Foresters Equity Services, Inc. ( Foresters Equity ) Investment Advisor Policies and Procedures Manual

Transcription

1 Foresters Equity Services, Inc. ( Foresters Equity ) Investment Advisor Policies and Procedures Manual Effective May 1, 2013 Page 1 of 67

2 Table of Contents Chapter 1: Registration, Licensing and Supervisory Structure 1.0 Introduction Advisory Programs and Services Registration and Licensing Supervisory Structure Additional Duties of the CCO Regarding Compliance with Risk Management Procedures for Compliance with Registration and Licensing 11 Chapter 2 The Fiduciary Standard 2.1 Antifraud Provisions Fiduciary Duties Procedures for Compliance with Fiduciary Requirements 13 Chapter 3 Training and Supervision 3.1 IAR Training Compliance Questionnaire Supervision New Account Review Portfolio Management Political Contributions 17 Chapter 4 Code of Ethics and Insider Trading 4.1 General Basic Principles Chief Compliance Officer Security 19 Page 2 of 67

3 4.1.4 Covered Accounts Beneficial Ownership Personal Account Trading and Investment Policy Service as a Director Gifts Duties of Confidentiality General Ethical Conduct Misappropriation of Customer Funds Insider Trading Policy Statement on Insider Trading Who is an Insider? What is Material Information? What is Nonpublic Information? Types of Liability Penalties for Insider Trading Procedures for Compliance with Code of Ethics 26 Chapter 5 Anti-Money Laundering ( AML ) 5.1 Definition Due Diligence AML Compliance Officer IAR Awareness and Training Client Identification Program ID Verification Documentary Verification Non-Documentary Verification 32 Page 3 of 67

4 5.5.4 Reliance on a Third Party for Identity Verification Special Situation Clients Who Refuse to Provide Information Government List Comparison FinCEN Requests under PATRIOT Act Section Acceptable Types of Clients Individual Clients Corporations, Partnerships and Comparable Legal Entities Domestic Operating or Commercial Entities Domestic Trusts Non-Resident Alien Accounts Prohibited Clients Suspicious Transactions and Activity Suspicious Activity at Initial Investment Transactions Suspicious Activity Related to Transactions Procedures for Compliance with Anti-Money Laundering Policies 39 Chapter 6 - Business Continuity Plan 6.1 Content of Plan IAR Training Procedures for Compliance with Business Continuity Planning 41 Chapter 7 Regulatory Filings 7.1 Forms 13D, 13F and 13G SEC Registration Procedures for Compliance with Regulatory Filing Requirements 43 Page 4 of 67

5 Chapter 8 Gifts and Entertainment 8.1 Procedures for Gifts and Entertainment 44 Chapter 9 Trading 9.1 Aggregation of Orders Best Execution Trade Errors Agency Cross Transactions 46 Chapter 10 Protection of Non-Public Customer Data 10.1 The Privacy Policy Affiliate Clear and Conspicuous Consumer Continuing Relationship Customer Customer Relationship Nonpublic Personal Information Personally Identifiable Financial Information Publicly Available Information Consumers and Customers Notification Requirement Initial Notice Annual Notice Content of Notice Privacy Policies 50 Page 5 of 67

6 Customer Information California Residents Procedures for Compliance with Privacy Regulations 51 Chapter 11 Communications with the Public 11.1 Advertisements Investment Counsel RIA Testimonials Past Recommendations Performance Data Performance Reporting Prohibited Advertisements Correspondence Electronic Communications Retention Social Media Procedures for Compliance with Public Communications Requirements 57 Chapter 12 Regulatory and Internal Inspections 12.1 Scope of the Regulatory Inspection Regulatory Exam Topics 12.3 Annual Internal Review Chapter 13 Books and Records 13.1 Required Records Advertising File Annual Notice of Material Changes to Form ADV Part 2 Firm Brochure 61 Page 6 of 67

7 Associated Persons Personal Transactions Records Financial Records Order Tickets Organizational Documents Performance Advertising Supporting Documentation Policies and Procedures Solicitor Disclosure Document Transition Records Written Agreements Written Communications Custodial Advisors Records Additional Records Complaint File Disaster Recovery Client Lists Organizational Chart Privacy Policy Regulatory Inspections Trade Errors Proxy Voting Records Books and Records Retention Electronic Maintenance of Records Procedures for Compliance with Record-Keeping Policies 66 Appendix A Senior Management Approval 67 Page 7 of 67

