory
personnel invest for their own accounts, conflicts of interest
may arise between the client’s and the employee's interests. The
reporting regulations are designed to deter problem activity and
to create a “level playing field.” Tarheel Advisors, LLC must
maintain a record of all transactions in
Reportable Securities
in which an
Access Person
has a “direct or indirect beneficial interest.” (See Section
1.2.3)
1.2.1
Who is an “Access Person”
An Access Person is any person supervised by Tarheel Advisors,
LLC who has access to nonpublic information regarding any
client’s purchase or sale of securities, or information
regarding the portfolio holdings of any Reportable Fund (see
below); or who is involved in making securities recommendations
to clients, or who has access to such recommendations that are
nonpublic.
As a matter of policy, Tarheel Advisors, LLC designates ALL
employees of the company as access persons’ with respect to its
compliance with Rule 204A-1.
1.2.2 What are “Reportable Securities”
Reportable Securities are all securities as defined in Section
202(a)(18) of the Act, including listed and unlisted securities,
private transactions (which include private placements,
non-public stock or warrants), EXCEPT:
(a) direct obligations of the united States Government;
(b) bankers’ acceptances, bank certificates of deposit,
commercial paper and high quality short term debt instruments
including repurchase agreements;
(c) shares issued by money market funds
(d) open end mutual funds and exchange traded funds (‘ETF’s”)
other than
(e) “Reportable Funds” closed end funds (e.g., unit investment
trusts
(“UIT’s”) – including closed end ETF’s organized as UIT’s)
(f) Transactions in units of UIT’s that are invested solely in
the shares of unaffiliated open end mutual funds (e.g.,
variable product sub-accounts) Reportable Funds include all
funds for which Tarheel Advisors, LLC serves as investment
adviser and any fund whose investment adviser controls, is
controlled by or is under common control with, Tarheel Advisors,
LLC
1.2.3
What is a “Direct or Indirect Beneficial Interest”
A Direct or Indirect Beneficial Interest is any direct ownership
or an indirect
pecuniary
interest
through any contract, arrangement, understanding, relationship
or otherwise, including immediate family members (person who is
supported directly or indirectly to a material extent by such
person), partners in a partnership or beneficiaries of a trust.
The term
pecuniary interest
means the opportunity, directly or indirectly, to profit or
share in any profit derived from a transaction in the Reportable
Securities.
Tarheel Advisors, LLC undertakes to protect the privacy and
security of the information provided by non-access persons’ as a
consequence of their relationship with one or more of Firm
Name’s listed access persons. As such, the CCO is responsible
for ensuring that such reports are only distributed to those
individuals who have a compliance need to view and analyze them.
1.2.4 Holding Reports
Each Access Person must submit to the CCO a signed
Holding Report
(See Forms Section),
within ten (10) days of the date the person becomes an Access
Person
AND
annually at least once in each subsequent 12 month period.
The Holding Report must be signed and personally delivered or
mailed to the Chief Compliance Officer. All Holding Reports
will be held in confidence in a secure location, subject to
review requirements by authorized officers of Tarheel Advisors,
LLC. Each Holding Report shall contain the following
information, current within not more than 45 days of the date
the person became an Access Person or the date of the Report as
the case may be, for each Reportable Security in which the
Access Person has a Direct or Indirect Beneficial Interest:
•title, exchange ticker or CUSIP number of the security
involved;
•number of shares or principal amount and dollar value of
purchase;
•date of acquisition;
•nature of the acquisition (purchase or other);
•nature of the interest ( direct or indirect and how held );
•price at which effected;
•name of each broker dealer or bank where the person maintains
an account or where thesecurities are held.
•date of the report.
The firm retains copies of each access person’s brokerage
account statements to satisfy these requirements.
