Morningstar Research Services LLC Code of Ethics

Transcription

1 Mrningstar Research Services LLC Cde f Ethics March 2017 Cmpliance Plicy Manual March 2017 i

2 Intrductin Mrningstar Research Services LLC ( Research Grup ) is an investment adviser registered with the United States Securities and Exchange Cmmissin ( SEC ) pursuant t Sectin 203 f the Investment Advisers Act f 1940, as amended ( Advisers Act ). As a registered investment adviser, the Research Grup must cmply with the Advisers Act and its rules and regulatins. In instances where an issue r situatin is nt cvered within the Manual, please cntact the Chief Cmpliance Officer. In additin, the Chief Cmpliance Officer may, at her/his discretin, grant exceptins t the plicies and respnsibilities nted herein. Respnsibility All persns assciated with the Research Grup are respnsible fr taking steps necessary t supprt a culture f cmpliance. This culture can be created by having an envirnment that recgnizes and supprts the rle f strng cmpliance and ethical practices. Such persns can shw their supprt by attending cmpliance meetings, timely cmpletin f cmpliance reprting respnsibilities, and bringing matters t the attentin f the Chief Cmpliance Officer that may directly r indirectly impact the Research Grup s ability t cmply with its regulatry requirements r its fiduciary respnsibility t its clients. The Research Grup is respnsible fr verseeing activities being perfrmed by its emplyees r persns acting n their behalf. As part f that versight, such emplyees/persns will be subject t f this Manual. The Research Grup s emplyees and thse persns acting n behalf f the Research Grup will be prvided a cpy f this Manual upn emplyment/engagement, and whenever material updates are made. Each persn is t sign an acknwledgement f their receipt f the Manual and understanding f its cntents within ten calendar days f hire/engagement and within 30 calendar days after the annual delivery f the Manual. Terms f this Manual This sectin prvides clarity n terms that are used thrughut the Manual. Cmpliance Plicy Manual March

3 Client The term Client refers t Advisry Clients and Investment Research Clients cllectively. The term Advisry Client refers t a financial institutin wh engages Mrningstar Research Services t prvide investment advice based n the financial institutin s facts and circumstances (i.e., prviding persnalized investment advice). Fr purpses f this Manual, a financial institutin wh engages Mrningstar Research Services directly r thrugh ne r mre Mrningstar, Inc. s sftware prducts t btain access t Mrningstar Research Services generic/impersnal investment research is nt cnsidered an Advisry Client. The term Investment Research Client refers t a financial institutin which has access t Mrningstar Research Services investment research either thrugh an agreement with Mrningstar Research Services directly r thrugh ne r mre Mrningstar, Inc. s sftware prducts. Senir Management The term Senir Management includes the President f Mrningstar Research Services LLC and her/his direct reprts. Supervised Persns the term Supervised Persns includes Senir Management, persns emplyed by Mrningstar Research Services LLC and persns wh supprt Mrningstar Research Services LLC services is sme capacity (e.g., technlgy, marketing, peratins), but are emplyed by a Mrningstar entity ther than Mrningstar Research Services LLC.

4 Cde f Ethics General Statement The Research Grup intends fr Supervised Persns t subscribe t the highest standards f ethical and prfessinal cnduct. The highest duty f care with respect t ur advisry services and lyalty t all clients are t be bserved. What is in the best interests f users f ur investment research and clients f ur advisry services is paramunt, and any issue that arises must be reslved in a manner that is in their best interests. In additin t the mre detailed and specific regulatry requirements utlined in this Manual, general anti-fraud prvisins apply t ur activities. As the phrase implies, the anti-fraud prvisins within the law are general in nature. As a general matter, if an activity seems untld, extrardinary r unusual, Supervised Persn shuld cnsult with the Chief Cmpliance Officer. The purpse f the Cde f Ethics is t (1) educate Supervised Persns as t the laws gverning their cnduct; (2) prtect the Research Grup s reputatin; (3) mitigate securities law vilatins; and (4) t prtect Clients by deterring Supervised Persns miscnduct. This Cde f Ethics is expected t be cmplied with bth in wrd and in spirit. Failure t cmply with this Cde f Ethics in whle r in part is a serius matter that may result in disciplinary actin; actin that culd include terminatin f emplyment. Fiduciary Duty t Clients Backgrund An investment adviser s fiduciary bligatins are nt cntained within the Advisers Act, but cme frm views expressed by the Supreme Curt in SEC v. Capital Gains Research. Thse views are that a registered investment adviser has the: Duty t Disclse Duty t Put Clients Interests First Duty t be Fair Duty f Care Cmpliance Plicy Manual March