8 Chapter 1 Registration, Licensing and Supervisory Structure 1.0 Introduction Foresters Equity Services, Inc. ( Foresters Equity ) is an SEC Registered Investment Advisor. The Foresters Equity main office is located in San Diego, California. Foresters Equity is also a broker-dealer registered with the Financial Industry Regulatory Authority ( FINRA ). As an investment advisor, Foresters Equity is a fiduciary to its advisory clients, and has a duty of undivided loyalty to always act in utmost good faith, place its clients interests first and foremost, and to make full and fair disclosure of all material facts including information as to any conflicts of interest. This Investment Advisor Policies and Procedures Manual ( Manual ) reflects the policies and procedures that have been adopted by Foresters Equity to fulfill its obligations when providing investment advisory services. The Manual will be updated on a periodic basis to be current with Foresters Equity s business practices and regulatory requirements. All officers, employees and investment advisory representatives ( IARs ) of Foresters Equity are expected to follow the policies and procedures outlined in the Manual, and as amended from time to time. A copy of the Manual is provided to each officer, employee and IAR, and a current copy of the Manual is posted to the Foresters Equity internet website for easy reference at In addition, all IARs that are also securities registered through Foresters Equity are also expected to follow the policies and procedures outlined in the firm s brokerdealer manual entitled Written Supervisory Policies and Procedures. 1.1 Advisory Programs and Services Foresters Equity offers three types of advisory services to clients as described below. Third Party Money Management. Foresters Equity refers clients to third party investment advisory firms for management services. IARs of Foresters Equity will assist the client in determining his/her investment objective for the account, and recommend an appropriate portfolio or management style offered by the third party advisor. The third party advisor will buy and sell mutual funds, exchange traded funds ( ETFs ), or variable annuity subaccounts in the client s account on a discretionary basis. Neither Foresters Equity nor the IAR have any discretionary authority over the accounts managed by the third party advisor. For a list of approved third party management firms, IARs should refer to the firm s website at Advantage. Foresters Equity also offers the Advantage program sponsored by Southwest Securities, Inc. ( Southwest ), an investment advisor, through which Page 8 of 67

9 Foresters Equity will provide non-discretionary investment advice that is tailored to the needs of the client. The IAR will assist the client in determining his/her risk tolerance and investment objective for the account through completion of a client profile. The IAR will also assist the client in selecting an asset allocation model for the account. Based upon the goals of the client and the asset allocation model selected, the IAR will recommend investments for the client. These investments may include no-load or load-waived mutual funds, ETFs, and cash or cash equivalents. The client will be responsible for selection of the investments in the account. Southwest will then periodically rebalance the assets on an as needed basis in order to maintain the client s target asset allocation among the investments. Financial Planning Services. Foresters Equity offers financial planning services consistent with the client s financial and tax status, risk profile and investment objective. 1.2 Registration and Licensing Foresters Equity is a federally registered investment advisor. To affect its registration, Foresters Equity has registered with the SEC through the Investment Advisors Registration Depository ( IARD ). Through the IARD, Foresters Equity has submitted Form ADV Part 1 and paid all relevant fees. Foresters Equity has also created a Form ADV Part 2 Firm Brochure and keeps up with the requirements to update this document annually and whenever it becomes materially inaccurate. The IARs affiliated with Foresters Equity must also maintain the proper licenses and registration before soliciting clients. Although the approach to licensing individual IARs (including those in supervisory roles) differs from state to state, Foresters Equity as a firm requires its IARs to maintain an active 65 or 66 license or a stateapproved designation, including the Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC) designations, or other proficiency exam. Compliance with these requirements may generally be reported through disclosures on the IARD system during the application process. Each IAR must be registered as an IAR within each state in which the IAR has a place of business as defined by the SEC, unless otherwise required by the state(s) by notifying the Foresters Equity Registration Department and paying the appropriate fees. Foresters Equity is required to maintain current registration data through the IARD system. Under federal regulations, Foresters Equity is required to file an annual updating amendment through IARD within 90 days following the end of its fiscal year. This process is handled by the Registration Department. Foresters Equity is required to keep the information in its Form ADV (Parts 1 and Part 2) current. All amendments to Form ADV Parts 1 and 2 are processed through the IARD system. The IARs of Foresters Equity are also required to maintain an up-to-date Brochure Supplement, created by the back office of Foresters Equity. The information contained in the Brochure Supplement provides details regarding the IAR s Page 9 of 67

