Business conduct policy

Employees need a roadmap to guide them and a typical conduct policy would address
the following issues:
Ω No insider trading
Ω No acceptance of gifts over a certain value
Ω No interested transactions with the company
Ω Whistleblower protection
Ω Salespersons shall not own stock of companies covered
Ω Traders shall not trade the same instrument for personal accounts that they trade
on the job
Ω Competitor contact parameters
Ω Comments to media
Ω Software development
Ω Client entertainment
Ω Confidential information
Policies are often too broad or simply written poorly. It is typically helpful to
provide examples when there is any likelihood of any misunderstanding or confusion.
pwdAlternatively, one may want to use an example to emphasize the significance of
a particular rule.
No employee should trade based on non-public information of information obtained
due to his or her unique relationship with a company. Even the appearance of
impropriety should be avoided. Salespersons cannot own customer stock simply to
ensure that there are no trades that can ‘tainted’ by possible access to confidential
information. In the same spirit, a trader cannot trade the same product for the
company that he or she trades for their own personal account. This discourages
moral hazard and the temptation to focus on personal positions to the detriment of
the company’s position. Competitors can be contacted as long as it is on a professional
basis and no laws are violated such as price fixing, collusion, etc. or the meetings
can be construed as creating a buying cartel.
Media comments and training tapes are two areas of special caution. Publicity is
generally good but you want to ensure that it is controlled and that there is no
inadvertent release of information. Moreover, there may be strategic initiatives that
are occurring unknown to the person providing media comments and those comments
may be misconstrued in retrospect. Training tapes are often given to hyperbole
and when taken out of context, may present a distorted view of company policies.
Client entertainment should be appropriate to the overall client–dealer relationship.
For clients similarly situated, the frequency and expense should be in a comparable
range. It is a preferred practice to accompany a client rather than send a client to an
event.
Salespersons may become privy to confidential information about a client. They
should be especially careful not to divulge the information especially if it is material,
non-public information. Conversely, compliance should ensure that spreadsheets
and dealers’ proprietary information are not being sent out to a customer via
facsimile, e-mail or other means without proper authorization. Any non-standard
information that does not fit into a prespecified template should be approved by
divisional compliance. There are two main cautions. The customer might rely on a
spreadsheet or adjust it for purposes/transactions for which it was not intended. In
addition, if there are any dealer trade secrets or protected information, it may lose
its protected status if it is widely or indiscriminately disseminated.
In the documentation of a transaction, a dealer should establish non-reliance on
the part of the end-user. Moreover, the dealer is not a financial advisor and each
party to the trade is acting independently and the end-user should determine that
transaction is an appropriate one. No guarantees or assurances as to the results of
the transaction should be made. Each party should have the authority to enter into
the transaction and take on the risks entailed in the specific transaction.