5 Plicy It is the Research Grup s plicy that Supervised Persns cnduct themselves and perfrm their assigned duties in a manner cnsistent with the abve duties. Duty t Disclse It is the Research Grup s plicy t include infrmatin n the Research Grup s services, its investment prcess/methdlgy and cnflicts f interests in its Frm ADV Part 2, which is publicly available n the SEC website. Duty t Put Clients Interests First It is Research Grup s plicy that the interests f the firm r the Supervised Persns des nt cme befre the best interests f the Clients. Duty t be Fair It is the Research Grup s plicy t treat each similar situated Client and prspective Client fairly. Equity Investment Research: Please refer t the Publishing and Distributing Investment Research sectin f the Investment Research Integrity Plicy Equity Research Grup fr specific details. Manager Investment Research: Please refer t the When prviding Manager Research Services, Mrningstar analysts must deal fairly and bjectively with all clients sectin f the Mrningstar Manager Research Integrity Plicy fr specific details. Duty f Care It is the Research Grup s plicy t perfrm its duties in a prudent manner and cnsistent with the fllwing: Recmmendatins/pinins have a reasnable and adequate basis; supprted by thrugh, diligent and apprpriate research and investigatin; Recmmendatins/pinins are based slely n the merits f the security r securities being recmmended r written abut; they are nt biased by utside pressures such as the relatinship the Research Grup, Mrningstar, Inc., r any f the Research Grup s affiliates have r wish t have with the issuer/spnsr f the security; and Facts are clearly distinguished frm pinins and utput prvided t a Client (e.g., investment research reprt) is clear and cmplete.

6 Prfessinal Respnsibilities Backgrund Emplyees are t have qualificatins that are cmmensurate with the duties they perfrm, and t cnduct themselves in an ethical manner, such as with hnesty and integrity. Plicy It is the Research Grup s plicy fr its Supervised Persns t have the apprpriate skills and experience that are cmmensurate t their assigned duties. It is the Research Grup s plicy that Supervised Persns exhibit high mral standards, prfessinalism, and ethical cnduct. T that end, Supervised Persns are prhibited frm: Guaranteeing the investment perfrmance f their recmmendatins/pinins. Falsely stating r misrepresenting her/his credentials (e.g., prfessinal designatin r educatin). Selling services in a manipulative, deceptive r fraudulent manner. Stating r implying that the SEC r any ther federal r state regulatry bdy endrses r apprves the Research Grup s services r its investment prcess/methdlgies. Rendering legal r tax advice t Clients. Cmmunicating cnfidential, nn-public infrmatin abut the Research Grup r its Clients t persns utside f the Research Grup. Cmmunicating cnfidential, nn-public infrmatin abut Mrningstar, Inc. r its affiliates t anyne utside f Mrningstar. Buying r selling a publicly-traded security while in pssessin f inside infrmatin r tipping such inside infrmatin t thers. Signing a Client s name t any dcument, even if the Client gives permissin t d s. Instructing the Client t pay them (the Supervised Persn) directly fr services rendered by the Research Grup. Accepting cash r checks payment made payable t the Supervised Persn frm a Client.

7 Lending mney t a Client. Brrwing mney r securities frm a Client. Acquiring r deriving persnal gain r prfit frm a business r investment pprtunity that cmes t her/his attentin as a result f the Supervised Persns assigned duties. Fr avidance f dubt, Supervised Persns can acquire a security as a result f reviewing an investment research reprt prduced by the Research Grup prvided it is dne in accrdance with the cnditins laid ut in the Persnal Security Transactins and Hldings sectin belw. Public Speaking Engagements Backgrund A public speaking engagement includes participatin in a seminar, cnference, webinar, vides and any ther public frum (including an interactive electrnic frum) in which a firm s emplyee ffers an pinin r pinins n ne r mre securities (e.g., stcks, mutual funds, ETFs). Plicy While public speaking engagements are acceptable, it is the Research Grup s plicy that: Supervised Persns adhere t the guidelines set frth in the Prfessinal Respnsibilities sectin abve; If speaking abut a specific stck, ETF r mutual fund, Supervised Persns infrm the audience: Of cnflicts f interests, either their wn r the Research Grup that they are aware f (e.g., they wn the fund they are speaking abut, the cmpany they are speaking abut is a Client). Where/hw the audience can gain access t ur published research n the security r securities being spken abut (e.g., available at That their presentatin shuld nt be used as a basis fr making investment decisins. Supervised Persns are nt t cmmunicate ratings and pinins that are different frm the current published rating r pinin n the security being talked abut.