1.2.5 Transaction Reports
Each Access Person must submit to the CCO a signed
Transaction Report,
(see Forms Section)
within thirty (30) days of the end of each calendar quarter,
containing the following information with respect to each
transaction during the quarter involving a reportable security
in which the Access Person acquired a direct or indirect
beneficial interest:
•title, exchange ticker or CUSIP number of the security
involved;
•number of shares or principal amount and dollar value of
purchase;
•nature of transaction ( purchase, sale, other type of
acquisition, etc );
•price of the security;
•name of the broker, dealer or bank with or through which the
transaction was effected;
•nature of ownership ( direct or indirect and how held );
•date of the transaction;
•date of the report; and
•copies of all confirmations.
•Copies of brokerage account statements containing the above
data will satisfy these
requirements.
Exceptions from Reporting Requirements. Tarheel Advisors, LLC
does not require reports with respect to the following:
(a) Any reports for securities in accounts over which the
Access Person has no direct or indirect influence or control;
(b) Transaction reports for transactions pursuant to automatic
investment plans;
(c) Transaction reports which would duplicate information
contained in broker trade confirmations or account statements
already held in Tarheel Advisors, LLC’s records as long as the
confirmations or statements are received by Tarheel Advisors,
LLC no later than 30 days after the end of the applicable
calendar quarter;
(d) One-person advisor firms
1.2.6
Review of Reports
Upon receipt of each Holding Report or Transaction Report the
Chief Compliance Officer will review it to determine whether or
not there are any questions about the contents, including the
security(ies) referenced, size, timing or other aspects of the
holding or transaction that require further inquiry. Particular,
access person reports will be reviewed for unauthorized trading
relating (but not limited) to the following issues:
(a) Securities currently on the firm’s Restricted list;
(b) Securities currently on the firm’s Watch list;
(c) Initial public offerings;
(d) Private placements;
(e) Any securities which may be potentially affected by inside
information that the firm or access person may possess;
(f) Market timing (if prohibited);
(g) Front Running;
(h) Participating in bunched trades to the disadvantage of
clients;
(i) Trading activity in contravention to advice given to
clients.
Reports requiring no further inquiry are initialed and filed.
Those requiring further inquiry will be the subject of “follow
up” with the individual(s) involved and appropriate further
action will be taken, if necessary, as described below.
Personal Securities Holdings and Transaction Reports will be
reviewed by the CCO within 15 of collection. If a problem or
concern is detected, the CCO will immediately take appropriate
action on any items that may conflict or potentially cause a
conflict with the Code. Documentation of any actions taken,
including any resolution or remediation will be created and
maintained as required by the Rule under the direction of the
CCO.
All reports will be initialed by the CCO after their review is
complete.
1.2.7 Pre Approvals
Tarheel Advisors, LLC requires that each Access Person obtain
pre-approval in writing from the Chief Compliance Officer before
he or she acquires direct or indirect beneficial ownership of
any security in an initial public offering or in a limited
offering.
Tarheel Advisors, LLC also requires that each Access Person
obtain pre-approval from the Chief Compliance Officer before
opening any brokerage account. Tarheel Advisors, LLC may
restrict the number of accounts or the broker dealers with whom
accounts may be opened.
Tarheel Advisors, LLC maintains a “restricted list” of
securities in which Access Persons may not transact purchases or
sales without pre-approval in writing from the Chief Compliance
Officer. Each Access Person is responsible for checking the
“restricted list” before engaging in any personal transaction.
Unethical Trading Practices
With respect to enforcing Tarheel Advisors, LLC’s Code of
Ethics, the firm will monitor the activities of its
representatives and access persons to ensure the provisions of
the Code are followed and the various securities and
non-securities related components of the Code are complied with.
Any perceived violations of the Code will be immediately
investigated, resolved, and documented as appropriate to the
situation.
The following practices are universally regarded as violations
of SEC and/or state regulations and are subject to severe
penalties if discovered:
1.3.1 Front running/Dumping
Purchasing or selling a security (including a mutual fund) in a
personal account before purchasing or selling that security in a
client account; OR purchasing or selling with advance knowledge
of, and before, corresponding purchases or sales in portfolios
of mutual funds owned by clients. In both cases, acting to
obtain a more favorable price for a personal account than may be
later available.
1.3.2 Improper Use of Information
Generally using economic, market or other investment information
obtained by virtue of one’s position with the adviser to advance
a personal interest. SEE ALSO BELOW: “Inside Information”.