10 educational history, business background, current business activities as well as disclosure regarding any sanctions for violating securities law or entering into bankruptcy. The Form ADV Part 2 Firm Brochure along with the IAR s Brochure Supplement form a written disclosure statement that provides information about business practices, fees, and conflicts of interest Foresters Equity and its IARs may have with its clients. Foresters Equity must maintain its Form ADV Part 2 and Brochure Supplements in paper format, upload a PDF copy in electronic format through IARD, and ensure that it s IARS provide a copy to all of its clients upon entering into an investment advisory relationship. Foresters Equity requires its IARs deliver the Form ADV Part 2 Firm Brochure and relevant Brochure Supplement to the client (1) at least 48 hours prior to entering into the advisory relationship, or (2) at the time of entering into a contract with Foresters Equity, provided the client can terminate the contract without penalty within 5 business days after entering the contract. It is the obligation of the IAR to provide these documents to the client. Clients acknowledge receipt of these documents in the Disclosure and Acknowledgement of Receipt of Documents when entering into an advisory relationship with a third party money manager or for the Mutual Fund Advantage program. For clients receiving financial planning services, the acknowledgement of receipt is included within the Financial Planning and Consultation Agreement. At least once annually Foresters Equity must advise each of its clients of the material changes that were made to the ADV Part 2 Firm Brochure throughout the year, and that a current Form ADV Part 2 Firm Brochure is available if desired by the client. The firm shall maintain a record of the clients to whom the material changes and updated form is offered, the date and form of the offer (by representative sample copy), and of those accepting the offer. For those clients requesting a copy of the offered Form ADV Part 2 Firm Brochure, Foresters Equity shall also maintain evidence that such copy was provided. 1.3 Supervisory Structure Foresters Equity has established a supervisory structure that includes the designation of personnel in key positions and a description of those positions. In a separate file maintained by Foresters Equity, it has identified and maintains current a list of key personnel and their duties and supervisory obligations, as applicable. Foresters Equity has designated one employed individual to act as its Chief Compliance Officer ( CCO ), whose duty it shall be to administer Foresters Equity compliance policies and procedures. The CCO has full responsibility and authority to develop and enforce all appropriate compliance related policies and procedures for Foresters Equity. Foresters Equity identifies its CCO in its organizational chart and through the IARD system as required. Page 10 of 67

11 Foresters Equity's senior management includes but is not limited to principals such as the President/CEO, the CCO, Vice President Finance and Administration and others properly licensed and designated. These individuals are responsible for Foresters Equity's compliance, control and supervisory system, including its implementation, maintenance and ongoing review as more fully described below. Foresters Equity's principal officers may directly supervise other officers, employees, branch managers, registered representatives and IARs. Foresters Equity s principal officers are responsible for the duties performed by all personnel. Foresters Equity's President/CEO and CCO are responsible for development and enforcement of Foresters Equity's compliance program. 1.4 Additional Duties of the CCO Regarding Compliance with Risk Management In addition, the CCO is charged with responsibility for assessment of the primary areas of Foresters Equity's risk exposure. This assessment will include asking questions about such topics as the firm's affiliations, business lines, business continuity, firm viability and personnel, strategic direction, corporate governance, privacy, trading and portfolio management, custody, proxy voting, unethical behavior and insider trading, anti-money laundering, record-keeping, and disclosures, among others. Following an assessment of the risk areas, the CCO will: Examine the policies, procedures, day-to-day business processes and/or systems surrounding the risks Determine the level of risk to the firm and its clients Propose reasonable compliance solutions to eliminate or decrease the risk, if necessary 1.5 Procedures for Compliance with Registration and Licensing Foresters Equity has designated an individual who is responsible for the ongoing maintenance of accurate and current registration data, both for the firm and for the individual IARs. A list of the individual(s) so designated is maintained separately among the central advisory files of the firm, including the date the individual(s) accepted and were granted such authority. This review shall include, but is not limited to, a review of the IARD Form ADV Part 1 filed with the states and Part 2, review of the underlying criteria and supporting information for the Form, licensing of its IARs, and related supporting documentation and information. Records of these activities shall be retained among Foresters Equity s central records. Foresters Equity requires that each individual providing investment advice is required to maintain all applicable licenses, and has in place controls including the designation of a qualified supervisor to implement its policies. An associated person must be registered as an IAR in those states that require IAR registration before the IAR can open or solicit a managed money account. Page 11 of 67

12 To ensure that its supervisory structure is adequately formed and adhered to, Foresters Equity maintains an updated record of its supervisory chain of command among its central files and records. The record is periodically distributed to individuals named as supervisors, to ensure that they will remain at all times informed of the supervisory requirements attributed to them. The CCO is responsible for implementation and ongoing oversight of these procedures, including the oversight of individuals to whom certain procedures may be delegated. No less frequently than annually, the CCO will oversee the renewal of Foresters Equity's registration. No less frequently than annually (within 90 days of the fiscal year end of Foresters Equity), the CCO will oversee the filing of an annual amendment, and reviewing the related forms and records as necessary. Page 12 of 67