8 Clients Nn-Public Infrmatin Backgrund Given its relatinship with clients (as well as pssible cntractual prvisins), a firm is t ensure client s nn-public, cnfidential infrmatin is nt prvided r made accessible t unauthrized persns. Plicy It is the Research Grup s plicy t prtect Client s nn-public, cnfidential infrmatin frm being given r made accessible t persns wh d nt need t knw r need access t such infrmatin t perfrm their assigned duties. If a Supervised Persn has r can access Client s nn-public, cnfidential infrmatin, that Supervised Persn is respnsible fr maintaining its cnfidentiality including nt sharing r prviding access t any persn wh des nt need t have such infrmatin t perfrm their assigned duties. In additin, t mitigate cnfidential infrmatin frm being made available t persns wh d nt need t knw such infrmatin t perfrm their assigned tasks, a Supervised Persn is respnsible fr: Nt discussing cnfidential infrmatin in public places, such as elevatrs, hallways, r at scial gatherings. Aviding use f speaker phnes in areas where unauthrized persns may verhear cnversatins. Aviding expsing dcuments cntaining cnfidential infrmatin t areas where they may be read by unauthrized persns (e.g., cpy machine). String dcuments cntaining cnfidential infrmatin in a secure lcatin when they are nt in use. Refraining frm using unsecured wireless netwrks when accessing r using cnfidential infrmatin. Althugh maintaining the cnfidentiality f nn-public, cnfidential infrmatin is f utmst imprtance, it des nt preclude a Supervised Persn frm their duty t reprt any actual r suspected illegal activities by Clients t the Chief Cmpliance Officer.

9 Gifts and Entertainment Backgrund A cnflict f interest ccurs when the persnal interests f a persn interferes r culd ptentially interfere with their respnsibilities t the firm and its clients. The verriding principle is that persns shuld nt accept inapprpriate gifts, favrs, entertainment, special accmmdatins, r ther things f material value that culd influence their analysis, pinins, r decisinmaking r make them feel behlden t a persn r firm. Similarly, persns shuld nt ffer gifts, favrs, entertainment r ther things f value that culd be viewed as verly generus r aimed at influencing decisin-making r making a client feel behlden t the firm r the supervised persn. Definitins Fr purpse f this Manual, a gift includes: Meals; Entertainment; Travel/ldging; Gift baskets r perishable items; and Lg-stamped prmtinal items valued at mre than $30. Fr purpse f this Manual, gifts d nt include: Persnal gifts such as a wedding gift, retirement gift r a cngratulatry gift fr the birth f a child prvided it is nt in relatin t the business f the emplyer f the recipient. A gift sent t the Research Grup in general r t a specific department within the Research Grup where it is shared (e.g., a fruit basket received during the hlidays that is left in the tea-pint). A meal r business entertainment that is nt frequent nr excessive as t raise any questin f imprpriety. Fr example, a Supervised Persn may accept an ccasinal dinner invitatin if the persn wh extended the invitatin attends the dinner

10 and the purpse f the meeting is t discuss legitimate business r establish a business relatinship. Plicy It is the Research Grup s plicy: Gifts N Supervised Persn may receive any gift f mre than $100 frm any persn r entity that relates t the Research Grup s business (e.g., client, prspect, vendr). Cash Entertainment Slicited Gifts N Supervised Persn may give r ffer t give any gift f mre than $100 t Clients, prspective Clients, r any entity that relates t the Research Grup s business (and includes representatives f such Clients, prspects and ther entities). N Supervised Persn may give r accept cash r cash gifts (e.g., gift card) frm a Client, prspective Client, r any entity that des business with the Research Grup. N Supervised Persn may prvide r accept extravagant r excessive entertainment t r frm a Client, prspective Client, r any persn r entity that des r seeks t d business with the Research Grup. N Supervised Persn may use her/his psitin t btain r seek a gift fr themselves r fr the Research Grup. Gift t Elected Officials, Unin Official and Labr Unins Because f the intricacies invlved, n Supervised Persn may give a gift t an elected fficial, unin fficial r a labr unin withut prir apprval frm the Chief Cmpliance Officer. Cnflicts f Interest Backgrund In general, cnflicts f interests are thse situatins when the interests f the Supervised Persn r the Research Grup differs frm the interests f the Client. An activity r situatin may be fund t invlve a cnflict f interest even thugh it des nt result in any financial lss t a Client(s).

