All employees are required to sign the organisation's Code of Ethics and Professional Conduct; Conflicts of Interest Policy and Confidentiality Policy.
In addition, the following steps are taken to minimise opportunities for misconduct:
No reliance on confidential inputs
All Scientific Beta index determinations derive from the application of fully transparent and replicable methodologies to public information concerning securities traded on regulated markets or exchanges with mandatory post‐trade transparency requirements. While the data acquired by Scientific Beta is subject to commercial terms and conditions that limit its authorised usages, it is nevertheless void of any material non‐public information.
Minimisation of material non‐public information generation through the use of systematic and fully transparent methodologies
To protect the integrity and independence of its indices, Scientific Beta designs and implements research‐based systematic index methodologies and provides full and complimentary transparency on the methodology, historical levels and historical composition of its indices. Adherence to the highest standards of objectivity and transparency contributes to index quality and robustness, enables advanced pre‐investment due diligence and on‐going risk analysis and performance measurement, allows for independent verification of the integrity of Scientific Beta indices by interested parties, and greatly limits the generation of material non‐public information that could, for example, impact the values of the financial instruments tracking any Scientific Beta index or of index constituents.
Segregation of duties and imposition of confidentiality obligations
Reporting lines within Scientific Beta are segregated to clearly define responsibilities and avoid the transfer of confidential information to personnel that do not need such data in the performance of their duties.
All individuals directly contributing to Scientific Beta are required to abide by the provisions of the CFA Institute Code of Ethics and Standards of Professional Conduct (effective 1 July 2014), which include conflicts of interests and confidentiality provisions.
Furthermore, all personnel contributing directly or indirectly to index determinations are subject to specific conflicts of interest and confidentiality policies to further protect the integrity and confidentiality of the process.
While the Scientific Beta index review has been largely automated to make the process transparent and systematic and facilitate timely communication of index changes to investors, an internal index review committee is relied upon to deal with exceptional cases where the rule‐based approach of index methodologies leads to inconclusive outcomes or where additional information is required. Members of the index review committee are instructed to treat their decisions as material non‐public information until such decisions have been published.
Likewise, while Scientific Beta may consult stakeholders about possible updates or changes to index rules, members of the research and development team and related committees are instructed to treat information concerning decisions on index methodologies as material non‐public information until they have been published. Similarly, members of the production team in charge of changing or updating index methodologies are instructed to treat information concerning index methodologies and index rules as confidential until published.
The previous section on the minimisation of material non‐public information notwithstanding, quarterly index revisions and daily index determinations are treated as confidential until they are published even if they reflect the transparent application of systematic methodologies. Likewise, daily information on weights and constituents, which reflects the treatment of corporate actions according to transparent and replicable index calculation rules, is treated as confidential until it is published.
Employee Investments and Trading Policy
Personnel with access to index determinations prior to publication, i.e. personnel of the Scientific Beta Operations and I&T department are prohibited from holding in any personal trading account:
- Any security included, or to be included, in the Scientific Beta Global Universe (and its buffer) and any security representing interest in the equity of firms whose securities are included or to be included in the said universe and buffer;
- Any other individual public market equity security with market capitalisation above USD500 million on 1 January 2017 or on the date of its subsequent listing;
- Short positions on the said securities;
- Derivative instruments whose underlying are the said securities;
- Other instruments, including but not limited to debt securities, representative of long or short interest in the said securities.