COMPLIANCE SUPERVISORY GUIDELINES MANUAL

Transcription

1 COMPLIANCE SUPERVISORY GUIDELINES MANUAL April 2008 INTRODUCTION... Section I REGISTRATION AND LICENSING Registration Definition of Investment Adviser Investment Adviser Registration Depository Form ADV Review and Updating of Form ADV Filing Fees Withdrawal from Registration Regulatory Reporting State Licensing and Notice Filing Investment Adviser Representative Registration Registration Amendments Section II COMPLIANCE RISK ASSESSMENT Corporate Standards Monitoring and Reporting Testing Chief Compliance Officer Oversight Compliance Review Section III BOOKS AND RECORDS... Responsibility Five-Year Requirements The Use of Electronic Media to Maintain and Preserve Records Corporate Records Storage of Books and Records Using Electronic Media Retention Disaster Recovery Planning Section IV

2 CUSTODY... Responsibility Deduction of Advisory Fees from Client Accounts Inadvertent Receipt of Funds or Securities Receipt of Third Party Funds Notice of Qualified Custodian Account Statements Definition of Qualified Custodian Use of an Independent Representative Definition of an Independent Representative Section V CLIENT ACCOUNTS AND DOCUMENTS Client Contracts Financial Planning, Portfolio Management & Fees Pension Consulting Selection of Other Advisors Confidentiality Reports & Disclosures Paperwork Requirements Sections VI ADVERTISING Regulation Prohibited References Definition of Advertising Review and Approval Testimonials Past Recommendations Use of Graphs, Charts and Formulas Performance Advertising Use of Hedge Clauses Interviews with the Media Section VII DISCLOSURE REQUIREMENTS... Section VIII Responsibility Brochure Rule Disciplinary Disclosure Financial Disclosure Wrap Fee Program Disclosures ii

3 Compensation Privacy Notice Disclosures Electronic Delivery of Disclosure Information ELECTRONIC COMMUNICATIONS Section IX Supervisory Responsibility Policies Review Advertising and Sales Literature Disclosure Information Standards for Internet and Communications Maintenance Licensing TRADE ERROR PROCEDURES.... Definition of Trade Error Policy Trade Error Notification Procedures Section X CODE OF ETHICS Introduction General Principles Definitions Guidelines for Professional Standards Personal Trading Policies Insider Trading Sanctions Certification Section XI FEDERAL FILINGS.... Section 13d Section 13g Section 13f Section 16 Rule 144A Forms 3, 4, 5 Section XII PORTFOLIO MANAGEMENT Portfolio Management and Trading Process Section XIII iii

4 Research Process Valuation of Securities Account Statements Sub-Advisers Block Trading Restrictions on Principal and Agency Cross Transactions Principal Transactions Agency Cross Transactions for an Advisory Client Cross Trades Soft Dollar Practices Best Execution Safe Harbor for Investment Advisory Programs ERISA CONSIDERATIONS... Responsibility Definition of ERISA Plan Fiduciary Obligations under ERISA Prudent Man Standard Appropriate Consideration Investment Policy Statement Directed Brokerage (Soft Dollars) Use of Affiliated Brokers Use of an Affiliated Mutual Fund Responding to Tender Offers ERISA Bonding Requirements Dual Fees Self Dealing Prohibited Transactions Section XIV COMPLAINTS Supervisory Responsibility Definition Handling of Customer Complaints Section XV CORRESPONDENCE Scope Responsibility General Guidelines for Outgoing Correspondence General Guidelines for Incoming Correspondence Section XVI iv