1.3.3 Conditioning (Manipulating) the Market
Utilizing one’s position or influence with a fund or clients to
induce purchases or sales by these persons or entities of thinly
traded securities in anticipation of profit from timed personal
sales or purchases of these same securities.
1.3.4 Inducements
The receipt of inducements or other benefits, including warrants
or cash, from sponsors or others in return for selling or
recommending certain mutual funds or other securities.
1.3.5 Short Term Trading and Market Timing
Tarheel Advisors, LLC prohibits Short Term Trading and Market
Timing by Access Persons. “Short Term Trading” is the practice
of purchasing and selling the same security and/or the options
or convertibles in a security within a short period of time..
The length of the time period can vary from as short as a single
trading day to a period of weeks, depending on the volatility of
the security, use of margin, discount transaction costs or
methods, etc.
“Market Timing” is the practice of placing purchase and sales
orders in the same security or a related security in different
markets in order to take advantage of price differentials.
Transactions which have as their apparent purpose the obtaining
of a short term trading and/or a market timing advantage will be
regarded as a violation of Tarheel Advisors, LLC’s Code of
Ethics where applicable and dealt with severely. Persons who
have engaged in these transactions may be subject to the
requirement that they give up any profits obtained or otherwise
subjected to disciplinary action.
Misuse of Material Inside Information
(a) In situations where Tarheel Advisors, LLC provides research
services or securities analyses where it may come into contact
with material inside information relating to a company, the firm
will review (prior to assignment) the securities holdings and
transaction activity of the access person to be assigned to
conduct such research or analysis to ensure the access person:
(b) Does not currently hold the security in any brokerage
account where they have actual or beneficial ownership;
(c) Does not have a prior trading history with respect to such
security within the last 12 months;
(d) Does not have any other discernible conflict of interest
which may impair their objectivity with respect to the
assignment.
Material Inside Information
is information:
•Not generally available to the public,
•About which the public has not had a reasonable opportunity to
make an investment decision,
•Communicated in breach of a fiduciary duty owed by employee or
person under contract or professional relationship or
misappropriated from such a person,
•With “Substantial likelihood” that a reasonable investor would
consider the information to be important in making investment
decision (likely to have a substantial effect on the price of
the company’s stock).
Examples of Material Inside Information
•Special briefing information provided to analysts and other
securities professionals by company officials in the course of
dealings with the investment community;
•Plan to change fund manager;
•Plan to purchase or sell specific securities by fund;
•Alteration in manager or fund philosophy or strategy;
•Merger, tender offer, joint venture or other acquisition or
similar transaction ;
•Stock split or stock dividend or other change in dividend
practice;
•Significant earnings change;
•Litigation;
•Default in a debt obligation or a missed or changed dividend;
•Sale or redemption of securities or change in ownership of a
significant block of securities; or
•Change in major product, customer or supplier.
Employees of Tarheel Advisors, LLC are absolutely prohibited
from involving themselves in any way in any securities
transaction undertaken with knowledge of material nonpublic
information.
The law absolutely requires that an adviser and any Associated
Person refrain from any “Personal Securities Transactions” until
the material nonpublic information becomes public. Persons who
are found to have abused the insider trading rules are subject
to severe penalties, including loss of license, fines and
damages.
Should an employee acquire such information he or she should
not share it with any unauthorized person. Do not just stand by
and watch someone else do it. Your knowledge amounts to
participation and you could be drawn into a serious situation if
you know about it and take no action. On a confidential basis,
the Chief Compliance Officer will always be able to talk with
you and/or the persons involved and can often act to avert
trouble before it starts.
Rules and procedures for handling situations involving material
nonpublic information are set forth in the Compliance and
Procedures Manual. If in doubt, consult with the Chief
Compliance Officer.
1.5 Other Conduct
In addition to the “insider trading” rules and reporting
personal securities transactions, Access Persons must observe
specific substantive restrictions, as follows:
1.5.1 New Issue Purchase Restrictions
As specifically outlined by the Rule, access persons are
prohibited from engaging in purchases of initial public
offerings or private placements without prior written approval
of the Chief Compliance Officer.