11 Cnflicts f interests may als arise where the Research Grup r a Supervised Persn have reasn t favr the interests f ne Client ver anther (e.g., Clients in which a Supervised Persn has a material persnal investment in, persns emplyed by a Client where a Supervised Persn is clse friends with r they are relatives). Plicy It is the Research Grup s plicy that Supervised Persns may nt: favr ne Client ver anther similarly situated Client. use the knwledge f an unpublished change (e.g., change in a fair value estimate, qualitative rating, r analyst s pinins r an investment recmmendatin(s) yet t be given t a Client) t prfit persnally, directly r indirectly, because f such knwledge, including by purchasing r selling such securities. Recmmend a security withut disclsing t an apprpriate designated persn (e.g., Senir Management) and Client that they have a material beneficial wnership, business r persnal relatinship, r ther material interest in the issuer r its affiliates. Negtiate r make decisins regarding the Research Grup s use f a vendr r supplier withut disclsing t an apprpriate designated persn (e.g., Senir Management) that they have a material beneficial wnership, business r persnal relatinship, r ther material interest in such vendr r supplier. Persnal Security Transactins and Hldings Backgrund The persnal security recrds are intended as a means f bringing inapprpriate trading practices t light. It requires, amng ther things, an access persn t reprt t the Chief Cmpliance Officer (r her/his designee) a list f reprtable securities in which he r she has a beneficial wnership and reprt transactins in reprtable securities t the Chief Cmpliance Officer (r her/his designee). (Italicized terms are defined belw.) Definitins The definitins nted belw are specific t this sectin f the Manual. Access persn is (i) an fficer f the Research Grup, (ii) a persn wh makes r participates making an investment recmmendatin, and (iii) a

12 persn wh has access t the Research Grup s recmmendatins prir t disseminatin t the public and/r Clients. In additin t written analysis where a reasnable persn wuld view as a call t actin (buy, sell, hld), Research Grup s investment recmmendatins include fair value estimate, Analyst Rating fr Stcks, Analyst Rating fr Funds, Analyst Rating fr ETFs, and usage f terms such as undervalued/vervalued r cnsider buy/sell/hld. At the discretin f the Chief Cmpliance Officer, cnsultants, independent cntractrs, r interns used by the Research Grup and whse duties may expse them t abve infrmatin may be cnsidered access persns. Reprtable securities are: Stcks Municipal r crprate bnds Derivatives (e.g., ptins, futures) Clsed-ends funds Exchanged Traded Prducts (e.g., ETFs, ETNs) Hedge funds REITs Mrningstar restricted stck units (at the time the units vest) Private placements Open-end mutual funds (nly if the Research Grup is the fund s investment adviser r sub-adviser) Cllective investment trusts (nly if the Research Grup is the CIT s investment adviser r sub-adviser) Beneficial wnership is where an access persn has the pprtunity, directly r indirectly, t prfit r share in any prfit derived frm a transactin. Generally, this includes reprtable securities wned by immediate family members residing in yur hme (e.g., a reprtable security held in an accunt that is under yur spuse r partner s name), investment club accunts, r ther accunts where yu can influence trading decisins. This sectin f the Cde f Ethics applies t access persns and her/his immediate family. Plicy An access persn s immediate family cnsists f her/his spuse r live-in partner, each member f the access persn s husehld, and any ther persn r entity whse investment activity culd reasnably be attributed t the access persn. It is the plicy f the Research Grup that all Supervised Persns are cnsidered access persns.

13 It is the plicy f the Research Grup fr access persns t reprt t the Chief Cmpliance Officer (r her/his designee) hldings and security transactins in reprtable securities. It is the plicy f the Research Grup that access persns btain written apprval frm the Chief Cmpliance Officer prir t participating in an initial public ffering ( IPO ) r investing in a private placement (which includes hedge funds). Equity Analysts It is the plicy f the Research Grup that access persn wh reprt up thrugh the Head f Equity Research and their immediate family are: prhibited frm wning a security that the research analyst cvers and the clse cmpetitrs f the security they cver. prhibited frm transacting in a security that is n the Restricted List fr Analysts (that List is available n the Pnd) ( Restricted List ). prhibited frm transacting in a security that is currently n the Research Grup s restricted list. It is the plicy f the Research Grup that access persn wh reprt up thrugh the Head f Manager Research and their immediate family are prhibited frm hlding/transacting in a publicly traded cmpany that derives a significant prtin f their revenue frm managing mutual funds. Insider Trading Backgrund Investment advisers may have access t material infrmatin that has nt been publicly disseminated. T cmbat misuse f this infrmatin by advisers, their emplyees, r affiliates, thrugh insider trading r therwise, Cngress added Sectin 204A t the Advisers Act, requiring an investment adviser t adpt plicies and prcedures t preserve the cnfidentiality f infrmatin and prevent pssible insider trading. The term insider trading is generally cnsidered t include bth the use f material, nnpublic infrmatin t trade securities and the cmmunicatin f material, nnpublic infrmatin t thers. Als, infrmatin is material if there is a substantial likelihd that a reasnable investr wuld cnsider it imprtant in making an investment decisin r