5 Approval Records Personal Mail Electronic Mail Protective Legend PRIVACY POLICY/REGULATION S-P... Scope Overview Employee Responsibility Types of Permitted Disclosures Sharing as Permitted by Law Safeguarding of Client Records and Information Security Standards Privacy Notice Privacy Notice Delivery Revised to Privacy Notice Section XVII CASH PAYMENT FOR CLIENT SOLICITATION... The Written Solicitation Agreement Solicitor s Written Disclosure Document Instructions to Solicitor Section XVIII ANTI-MONEY LAUNDERING... Definition Responsibility Section XIX PROXY VOTING/CLASS ACTION LAWSUITS.. Fiduciary Duty Proxy Voting Policy Class Action Lawsuits Section XX APPENDIX A - ACKNOWLEDGEMENT OF RECEIPT AND ACCEPTANCE APPENDIX B - ANNUAL ADV OFFER LETTER APPENDIX C BUSINESS CONTINUITY PLAN (BCP) APPENDIX D - PRIVACY POLICY v

6 I. INTRODUCTION A. Purpose. Bankers & Investors Company, Inc. ( the Company ) is an Investment Adviser registered with the State of Missouri IARD file number The Company has designated Jerrod L. Foresman to act as its Chief Compliance Officer (CCO). This manual contains the written supervisory procedures of the Company and shall be followed by all personnel in the carrying out of their responsibilities with the Company. Our clients interests are our primary concern and we will therefore conduct our client business in a manner that fulfills our fiduciary duties when dealing with clients. It is the responsibility of every employee of the Company to help ensure that the Company conducts its business in compliance with all applicable federal and state laws, rules and regulations and in keeping with the highest level of professional and ethical standards. B. Guidelines Only. Compliance requires constant attention to the Company s policies and obligations as they change from circumstance to circumstance. No manual or written set of policies can anticipate every business circumstance and, therefore, eliminate the Company's regulatory and compliance risks. However, the Company believes these risks can be significantly reduced by a comprehensive program of oversight aimed at insuring that all employees are familiar with, and follow, the Company's compliance policies and procedures. This Manual contains both supervisory procedures of the Company and its policies in each of the included subject areas. The information and procedures provided within this manual represent guidelines to be followed by each and every employee of the Company under the overall direction of supervisory personnel. These guidelines are not necessarily inclusive of all laws, rules and regulations that govern the activities of the Company. C. Amendments. The Company s CCO will review this manual at least annually and amend it as appropriate within a reasonable time after changes Section I Introduction Page Page 1

7 occur in federal and state securities laws, rules and regulations, and as changes occur in the Company s supervisory system. D. Questions. Any questions concerning the policies and procedures contained within this manual or regarding any regulations should be directed to the appropriate supervisor or to the Company's CCO. E. Use of Manual. All supervisory personnel are required to read this manual and to sign an acknowledgment of receipt and acceptance of responsibilities assigned to them. See Appendix A. Copies of this manual shall be maintained, either in written or electronic format, in the Main Office and at all other locations where supervisory activities are conducted. F. Limitations on Use. The Company is the sole owner of all rights to this manual and it must be returned to the Company immediately upon termination of employment. The information contained herein is confidential and proprietary and may not be disclosed to any third-party or otherwise shared or disseminated in any way without the prior written approval of the Company. Section I Introduction Page Page 2

8 II. REGISTRATION AND LICENSING A. Registration. Prior to October 1996, all investment adviser firms were required to register with the SEC unless they qualified for one of the exemptions from registration, including the so-called private adviser exemption. However, under the Coordination Act of NSMIA, which went into effect in July 1997, firms managing less than $25 million in client assets are no longer eligible to register with the SEC. If registration is required, they must register under applicable state law (usually with the state securities commissioner). Advisers with client assets under management of at least $25 million (and certain other categories of investment advisers) remained eligible to register with the SEC. Therefore, pursuant to state law, the Company has applied for registration, and has been granted registration as an investment adviser with the State of Missouri and Kansas and has registered in states where such filing is required. In general, a registration is required in a state where the Company: (i) has a place of business; (ii) holds itself out as an investment adviser; (iii) has more than five (5) clients (the statutory minimum varies from state-to-state); or (iv) has IARs with a place of business in that state. The CCO shall ensure that the Company and its IARs are at all times properly registered and licensed as required by applicable federal and state rules and regulations. B. Definition of "Investment Adviser Representative" (IAR). Advisers Act Rule 203A-3(a) IARs include individuals meeting both of the following two criteria: 1. Any partner, officer, director or any person performing similar functions employed by or associated with the Company (except for clerical or ministerial personnel) who is subject to the supervision and control of the Company and provides any of the following services: (a) (b) makes recommendations regarding securities; manages accounts or portfolios of clients; Section II Registration and Licensing Page 1