“Blackout Periods”
No purchasing of initial public offerings or any other
designated security for personal, family, or other beneficial
accounts during the blackout period specified by the Firm Name
or otherwise by regulation, without prior written approval of
the Chief Compliance Officer. The blackout period may vary by
the type of security or transaction being contemplated and will
be specified by the CCO when such information is distributed to
Firm Name’s access persons and/or employees.
1.5.3
Pending Transactions/Allocation of Investment Opportunities
No personal trades in a security during a pending Client
buy/sell order in that security. Investment opportunities must
first be offered to clients before the firm or any access person
is permitted to participate in the purchase or sale of such
security. Furthermore, all trade allocations must be equitably
made to clients first (not the firm or its access persons) and
must not disadvantage the client to the benefit of the firm or
access person under any circumstances.
1.5.4 Public Commentary
Care should be taken in writing and publishing newsletters,
analyses and other public commentary on markets, funds and other
securities not to place the employee or the Company in a
situation where a recommendation to buy or sell could be seen as
conferring a personal benefit. If in any doubt, check with the
Chief Compliance Officer.
1.5.5 Gifts, Entertainment, and Training Expenses
Non-Cash Compensation, Defined:
This term encompasses any form of compensation received by the
firm or any employee in connection with the sale and
distribution of securities that is not cash compensation,
including, but not limited to, merchandise, gifts
and prizes, travel expenses, meals, lodging and securities. The
firm generally prohibits employees from accepting gifts and
gratuities from vendors, sponsors, clients, or other business
partners unless specifically approved by the CCO. Cash, Gifts,
trips, entertainment and any other perks or financial
remuneration from clients or business partners (other than the
occasional meal or memento) should typically be refused. The CCO
should be immediately informed when a gift or gratuity is
offered or received.
Training and Education.
Since various products and services are continuously offered, it
is particularly important that employees receive educational
opportunities whenever possible. Should employees of the firm
attend training or education meetings held by a product sponsor
or business partner, any related reimbursement or payment of
expenses must be made to Tarheel Advisors, LLC (not the employee
individually, unless approved by the CCO. Any such payment or
reimbursement must not be conditioned by the offeror on the
achievement of sales targets or other incentives, such as
gathering a specific level of assets.
1.5.6 Service on Boards of Directors, etc.
Service as a director or trustee of a public company or entity
involved in the investment process should be avoided where
“conflict of interest” issues might arise. Persons associated
with Tarheel Advisors, LLC are required to notify the Director
of Compliance in writing and receive written permission prior to
becoming a member of any board or a trustee of any entity.
1.6 Review and Further Action
Tarheel Advisors, LLC takes its responsibilities seriously to
review employee activities to detect and deter conduct, which
is, or could become, a violation of this Code of Ethics where
applicable. All employees are required to report any suspected
violations of this Code to the Chief Compliance Officer.
Employees should know that they might be asked to explain,
informally or otherwise, their conduct or documentation with
which they are associated. If further investigation reveals a
problem Tarheel Advisors, LLC may take further action, including
placing the individual(s) involved under heightened supervision
or restrictions, imposing internal penalties including canceling
an improper employee securities trade disgorgement of ill-gotten
profits or, in extreme cases, suspension or dismissal.
In certain cases the existence of violations may need to be
disclosed to the SEC and/or state authorities with the
consequent requirement that Form ADV be amended as well as the
CRD/ IARD registrations on Form U-4 of the individuals involved.
Corrective action may, in addition, involve unwinding improper
client trades and other remedial action to make the client
whole.
1.7
Books and Records
Tarheel Advisors, LLC is required to maintain books and records
related to the implementation of this Code of Ethics, in
accordance with the provisions of SEC Rule 204-2. These include
the following:
-Documents
-Access Person listings
-Receipts and Acknowledgments of this Code of Ethics
-Holding Reports and actions taken
-Transaction Reports and actions taken
-Dated copies of this Code of Ethics and amendments
-Documentation of any investigations, actions and remedies |
