Knowledge Base

Other than the requirements of the Rule, what else should be considered or included by an investment adviser when drafting a code of ethics?

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The following are areas that should be considered when preparing a code of ethics for a registered investment adviser:

  • Pre-clearance of personal securities transactions by access persons;
  • Maintenance of lists of issuers of securities that the advisory firm is analyzing or recommending for client transactions and prohibitions on personal trading in securities of those issuers during certain periods (“black out periods”);
  • Maintenance of restricted lists of securities for personal trading or holding;
  • Reminders that investment opportunities must be offered first to clients before the adviser or its employees may act on them and procedures to implement this principle;
  • Prohibitions or restrictions on short-swing trading and market timing;
  • Requirements to trade only through certain brokers, or limitations on the number of brokerage accounts permitted;
  • Requirements to provide the adviser with duplicate trade confirmations and account statements; and
  • Procedures for assigning new securities analyses to employees whose personal holdings do not present apparent conflicts of interest;

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