9 (c) (d) (e) determines what advice should be given; solicits the sale of or sells investment advisory services (unless incidental to his or her profession); or, supervises employees who perform any of the foregoing; and, 2. Has more than five clients who are natural persons and, more than 10 percent of whose clients are natural persons but not qualified clients as defined under the Investment Advisers Act. (state law may vary) Note: Supervised persons who do not regularly meet with advisory clients or who provide only impersonal investment advice are excluded from the definition. Certain states consider solicitors to be IARs requiring registration. C. Investment Adviser Registration Depository (IARD). The SEC and the state securities authorities have created an electronic filing system, the IARD, through which investment advisers may make filings with states electronically. The National Association of Securities Dealers, Inc. (NASD) operates the IARD under contract with the SEC and the North American State Securities Administrators (NASAA). The NASD will be responsible for certain ministerial tasks as the operator of the IARD, but will not act as a selfregulatory organization for advisers. D. Form ADV. Investment advisers file Form ADV through the IARD. Additionally, each registered adviser must file amendments to the Form ADV through the IARD at least annually. The Form ADV contains three parts. (a) Part 1A of Form ADV. Part 1A of Form ADV asks a number of questions about the Company, the Company s business practices, the persons who own and control the Company and the persons who provide investment advice on behalf of the Company. Part 1A also contains several schedules that supplement Part 1A. These are: Section II Registration and Licensing Page 2

10 Schedule A This schedule asks for information about the Company s direct owners and executive officers. Schedule B This schedule asks for information about the Company s indirect owners. Schedule C This schedule is used by paper filers to update the information required by Schedules A and B. Schedule D This schedule asks for additional information for certain items in Part 1A. DRPs These Disclosure Reporting Pages ask for details about disciplinary events involving the Company or persons affiliated with the Company. 2. Part 1B of Form ADV. This Part of the Form asks additional questions required by state securities authorities.. 3. Part II and Schedule F of Form ADV. Part II of Form ADV discloses, among other information, the Company's services and fee structure, background information on the individuals providing advisory services and potential conflicts of interests. The Company as its disclosure brochure uses Part II of Form ADV. The Company will amend Part II promptly when it becomes materially inaccurate by substituting pages or by affixing a sticker replacing the outdated information. Additionally, the Company will deliver or cause delivery of the Part II to prospective clients, and annually offer it in writing to current clients (Rule 204-3). Most states require the filing of the Part II with the initial registration package and then again each time the Part II is amended. The CCO will retain copies of the Part II on premise and provide it to the sate regulators upon request. Section II Registration and Licensing Page 3

11 E. Review and Updating of Form. It is the responsibility of the CCO to review the Form ADV on an ongoing basis to ensure that all information is current and accurate. Material changes to the Form ADV Part 1A, must be filed with the state through the IARD in a timely manner (usually defined as within 30 days). F. Filing Fees. The CCO will also be responsible for maintaining required capital balances with the NASD to facilitate the payment of registration fees for the Company and its IARs as well as annual renewal fees when they are due. G. Withdrawal from State Registration. If at any time the Company is required to withdraw from registration with its home state, in the event it ceases doing business or is required to register with the SEC it will do so by filing the Form ADV-W electronically through the IARD. The withdrawal, in most cases, will be effective upon filing. In the event the Company is transitioning from state to SEC registration a form ADV-W (partial) shall not be filed until the Company is registered with the SEC. H. Regulatory Reporting. Advisers Act Rules 17CFR 279.1, and Annual Updating Amendment. The Company must file an annual renewal prior to year-end through the IARD and annual updating amendment via the IARD within ninety (90) days after its fiscal yearend. This amendment to the Company s Form ADV reaffirms the eligibility information contained in Item 2 of Part 1A and acts to update the responses to any other item for which the information is no longer accurate. It is the responsibility of the CCO to file or cause the filing of the annual updating amendment. 2. Annual Renewal. The Company must file an annual renewal prior to year-end through the IARD and annual updating amendment via the IARD within ninety (90) days after its fiscal year-end. This amendment to the Company s Form ADV acts to update the responses Section II Registration and Licensing Page 4