14 public disseminatin f such infrmatin will likely affect the market price f the security. psitive r negative infrmatin may be material. material infrmatin is nt limited t histrical facts, may als include future events, prjectins and frecasts. infrmatin is nnpublic if it has nt been disseminated in a manner making it available t investrs generally and investrs have had an pprtunity t absrb the infrmatin. as a rule, infrmatin is nt cnsidered public until it is cnsidered absrbed and evaluated by the investment market after cmpletin f the secnd trading day after the infrmatin is released t the public. SEC s histrical psitin is that the term material nnpublic infrmatin relates nt nly t issuers but als t the adviser s investment recmmendatins and client securities hldings and transactins. Plicy It is the plicy f the Research Grup t strictly prhibit Supervised Persns frm trading securities while in pssessin f material, nnpublic infrmatin. It is the plicy f the Research Grup t strictly prhibit Supervised Persns frm cmmunicating (i.e., tipping) material nnpublic infrmatin t persns wh are nt Supervised Persns. Exceptin includes cmmunicatin with the Chief Cmpliance Officer and/r Mrningstar, Inc. s General Cunsel. Outside Activities Plicy It is the Research Grup s plicy fr its Supervised Persns nt t engage in utside activities that presents a real r perceived cnflict f interest. Respnsibility It is the respnsibility f the Supervised Persn t btain written apprval frm the Chief Cmpliance Officer (r her/his designee) befre engaging in any utside activity that invlves (i) a Client r (ii) having discretin t invest and/r participate in investment decisins, r related investment matters whether cmpensated fr the activity r nt.

15 Fr avidance f dubt, Outside activity is any activity that is nt part f a Supervised Persn s assigned duties r a Mrningstar spnsred activity. Invlvement in scial, religius, educatinal, charitable, civic, r fraternal rganizatin that des nt invlve the Supervised Persn being invlved the rganizatin s investment matters des nt require written apprval frm the Chief Cmpliance Officer. Cnfidential Infrmatin Plicy It is the plicy f the Research Grup fr Supervised Persns nt t disclse cnfidential infrmatin cncerning the Research Grup s, Mrningstar, Inc. r Mrningstar, Inc. s affiliates ( Mrningstar s Family f Cmpanies ) t anyne utside f Mrningstar, Inc. and its subsidiaries withut the prir apprval f the Chief Cmpliance Officer (r her/his designee). Supervised Persns may disclse, after publicatin, infrmatin cntained within Mrningstar, Inc. s 10-Q, 10-K, r 8-K. Any request fr infrmatin that is nt generally released in the nrmal curse f business, shuld be referred t the Chief Cmpliance Officer fr determinatin as t whether such request will be fulfilled. Reprting Vilatins Backgrund Rule 204a-1 f the Advisers Act requires all emplyees f an investment adviser t reprt prmptly any vilatins f the firm s Cde f Ethics that ccurred r are abut t ccur t either t the cmpliance department r t a third party designated by the firm. In additin, the Ddd-Frank Act cntains prvisins with respect t whistleblwers wh reprt fraudulent activities at financial services firms. Sectin 922 f the Ddd-Frank Act prvides that the SEC will pay awards t eligible whistleblwers that vluntarily prvide the SEC with riginal infrmatin that leads t a successful enfrcement actin yielding mnetary sanctins f ver $1 millin. An eligible whistleblwer is smene wh pssesses a reasnable belief that the infrmatin he r she is prviding relates t a securities law vilatin that has ccurred, is nging, r is abut t ccur, and wh prvides that infrmatin in the

16 manner as required under Sectin 21F(h)(1)(A) f the Securities Exchange Act f The Ddd-Frank Act als expressly prhibits retaliatin by emplyers against whistleblwers and prvides them with a private cause f actin if they are discharged r discriminated against by their emplyers in vilatin f the Ddd-Frank Act. Plicy It is the plicy f the Research Grup fr Supervised Persns t alert the Chief Cmpliance Officer immediately f any actual r suspected vilatins f applicable securities laws, Cde f Ethics, r any ther suspected wrngdings including. It is the plicy f the Research Grup t prhibit any frm f intimidatin r retaliatin against any Supervised Persn that brings ptential vilatins f Supervised securities laws, Cde f Ethics, r suspected wrngdings t the attentin f the Chief Cmpliance Officer r t the SEC directly under its whistleblwing prgram.