McGowan believes that it is in its best interest and is consistent with the obligations of directors, officers, shareholders, employees and consultants of McGowan (“team members”), to establish the Policy that all business decisions will reflect independent judgment and discretion, uninfluenced by any considerations other than those honestly believed to be in the best interest of McGowan’s clients.
The Policy extends to family members and close personal relationships. Family members and “close personal relationships” include a spouse, domestic or civil partner, significant other, son, daughter, other close relatives, or any person in our economic household.
Situations That May Lead to Conflicts of Interest.
While it is not possible to describe every situation or occurrence that could lead to a conflict of interest with McGowan’s clients, McGowan team members shall endeavor to avoid the appearance of conflict as well as actual conflicts.
- Relationships with Suppliers, Clients or Competitors. McGowan does not prohibit the ownership of stock or other financial interest in its clients or suppliers or competitors, per se. If a McGowan team member has such an interest that is material to the person or to such client or supplier, the relationship shall be fully disclosed to the McGowan CFO or other appropriate McGowan executive before engaging directly or indirectly in any McGowan business with such client or supplier, and will be considered on a case-by-case basis.
- Indirect Interests and Relationships. A conflict of interest can arise because of the business activities of an affiliate of the McGowan team member. The term affiliate includes close family members and family members who live in the same household as the officer, employee or consultant. A team member has a potential conflict of interest whenever an affiliate has a significant interest in a transaction or a significant relationship with any supplier, client or competitor of McGowan. The team member shall not make or influence any decision which could directly or indirectly benefit his or her affiliate and, in order to protect the team member from the appearance of a conflict of interest, all relationships of this nature are required to be reported to the McGowan CFO.
- Gifts, Loans and Entertainment. A McGowan team member shall not accept gifts from competitors or from anyone having or seeking business with McGowan or its clients, other than non-cash gifts of nominal value generally used for promotional purposes by the giver, or accept loans from any person having or seeking business with McGowan or its clients (other than loans from banks or financial institutions at prevailing market rates and terms).
- Business-Related Functions. Participation in business-related functions is permitted, including the acceptance of lunches or other meals. However, each McGowan team member shall exercise care to ensure that such functions are necessary and related to the conduct of business on behalf of McGowan or its clients. If in doubt, the McGowan CFO shall be consulted.
- Outside Business Activities. As a general rule McGowan does not allow its team members to participate or engage in business activities outside of their role with McGowan. As a general rule, participation on a part-time or other basis in any outside business or employment will be a conflict of interest if the team member’s participation in that business could interfere with his or her ability to devote proper time and attention to McGowan or its clients.
- Non-business Activities. Participation in the activities of a trade association, professional society, charitable institution or governmental institution on a non-compensated basis or holding a part-time office (with or without compensation) will not generally create a conflict of interest under this Policy. However, the McGowan CFO shall be consulted by any team member unsure of his or her particular participation in non-business activities.
- Personal Use of Corporate Property and Corporate Information. It is against McGowan Policy for any team member to use or divert any corporate property, including services of other employees, for his or her own advantage or benefit or use the corporate letterhead when writing personal correspondence.
No Trading on Inside Information. McGowan team members may not trade in client securities, either directly or indirectly through family members, friends, business associates or other persons or entities, if the team member is aware of material nonpublic information relating to the client. Similarly, McGowan team members may not trade in the securities of any other company if the team member is aware of material nonpublic information about that company.
No Tipping. McGowan team members may not provide material nonpublic information to others or recommend to anyone the purchase or sale of any securities when the team member is aware of such information. This practice, known as “tipping,” can also violate the securities laws and result in the same civil and criminal penalties that apply to illegal insider trading, even if the McGowan team member did not trade or gain any personal benefit from another’s trading.
No Speculative Transactions. McGowan team members may not engage in speculative transactions that could lead to inadvertent violations of insider trading laws, such as:
- Short Sales. Short sales in client securities (sales of securities that are not then owned), including “sales against the box” (sales with delayed delivery).
- Exchange-Traded Options. Option transactions (puts, calls and other derivatives) in client securities conducted on an exchange or in any other organized market.
- Margin Accounts. Holding client securities in margin accounts, because failure to meet a margin call could result in the sale of such securities without your consent at a time when you are aware of material nonpublic information or otherwise not permitted to trade in such securities.
- Pledges. Pledging client securities as collateral in a transaction that the office of general counsel of clients have determined could potentially lead to a violation of this policy or applicable securities laws, because a default could result in the transfer and/or sale of such securities without your consent at a time when you are aware of material nonpublic information or otherwise are not permitted to trade in such securities.
- Hedging and Monetization Transactions. Certain hedging or monetization transactions involving client securities, such as zero-cost collars and forward sale contracts, because such transactions may provide ownership in client securities without the full risks and rewards of such ownership and, therefore, are not aligned with the interests of our shareholders.
Post-Termination Trading. This policy continues to apply to McGowan team members after termination of employment or other services to clients and affiliated companies. In other words, if the team member is aware of material nonpublic information when employment or a service relationship terminates, the team member may not trade until that information has become public or is no longer material.
No Exception for Hardship. Personal financial emergency or hardship does not excuse McGowan team members from compliance with this policy.
Blackout Procedures. To help prevent inadvertent violations of the securities laws and avoid even the appearance of illegal insider trading, McGowan team members are required to refrain from trading in client securities during periods specified by the client where material financial or other information has not yet been released to and fully absorbed by the public.
Definition of Material Nonpublic Information
“Material nonpublic information” is any information which has each of the following characteristics:
Material Nonpublic Information. Information is “material” if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. In other words, any information that could reasonably be expected to affect the price of the security is material. Both positive and negative information can be material. Common examples of material information are:
- projections of future earnings or losses and other earnings guidance;
- earnings that are inconsistent with the consensus expectations of the investment community;
- pending or proposed mergers, tender offers or significant acquisitions or dispositions;
- changes in management;
- significant events regarding securities such as stock splits or new offerings;
- severe financial liquidity problems;
- changes in dividend policies;
- significant actual or threatened litigation (or the resolution thereof); and
- significant new contracts, orders, suppliers, customers or finance sources (or the loss thereof).
Nonpublic Information. Information is “nonpublic” if it is not generally known or available to the public. A common misconception is that information loses its “nonpublic” status as soon as a press release disclosing the information is issued. However, information is considered to be generally known or available to the public only when (a) it has been released broadly to the marketplace and (b) the investing public has had time to fully absorb it. McGowan’s general rule is that information remains nonpublic for a period of 24 hours after it is disclosed to the public by press release or SEC filing by the client.