12 3. Material Changes. In addition to the annual updating amendment, the CCO is responsible for filing additional amendments promptly if: (a) (b) (c) information provided in response to Items 1, 3, 9, or 11 of Part 1A or Items 1, 2.A through 2.F or 2.I of Part 1B becomes inaccurate in any way; information provided in response to Items 4, 8, or 10 of Part 1A or Item 2.G of Part 1B becomes materially inaccurate; or information provided in Part II becomes materially inaccurate NOTE: If an other-than-annual amendment is being submitted it is not required to update responses to Items 2, 5, 6, 7, or 12 of Part 1A even if responses to those items have become inaccurate. 4. Balance Sheet. A balance sheet may be required by the Company s home state on an annual basis. The CCO will review the State s regulations and if such a balance sheet is required it will be prepared in accordance the State s requirements and submitted in a timely manner. 5. Federal Filings. The Company may be subject to the reporting requirements in the United States under certain provisions of the Securities Exchange Act of 1934 and similar laws of other countries. Important reporting requirements of the 1934 Act include the filing duties under: (a) (b) Section 13(d) - Five percent or more beneficial ownership; Section 13(g) - Passive institutional investors, unless they have acquired more than 20 percent or more of a class of securities; Section II Registration and Licensing Page 5

13 (c) (d) Section 13(f) - Institutional investment managers; and, Section 16 - Directors, officers, and greater than 10% owners of publicly held companies. I. State Licensing and Registration 1. State Requirements. As noted, the Company must maintain its home state registration. In addition, the Company may have to register as an Investment Adviser in some or all of the states in which it conducts business or maintains an office. In addition, IARs of the Company may need to be registered, licensed or otherwise qualified in those states where they have offices or clients. 2. Supervisory Responsibility. It is the responsibility of the CCO to be aware of the particular requirements of the states in which the Company operates and to ensure that the Company and its IARs are properly registered, licensed and qualified to conduct business pursuant to all applicable laws of those states. 3. Restrictions. Unless otherwise permitted by regulation, the Company may not solicit or render investment advice for any client domiciled in a state where the Company is not properly registered. J. Investment Adviser Representative Registration 1. The CCO is responsible for filing all necessary registration and licensing materials with state regulatory agencies in connection with the registration of each IAR. 2. Prior to the submission of an application for registration or licensing of any person with any regulatory authority, a background check will be made on applicants to determine reputation, qualification and experience. A written record of each background check will be kept in the appropriate IAR s employment file. Section II Registration and Licensing Page 6

14 3. Once the CCO is satisfied that the employee is required to register with a state as an IAR, and can qualify for such registration, the CCO will review the registration requirements of the applicable state(s) and process such registration. 4. All IAR filings must be made via the IARD. 5. The CCO shall maintain all registration records for each IAR, including copies of Form U4, U5, employment applications, and correspondence. 6. The employee may not provide investment advice to any client until he or she has received notice from the CCO that he or she has been granted an IAR registration status (license) from the appropriate state (unless such license is not necessary). K. Registration Amendments 1. Each IAR must notify the CCO if any information required by the Form U4 becomes outdated. Depending upon what information has been updated, an amendment to the Form U4 may be required. If such an amendment is required it will be the responsibility of the CCO to or cause to have filed that amendment with the appropriate jurisdiction via the IARD. Section II Registration and Licensing Page 7