13 Chapter 2 The Fiduciary Standard As an investment advisor, Foresters Equity is a fiduciary to its advisory clients and has a duty of undivided loyalty to always act in utmost good faith, place its clients interests first and foremost, and to make full and fair disclosure of all material facts including information as to any conflicts of interest. 2.1 Antifraud Provisions Whereas registered representatives have transaction-based responsibilities to their customers, IARs have relationship- type responsibilities to their clients. This standard becomes important across Foresters Equity s activities imposing fiduciary standards on each client relationship and even beyond the nature of each individual transaction. The CCO, other principals and IARs are all extensions of Foresters Equity. As such, all these individuals must act in the best interests of Foresters Equity and its clients. Failure to do so can personally subject the individuals associated with Foresters Equity to enforcement action(s). 2.2 Fiduciary Duties In general, the fiduciary duty owed by Foresters Equity to its clients will guide IARs, officers and directors in avoiding conflicts of interest where possible, providing full and fair disclosure of services and fees, seeking best execution, and a number of other areas. Foresters Equity and its IARs are prohibited to carry out any of the following: 1. Employ any device, scheme, or artifice to defraud a client or prospective client 2. Engage in any transaction, practice, or course of business which defrauds or deceives a client or prospective client 3. Knowingly sell any security to or purchase any security from a client when acting as principal for his or her own account, or knowingly to effect a purchase or sale of a security for a client's account when also acting as broker for the person on the other side of the transaction, without disclosing to the client in writing before the completion of the transaction the capacity in which Foresters Equity is acting and obtaining the client's consent to the transaction 4. Engage in fraudulent, deceptive or manipulative practices 2.3 Procedures for Compliance with Fiduciary Requirements The CCO or designee is the individual charged with monitoring Foresters Equity s performance of services in the context of its fiduciary duties. The CCO or designee shall take steps designed to ensure that IARs perform their job duties and responsibilities within the context of its fiduciary responsibility. Among these, each IAR will be required to complete an annual attestation of compliance. Page 13 of 67

14 Record of the completion shall be maintained among Foresters Equity s central compliance files. Page 14 of 67

15 Chapter 3 Training and Supervision 3.1 IAR Training Foresters Equity intends to offer training to its IARs on at least an annual basis through online training resources. All IARs will be required to take the mandatory training each year, and failure to complete the training will be grounds for disciplinary action up to and including termination from Foresters Equity. It is anticipated that the training topics to be covered will include, but not necessarily be limited to, the following: Fiduciary Duty of Investment Advisors Importance of Adhering to Policies and Procedures Manual Outside Business Activities Anti-Money Laundering Protection of Non-Public Customer Data Code of Ethics, Insider Trading and Personal Securities Transactions Political Contributions The Compliance Department will be responsible for producing the training materials or locating a third party resource that is appropriate for IARs. 3.2 Compliance Questionnaire On an annual basis, the Compliance Department will send a questionnaire to each IAR asking for certain information and responses regarding the IARs understanding of the policies and procedures of Foresters Equity. In some cases, the IAR may be required to make certain representations or attestations regarding his/her compliance with specific policies and procedures. It is the responsibility of each IAR to complete and return the questionnaire to Foresters Equity in a timely fashion. The Compliance Department will use this questionnaire to monitor the activities of its IARs and to tailor its future training programs for IARs. 3.3 Supervision Foresters Equity and its IARs have an obligation to ensure that an advisory relationship being established is appropriate for the client. At the time of establishing an advisory relationship with a client, the IAR collects certain information from the client that may include the following: annual income, net worth and other financial information, investment experience, financial goals, and account restrictions. This data collection process assists the IAR in helping the client determine an investment objective for the account or services. It also assists the IAR and Foresters Equity in determining the appropriateness of the account or services for the client. The advisory services offered through Foresters Equity are designed for clients who wish to invest assets in accordance with long term Page 15 of 67

16 investment objectives. The IAR should not recommend advisory services for the client if the services are not suitable for the client or if the client does not intend to take a long term view toward investing New Account Review IARs must submit the following original paperwork to the Foresters Equity home office in order to open an advisory account relationship: New Account Application Disclosure and Acknowledgement of Receipt of Documents The third party advisor s required documents (e.g., Solicitation Agreement, Program Selection, etc) Any additional account documents (i.e., Trustee Certification, Power or Attorney, etc.) A principal at the home office will review the submitted paperwork, sign the documents as evidence of approval and ensure that the originals are forwarded to the third party money manager. For financial planning accounts, IARs must submit the following documents to the Foresters Equity home office: New Account Application Financial Planning and Consultation Agreement Copy of financial plan delivered to client Invoice Any additional account documents (e.g., Trustee Certification, Power of Attorney, etc.) Copies of the above items must also be maintained in the appropriate client file in the IAR s office. The IAR must also maintain any additional documentation related to clients including the reviewed copies of the client quarterly reports, and completed corresponding third party risk tolerance questionnaire Portfolio Management As an investment advisor, Foresters Equity is responsible for ensuring that clients receive ongoing management that is consistent with the client s stated investment objectives. In that regard, IARs are encouraged to periodically review client accounts being managed by third party money management firms or within the Mutual Fund Advantage program to ensure that the management, asset allocation and/or security selections, as applicable, continue to meet the needs of the client. IARs are further encouraged to update the client profile as appropriate and send the original updated client profile to the home office for review, approval and forwarding to the third party money manager. In addition, a copy must be maintained in the IAR s office in the client file. Page 16 of 67

