The Code of Ethics also contains employee trading policies and procedures that are closely monitored by our Legal and Compliance Department. Key aspects of the employee trading policies and procedures include: (a) requirements for securities accounts to be maintained with the firm or other approved entities; (b) an employee price restitution policy; (c) prohibitions against employee participation in initial public offerings; (d) prohibitions against trading on the basis of material non-public information; (e) pre-approval requirements for certain security transactions such as private placement offerings; (f) minimum holding periods for most personal securities transactions; and (g) annual written affirmation of reporting obligations and compliance with the Code.
The price restitution policy attempts to address the potential conflict that could arise from employees owning the same securities as clients, or where the accounts of both enter the market at the same time. Subject to certain exclusions, employee trades that are executed on the same day and in the same security as a client’s account are reviewed to ensure that the employee does not receive a better price than the client. In the event that the employee does receive a better price, the employee’s price is “switched” to that of the client’s and the cash difference in the execution price is disgorged from the employee account. Disgorged proceeds are often allocated to client accounts in the form of revised execution prices. In some instances, however, a revised execution price may for operational reasons not be feasible and the proceeds will either be remitted to client accounts or donated to charity.
Advisory Persons (as defined by the Code) are subject to a broader review period with respect to their own clients. There may also be differences in policies within the Code as it relates to Advisory Persons of the NB Mutual Funds with respect to certain employee trading policies and procedures, such as holding periods, blackout periods and price switch/discouragement policies.