15 III. COMPLIANCE RISK ASSESSMENT Bankers & Investors Co. has developed a compliance risk assessment and management process that is integrated into its ongoing compliance program. The risk assessment and management process is designed to identify, monitor, and manage compliance risk and related conflicts of interests inherent in the various lines of business in which the Company is engaged. The Company also recognizes that its compliance risk assessment and management process must evolve with changes in its business activities and various legal and regulatory developments. Compliance risk can be defined as the risk of legal or regulatory sanctions, financial loss, or damage to reputation and company value that arises when an organization fails to comply with laws, regulations, or the standards or codes of conduct applicable to the company's business activities and functions. Ultimately, the risk of noncompliance is that our clients may be harmed, so we recognize the extreme importance of the risk assessment and management process. Based on the Company s identified compliance risk areas, we have adopted this written supervisory procedures manual that addresses each of these areas. These procedures are designed to provide an understanding of the Company s on-going compliance, documentation, assessment and reporting requirements. The table of contents included with these procedures generally itemizes each area of compliance required for the Company. In an effort to continuously assess the company s compliance risk, the Company s CCO and other key staff members provide on-going monitoring and reviews of the Company s compliance process. As required, these individuals will work together both to raise concerns about compliance risks and to design and establish effective procedures and controls in an effort to eliminate or mitigate such risks. To ensure that compliance risk issues are addressed as they arise, all associated persons are required to report material compliance events to the CCO immediately. If you have any Section III Compliance Risk Assessment Page 1

16 doubt or uncertainty about what constitutes a material compliance event, you should ask the CCO. Please do not guess at the answer. The Company s risk management consists of five elements. A. Corporate Standards--Tailored within the Business Lines To create appropriate compliance risk controls, the Company first reviews compliance risks and requirements across the entire entity. This is accomplished by evaluating the Company s various lines of business, identifying related conflicts of interest, and determining the relevant compliance rules and regulations that govern the Company s investment advisory activities. The CCO and other staff members then assess and evaluate the risks and controls that are required. Once relevant data is gathered and the Company has identified and assessed its compliance risks, the Company then designs policies and procedures that are reasonably designed to eliminate or mitigate those risks. The Company recognizes that compliance risk management is dynamic. Therefore, risks are assessed whenever new business lines or activities are added, existing activities and processes are altered, or new rules and regulations are adopted. B. Monitoring and Reporting Monitoring is the means of identifying and communicating compliance breaches to the appropriate individuals/departments within the Company. The Company has established processes for monitoring the implementation of compliance policies, procedures, and controls. The monitoring and reporting consists of Company designed documents designed to evaluate the Company s existing compliance procedures and related risk. These documents are completed by the CCO and/or key staff members and are maintained in the Company s compliance files. For purposes of assessing risks related to the management of and transactions in client accounts, the Company relies on its client management process and the reporting features provided by its broker dealer and/or custodian, Southwest Securities, Inc. Also, reports regarding personal securities transactions and employee personal accounts are submitted to the Company and are reviewed at least quarterly by the CCO and/or other key staff members. Section III Compliance Risk Assessment Page 2