17 Reviews of client accounts are also conducted by Vice Presidents and the CCO, or their designees, on a quarterly basis. Approximately 30 accounts are reviewed on a random basis through this process Political Contributions SEC Rule 206(4)-5 (the Rule ) under the Investment Adviser Act of 1940 (the Advisers Act ) prohibits investment advisors from receiving compensation for providing advice to a government entity within 2 years after a contribution to an official of the government entity has been made by the investment advisor or by any of its covered associates advisory business. A de minimus provision permits associated persons to make contributions of up to $350 per election per candidate if the contributor is entitled to vote for the candidate and up to $150 per election per candidate if the contributor is not entitled to vote for the candidate. Foresters Equity prohibits all covered associates from making a contribution to an official, as defined above, in excess of the de minimus exemption. All covered associates must report all contributions to the compliance department at or prior to the time of the contribution on the Investment Advisor Representative Political Contribution Disclosure form. The time of the contribution is defined as no less than 24 hours prior to the contribution being paid to an official. It is the policy of Foresters Equity to separately identify all government entity accounts on its books and records. Each covered associate is required to notify compliance at the time of the account opening for this account type, if applicable. As part of Foresters Equity books and records, the firm maintains a log of all political contributions by its investment adviser representatives evidencing whether the contribution was approved or not approved Regarding cash solicitors, it is the policy of Foresters Equity to not accept referrals for government entity clients or any other form of direct or indirect solicitation. Covered associate is defined as any executive officer or other individual with a similar status or function, any employee who solicits a government entity for the investment adviser and any person who supervises directly or indirectly such employee, and any political action committed controlled by any covered associate. Violation of this policy as denoted above is subject to disciplinary action by Foresters Equity. Page 17 of 67

18 4.1 General Chapter 4 Code of Ethics and Insider Trading Foresters Equity maintains and enforces a written code of ethics, a copy of which is maintained under separate cover and available on the firm s website, In an effort to ensure that Foresters Equity Services, Inc. ( Foresters Equity ) maintains a reputation for integrity and high ethical standards, it is important that Foresters Equity and its supervised persons comply with federal securities laws and also maintain high standards of personal and professional conduct. The Code of Ethics (the Code ) is designed to help ensure that Foresters Equity conducts its business consistent with these high standards. Covered Individuals All Foresters Equity investment advisor representatives ( IARs ) and employees are covered by the Code and are required to acknowledge receipt of a copy of the Code in writing, as well as any amendments that may be provided in the future. It is the responsibility of all IARs to read, understand and comply with the requirements of the Code. Failure to comply with the Code may result in disciplinary action, including termination of employment Basic Principles This Code is based on a few basic principles that should pervade all investment related activities of all associated personnel: (1) the interests of Foresters Equity's clients come before its or any IAR s interests; (2) each IAR s professional activities and personal investment activities must be consistent with this Code and avoid any actual or potential conflict between the interests of clients and those of Foresters Equity or the IAR; and (3) those activities must be conducted in a way that avoids any abuse of an IAR s position of trust with and responsibility to Foresters Equity and its clients, including taking inappropriate advantage of that position. The IAR shall in all respects comply with applicable federal and state securities laws, and other laws, rules and regulations, any applicable laws of foreign jurisdictions, and the firm policies and procedures as may be amended from time to time, including without limitation those prohibiting insider trading and front running of client accounts. Fiduciary Duty. As a fiduciary, Foresters Equity has an affirmative duty of care, loyalty, honesty, and good faith to act in the best interests of its clients. This Page 18 of 67