17 All such reports are designed to ensure that information regarding compliance is communicated to the appropriate control persons within the Company. C. Testing Testing provides important feedback to determine how well the internal control framework is operating in practice, pointing the way toward any remedial actions that need to be taken. Thus, the Company maintains internally designed documents, which are reviewed by the CCO on a monthly basis to ensure its policies and procedures, are current. D. Chief Compliance Officer Oversight Key staff members attend formal meetings with the CCO, as required, to discuss, explain, and, if necessary, to define relevant compliance risk areas. The Company seeks to establish and maintain an effective compliance-risk management program based on advice and discussions from the staff, and, as needed, outside counsel. The Company recognizes that it is accountable and must exercise appropriate compliance oversight, the ultimate responsibility for risk management rests with the CCO. E. Compliance Review Pursuant to Rule 206(4)-7 under the Advisers Act, the Company will conduct a review of its policies and procedures at least annually to determine their adequacy and the effectiveness of their implementation in consideration of: a. the business being conducted by the Company, its investment adviser representatives, and supervisory personnel; and, b. any changes in the Advisers Act or applicable regulations; and, c. any compliance matters that arose during the previous year. The periodic audits and assessments will be documented and maintained in the Company s filing system, and shall be provided to the Securities and Exchange Commission on request. The CCO will review the results of the audit of the Company s compliance program. Corrective actions will be taken as required and such actions will be documented and maintained. Section III Compliance Risk Assessment Page 3

18 IV. BOOKS AND RECORDS A. Responsibility. The CCO is responsible for ensuring that books and records of the Company are promptly and accurately prepared and maintained in accordance with the requirements of the State of Missouri. B. Five Year Requirements. The following records, to the extent applicable, shall be maintained for a period of not less than five (5) years. They must be retained in the Company s office during the first two (2) years and be accessible for the remaining three (3) years: 1. A journal or journals, including cash receipts and disbursements records, and any other records of original entry forming the basis of entries in any ledger; 2. General and auxiliary ledgers (or other comparable records) reflecting assets, liabilities, reserve, capital, income and expense accounts; 3. A memorandum of each order given by the Company for the purchase or sale of a security. The memorandum may be an order ticket that is date-stamped or otherwise marked to comply with the requirements below. Such memoranda shall: (a) (b) (c) (d) (e) (f) (g) show the terms and conditions of the order (buy or sell); show any instruction, modification or cancellation; identify the person connected with the Company who recommended the transaction to the client; identify the person who placed the order; show the account for which the transaction was entered; show the date of entry; identify the bank, broker or dealer by or through whom such order was executed; and, Section IV Books and Records Page 1

19 (h) identify orders entered into pursuant to the exercise of the Company s discretionary authority; 4. Check books, bank statements, canceled checks, balance sheets, cash reconciliations; 5. All bills or statements (paid and unpaid) relating to the business of the Company as an investment adviser; 6. Trial balances, financial statements and internal audit working papers; 7. Written communications received from clients (originals); 8. Written communications sent to clients (copies); 9. A list of advisory clients and accounts over which the Company has discretion; 10. Discretionary power authorization forms (executed); 11. Advertisements, including copies of the Company s website (if applicable); 12. A record of every transaction in a security in which the Company holds a direct or indirect ownership interest (holdings/posting page); 13. Disclosure Document (Form ADV Part II or substitute and every amendment); 14. Solicitors Disclosure Document (if solicitors refer business to the Company); 15. Copy of Annual Offer of Disclosure Document (also include a list of clients who were sent the offer of the Disclosure Document, and a list of those who requested copies of the Disclosure Document); 16. Evidence of annual delivery of Privacy Policy (See Appendix B ); 17. Written agreements entered into by the Company (maintained for a period of not less than five (5) years after termination of relationship); 18. Customer complaint file (maintain even if empty); Section IV Books and Records Page 2