19 includes the obligation to place the interests of clients ahead of its own. Foresters Equity requires that IARs place client transactions ahead of any transactions for the account of an IAR. Foresters Equity requires all IARs to conduct business in an ethical fashion. Conflicts of Interest. IARs should try to avoid any situation that has even the appearance of conflict or impropriety, and should fully disclose to the client all material facts concerning any conflict of interest that does arise. Standards of Conduct. All IARs must comply with all federal securities laws. IARs are not permitted, in connection with the purchase or sale, directly or indirectly, of a security held or to be acquired by a client: To defraud such client in any manner To mislead a client, including by making a statement that omits material facts To engage in any act, practice or course of conduct, which operates or would operate as a fraud or deceit on a client To engage in any manipulative practice with respect to such client To engage in any manipulative practice with respect to securities, including price manipulation Chief Compliance Officer Many of the specific procedures, standards, and restrictions described in this Code involve consultation with the CCO Security For purposes of this Code, the term "security" includes not only stocks, but also options, rights, warrants, futures contracts, convertible securities, mutual funds or other securities that are related to securities in which Foresters Equity's clients may invest or as to which Foresters Equity may make recommendations (sometimes also referred to as "related securities") Covered Accounts Many of the procedures, standards and restrictions in this Code govern activities in "Covered Accounts." Covered Accounts consist of: 1. Securities accounts of which Foresters Equity is a beneficial owner, provided that (except where the CCO otherwise specifies) investment partnerships or other funds of which Foresters Equity or any affiliated entity is the general partner, investment advisor or investment manager or from which Foresters Equity or such affiliated entity receives fees based on capital gains are generally not considered Covered Accounts, despite the fact that Foresters Page 19 of 67

20 Equity or associated person may be considered to have an indirect beneficial ownership interest in them. 2. Each securities account registered in an IAR s name and each account or transaction in which an IAR has any direct or indirect "beneficial ownership interest" (other than accounts of investment limited partnerships or other investment funds not specifically identified by the CCO as "Covered Accounts") Beneficial Ownership The concept of "beneficial ownership" of securities is broad. It includes not only securities a person owns directly, and not only securities owned by others specifically for his or her benefit, but also (i) securities held by his or her spouse, minor children and relatives who live full time in his or her home, and (ii) securities held by another person if by reason of any contract, understanding, relationship, agreement or other arrangement the IAR obtains benefits substantially equivalent to ownership. Note: This broad definition of "beneficial ownership" does not necessarily apply for purposes of other securities laws or for purposes of estate or income tax reporting or liability. An IAR may declare that the reporting or recording of any securities transaction should not be construed as an admission that he or she has any direct or indirect beneficial ownership in the security for other purposes Personal Account Trading and Investment Policy It is Foresters Equity's policy to impose specific requirements related to each covered person's personal trading and investment activity. Foresters Equity's policy is to consider the effects of various types of trading, including short term trading and trading in new issues as a potential conflict of interest. Similarly, Foresters Equity may impose specific requirements related to investments in private placements. Approval may be refused for any proposed trade by an IAR when the trade: Involves a security that is being or has been purchased or sold by Foresters Equity on behalf of any client account or is being considered for purchase or sale Is otherwise prohibited under any internal policies of Foresters Equity (such as Foresters Equity's Policy and Procedures to Detect and Prevent Insider Trading) Breaches the IAR s fiduciary duty to any client Is otherwise inconsistent with applicable law, including the Adviser s Act and the Employee Retirement Income Security Act of 1974, as amended Creates an appearance of impropriety The Procedures section shall address Foresters Equity's specific procedures for these types of investments and trading. Page 20 of 67

21 4.1.7 Service as a Director No IAR may serve as a director of a publicly-held company without prior approval by the CCO (or a senior principal, if the CCO is the proposed board member) based upon a determination that service as a director would not be adverse to the interests of any client. In the limited instances in which such service is authorized, IARs serving as directors will be isolated from other IARs who are involved in making decisions as to the securities of that company through procedures determined by the CCO to be appropriate in the circumstances. These practices may also constitute illegal "insider trading." Some of the specific trading rules described below are also intended, in part, to prevent front running and scalping. If an account is managed by an investment advisor, other than Foresters Equity, to which full investment discretion has been granted, these rules will not apply for so long as the IAR(s) who has (have) a beneficial ownership interest in the account do not have or exercise any discretion. Such accounts will remain subject to the reporting requirements set forth in the next section of this Code Gifts and Entertainment An IAR may not accept inappropriate gifts, favors, entertainment, or other things of value that could influence decision-making or make the IAR feel beholden to the person or firm. Similarly, IARs may not offer gifts, favors, entertainment or other things of value that could be viewed as overly generous or aimed at influencing decision-making or making a client feel beholden to Foresters Equity or the IAR. It is Foresters Equity s policy that the receipt or giving of any gift of more than nominal value ($100 per year) from or to any person or entity that does business with or on behalf of any client is prohibited, except as otherwise authorized in writing by the CCO Duties of Confidentiality Information concerning the security holdings and financial circumstances of clients, among other items, is confidential. All information about clients must be kept in strict confidence. IARs are prohibited from disclosing any information about any client, the investment made by Foresters Equity on behalf of any client, information regarding Foresters Equity s trading strategies, except as required to provide services to client or for other legitimate business purposes. All information relating to clients' portfolios and activities and to proposed recommendations is strictly confidential. Consideration of a particular purchase or sale for a client account may not be disclosed, except to authorized persons General Ethical Conduct: The following are potentially compromising situations that must be avoided: Causing Foresters Equity, acting as principal for its own account or for any account in which Foresters Equity or any person associated with Foresters Equity (within the meaning of the Investment Advisers Act) to sell any security Page 21 of 67