20 19. Copies of the Company s policies and procedures and any amendments thereto; 20. All accounts, books, records and documents necessary to form the basis for calculation of performance or rate of return of managed accounts or securities recommendations in any Company communications distributed to ten (10) or more persons; 21. Copies of the Company s code of ethics currently in effect or that was in effect any time within the last five (5) years, including (a) records of any violations of the code of ethics and any actions taken as a result of the violations and (b) records of all written acknowledgements of receipt of the code of ethics for each person who is currently or has been within the last five (5) years a supervised person of the Company; 22. Records of all holdings reports made as required under the Company s code of ethics, records of all persons who are, or were within the last five (5) years, access persons of the Company and records of all decisions (with supporting reasons) to approve acquisition of securities by access persons. C. The Use of Electronic Media to Maintain and Preserve Records. The Company is permitted to maintain all records electronically including all records that are required to be maintained and preserved. The CCO is responsible for safeguarding these records from loss, alteration, or destruction. The CCO is also responsible for limiting access to the records by unauthorized personnel and to insure that all electronic copies of non-electronic originals are complete, true, and legible. Furthermore, the CCO should be prepared upon request by any regulatory authority to promptly provide (i) legible, true, and complete copies of these records in the medium and format in which they are stored, as well as printouts of such records; and (ii) a means to access, view, and print the records. Section IV Books and Records Page 3

21 D. Corporate Records. Articles of Incorporation, Minute Books, Stock Certificate Books and other corporate records shall be maintained at all times and for a period of not less than three (3) years after termination of the Company s existence. Such records shall be maintained at a location with reasonable access, the address of such location shall be communicated to the proper regulatory authority upon the required filing of Form ADV-W. Any change in the location of such records will be communicated to the proper regulatory authority promptly. E. Storing Books and Records Using Electronic Media. 1. Permitted Use. In addition to or as a substitute for storing documents in paper format, the records required to be maintained and preserved may be immediately produced or reproduced on film, magnetic disk, tape, optical storage disk, or other electronic storage medium. 2. Optical Storage Technology Defined. An optical storage disk is a direct-access disk written and read by light. CDs, CD-ROMs, DVDs and videodisks are optical disks that are recorded at the time of manufacture. 3. Requirements. When using an electronic storage format, the Company will: (a) (b) (c) (d) (e) Maintain a duplicate backup copy of electronically stored books and records at an off-site location; Notify the proper regulatory authority of the method used to store books and records and the backup location; Arrange and index the records to permit immediate location of a particular record; At all times be ready to promptly provide a copy or printout to an examiner; Verify the quality and accuracy of the storage media recording process; Section IV Books and Records Page 4

22 (f) (g) (h) (i) (j) Serialize the original storage media and time-date the information for the required period of retention; Maintain the capacity to readily download indexes and records preserved on the media; Maintain available facilities for the immediate and easily readable projection or production of the records; Have in place an audit system providing for accountability regarding record inputting; and, Establish such other appropriate procedures as are necessary for reproducing, maintaining and accessing electronically stored books and records, including reasonable safeguards to protect against loss, alteration or destruction. 4. Security. (a) (b) The CCO will inform all personnel with access to customer records not to leave their computers unattended unless they are turned off or secured in some appropriate manner. The CCO will take the necessary steps to assure that whenever an employee leaves the Company any password or code used to gain access to that employee s computer system or is extinguished or changed. F. Retention. Advisers should maintain a record of all s that pertain to advice being offered, recommendations being made, transactions executed and orders received. When storing communication the Company will arrange and index such communication like any other electronically stored record (see Item E, 3 above). This will be done in such a manner that permits easy location, access and retrieval. The Company will separately store a copy of these records as part of its Disaster Recovery Program and establish procedures to reasonably safeguard the s from loss, alteration, or destruction and limit access to these records to properly Section IV Books and Records Page 5

23 authorized individuals. The CCO will provide promptly any of the following, if requested by any regulatory authority: 1. a legible, true, and complete copy of an in the medium and format in which it is stored; 2. a legible, true, and complete printout of the ; and 3. means to access, view, and print the . For Bankers & Investors Co. advisors, the Company will archive all incoming and outgoing . Copies of will be stored in a centralized folder on the Company s network. For Bankers & Investors Co. independent advisors, the Company will request that each employee print down a copy of pertinent to a specific client and keep a copy in the client s correspondence file. The CCO will spot check this process on an unannounced basis by comparing a copy of the representatives incoming and outgoing to the correspondence in the client s file. All such correspondence will be kept for a period of not less than five years. G. Disaster Recovery Planning. 1. The CCO is responsible for developing written procedures to launch a timely recovery from a disaster. The basis of these procedures is to minimize the impact of a disaster to the Company, its employees, vendors and clients. A summary of Bankers & Investors Co. Business Continuity Plan (BCP) is available in appendix C. The full version of the Company s BCP is available at the main office at 1300 N. 78 th Street, Suite G3, Kansas City, KS The plan includes the following items: (a) Who can declare an emergency; Section IV Books and Records Page 6