22 to or purchase any security from a client in violation of any applicable law, rule or regulation of a governmental agency Communicating any information regarding Foresters Equity, Foresters Equity's investment products or any client to prospective clients, journalists, or regulatory authorities that is not accurate, true or omitting to state a material fact necessary in order to make the statements Foresters Equity has made to such person materially complete Engaging in any act, practice, or course of business that is fraudulent, deceptive, or manipulative, particularly with respect to a client or prospective client Engaging in any conduct that is not in the best interest of Foresters Equity or might appear to be improper Engaging in any financial transaction with any of Foresters Equity's vendors, clients or IARs, including but not limited to: providing any rebate, directly or indirectly, to any person or entity that has received compensation from Foresters Equity; accepting, directly or indirectly, from any person or entity, other than Foresters Equity, compensation of any nature such as a bonus, commission, fee, gratuity or other consideration in connection with any transaction on behalf of Foresters Equity; beneficially owning any security of, or have, directly or indirectly, any financial interest in, any other organization engaged in securities, financial or related business, except for beneficial ownership of not more than one percent (1%) of the outstanding securities of any business that is publicly owned Engaging in any form of harassment Improperly using or authorizing the use of any inventions, programs, technology or knowledge that are the proprietary information of Foresters Equity Investing or holding outside interest or directorship in clients, vendors, customers or competing companies, including financial speculations, where such investment or directorship might influence in any manner a decision or course of action of Foresters Equity. In the limited instances in which service as a director is authorized by Foresters Equity, IARs serving as directors will be isolated from other IARs who are involved in making decisions as to the securities of that company through procedures determined by Foresters Equity to be appropriate according to the circumstances Making any unlawful agreement with vendors, existing or potential investment targets or other organizations Making any untrue statement of a material fact or omitting to state to any person a material fact necessary in order to make the statements Foresters Equity has made to such person materially complete Participation in civic or professional organizations that might involve divulging confidential information of the company Unlawfully discussing trading practices, pricing, clients, research, strategies, processes or markets with competing companies or their associated persons Using any device, scheme or artifice to defraud, or engaging in any act, practice, or course of business Page 22 of 67

23 Conduct that operates or would operate as a fraud or deceit upon, any client or prospective client or any party to any securities transaction in which Foresters Equity or any of its clients is a participant Misappropriation of Customer Funds Misappropriation, stealing, or conversion of customer funds is prohibited and constitutes serious fraudulent and criminal acts. Examples of such acts include (1) unauthorized wire or other transfers in and out of customer accounts; (2) borrowing customer funds; (3) converting customer checks that are intended to be added or debited to existing accounts; and (4) taking liquidation values of securities belonging to customers. 4.2 Insider Trading Foresters Equity has adopted the following policies and procedures to detect and prevent the misuse of material, nonpublic information by IARs of Foresters Equity Policy Statement on Insider Trading The term "insider trading" is not defined in the federal securities laws, but generally is used to refer to the use of material nonpublic information to trade in securities (whether or not one is an "insider") or to communications of material nonpublic information to others. While the law concerning insider trading is not static, it is generally understood that the law prohibits the following: Trading by an insider while in possession of material nonpublic information Trading by a non-insider, while in possession of material nonpublic information, where the information either was disclosed to the non-insider in violation of an insider's duty to keep it confidential or was misappropriated Communicating material nonpublic information to others in violation of one's duty to keep such information confidential Foresters Equity prohibits any officer, director or IAR from trading a security, either personally or on behalf of others, while in possession of material, nonpublic information about the security or communicating material nonpublic information to others in violation of the law. Additionally, IARs are prohibited from communicating, sharing, or tipping such material, non-public information to others. Material information includes any information that a reasonable investor would consider in making an investment decision. Non-public information is information that has not been disseminated in a manner that would make it generally available to investors. This conduct is frequently referred to as "insider trading." Foresters Equity's policy applies to every officer, director and IAR and extends to activities within and outside their duties at Foresters Equity. Each officer, director and IAR must read this policy statement and acknowledge his or her understanding of it. An IAR that believes Page 23 of 67

24 he/she or a client may be in possession of material, non-public information, should immediately contact Foresters Equity CCO. Any questions regarding Foresters Equity's policy and procedures should be referred to the CCO Who Is An Insider? The concept of an "insider" is broad. It includes officers, directors and IARs of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of Foresters Equity s affairs and as a result is given access to information solely for the firm's purposes. A temporary insider can include certain "outsiders" such as, among others, Foresters Equity s attorneys, accountants, consultants, bank lending officers, and the associated persons of such organizations. According to the United States Supreme Court, before such an "outsider" may be considered a "temporary insider", the firm's relationship with the outsider must be such that the firm reasonably expects him or her to keep the disclosed nonpublic information confidential What Is Material Information? While covered persons are prohibited from trading on inside information, trading on inside information is not a basis for liability unless the information is "material." Information generally is material if there is a substantial likelihood that a reasonable client would consider it important in making his or her investment decisions, or if public dissemination of the information is reasonably certain to have a substantial effect on the price of a company's securities. Information that should be presumed to be material includes, but is not limited to: dividend changes; earnings estimates; changes in previously released earnings estimates; significant merger or acquisition proposals or agreements; commencement of or developments in major litigation; liquidation problems; and extraordinary management developments. Questions one might ask in determining whether information is material include: Is this information that a client would consider important in making his or her investment decisions? Is this information that would substantially affect the market price of the securities if generally disclosed? Is the information nonpublic? To whom has this information been provided? Has the information been effectively communicated to the marketplace by being published in a recognized national distribution agency or publication such as Reuters, The Wall Street Journal or other such widely circulated publications? Caution must be exercised, however, because material information does not necessarily have to relate to a company's business. The Supreme Court of the United States has broadly interpreted materiality in some cases, and has asserted criminal liability associated with inappropriate disclosures. Page 24 of 67

25 4.2.4 What Is Nonpublic Information? Information is nonpublic until it has been effectively communicated to the market place. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or other publications of general circulation would be considered public Types of Liability Actions by the US courts, including the Supreme Court, have resulted in findings that assert liability to fiduciaries in the context of trading on material nonpublic information. In some cases it has been found that a non-insider can enter into a confidential relationship with the company through which they gain information or they can acquire a fiduciary duty to the company's shareholders as "tippees" if they are aware or should have been aware that they have been given confidential information by an insider who has violated his fiduciary duty to the company's shareholders. This is a circumstance into which an associate of Foresters Equity may fall. In the "tippee" situation, a breach of duty occurs only if the insider personally benefits, directly or indirectly, from the disclosure. It is important to note that the benefit does not have to be monetary; it can be a gift, and can even be a 'reputational' benefit that will translate into future earnings. Another basis for insider trading liability is the "misappropriation" theory, where trading occurs on material nonpublic information that was stolen or misappropriated from any other person. This theory can be used to apply liability to individuals not previously thought to be encompassed under the fiduciary duty theory. 4.3 Penalties for Insider Trading Penalties for trading on or communicating material nonpublic information are severe, both for individuals involved in the trading (or tipping) and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include: Civil injunctions Damages in a civil suit as much as three times the amount of actual damages suffered by other buyers or sellers Disgorgement of profits Jail sentences Fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited, and Fines for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided Prohibition from employment in the securities industry Page 25 of 67

26 In addition, any violation of this policy statement by an IAR can be expected to result in serious disciplinary measures by Foresters Equity, including dismissal of the IAR involved. 4.4 Procedures for Compliance with Code of Ethics The CCO has determined that all associated persons are covered by Foresters Equity's Code of Ethics. In the following procedures all such persons shall be referred to as "covered persons." The CCO or designee will maintain in an accessible place the following materials: Copy of this Code of Ethics Record of any violation of these procedures for the most recent five years and a detailed synopsis of the actions taken in response Copy of each transaction report submitted by each officer, director and associated person of Foresters Equity for the most recent five years List of all persons who are or have been required to file transaction reports. In an effort to prevent insider trading, through his/her own efforts or as delegated to qualified covered persons under his/her supervision, the CCO will do the following: Answer questions and document responses regarding Foresters Equity's policy and procedures Provide no less than annually an educational program to familiarize covered persons with Foresters Equity s policy and procedures Require each IAR to acknowledge his or her receipt and compliance with this policy and procedures regarding insider trading on an annual basis, and retain acknowledgements among Foresters Equity s central compliance records Resolve issues of whether information received by an associated person of Foresters Equity is material and nonpublic and document findings Review on a regular basis and update as necessary Foresters Equity's policy and procedures and document any resulting amendments or revisions When it is determined that an IAR of Foresters Equity has material nonpublic information, implement measures to prevent dissemination of such information and if necessary, restrict covered persons from trading in the securities In an effort to detect insider trading, through his/her own efforts or as delegated to qualified covered persons under his/her supervision, the CCO or designee will perform the following actions: Review the trading activity reports filed by each officer, director, and IAR of Foresters Equity, documenting findings by initialing and dating the forms or reports reviewed Review the duplicate confirmations and statements and related documentation of personal and related accounts maintained by officers, directors and covered persons versus the activity in the fund(s) advised by Foresters Equity Page 26 of 67