24 (b) (c) (d) (e) (f) (g) (h) Who is responsible for maintaining an employee contact list; Primary and secondary meeting place if main office is destroyed or no longer usable (should be at least 25 miles from main office location); Notification to the proper regulatory authorities of the emergency and its nature; Recovery of Client information; A back up communication/telephone system for clients, personnel and others to contact the firm and for the firm to contact clients; Conduct and document periodic and annual testing of the plan in simulated conditions and training of all critical personnel; and, Review and document the preparedness of vendors and custodians. Section IV Books and Records Page 7

25 V. CUSTODY Advisers Act Rule 206(4)-2 sets forth extensive requirements regarding possession or custody of client funds or securities. A. Responsibility The Company doen not maintain possession or custody of client funds or securities. The CCO must ensure that a qualified custodian maintains those funds and securities -- (i) In a separate account for each client under that client's name; or (ii) In accounts that contain only your clients' funds and securities. B. Deduction of Advisory Fees from Client Accounts The Company s advisory fees are debited directly from the client accounts. Payment of the fees will be made by the qualified custodian, as that term is defined below, holding the client s funds and securities. In all such cases, the client must provide written authorization permitting the fees to be paid directly from their account. The Company will not have access to client funds for payment of fees without client consent in writing. Further, the qualified custodian must agree to deliver a quarterly account statement directly to the client, and never through the Company. The Company will receive a duplicate copy of the statement that was delivered to the client in order to form a reasonable belief that such statements are delivered to the client. Additionally, some states require advisers to deliver an invoice to their clients at the same time they deliver invoices to the qualified custodian. The Company shall provide invoices its clients if the Company s home state requires such delivery. C. Inadvertent Receipt of Funds or Securities It shall be the Company s policy to return the client s funds or securities to the sender without assuming custody. If the Company inadvertently receives client funds or securities, the Company will take the following steps to correct this action: Section V Custody Page 1

26 1. When the Company inadvertently receives funds/securities, a photocopy of the check or securities received will be made and placed in the client s file. 2. The Company will return the funds/securities to the sender with a letter of instruction on how and where the sender should forward funds/securities in the future. The Company will return such funds or securities by US Mail, registered, return receipt requested or by courier service within three business days of receipt. 3. The Company will keep a copy of the cover letter and the return receipt/courier notice in the client file. D. Receipt of Third Party Funds If the Company receives a check from a client payable to a third party, the Company will confirm that the check is made payable to a third party, e.g., the custodian, and then make a photocopy of the check, issue a receipt to the client and then forward the check directly to the third party. A copy of the check, the receipt, and the transmittal form will be kept in a master custody file. E. Notice of Qualified Custodian If the Company opens an account with a qualified custodian on behalf of Company clients, The Company will promptly notify the clients in writing of the qualified custodian s name, address, and the manner in which the client funds or securities are maintained when the account is opened and following any changes to this information. F. Account Statements The Company will arrange for the client s qualified custodian to send quarterly account statements containing at least the information required by the applicable SEC rules directly to the client (and not through an adviser). The Company will instruct the client to request that a copy of the quarterly accounting statements be sent to The Company. Section V Custody Page 2

27 G. Definition of Qualified Custodians Qualified custodians include the types of financial institutions that clients and advisers customarily turn to for custodian services. These also include banks and savings institutions, registered broker-dealers, and registered futures commission merchants among others. H. Use of an Independent Representative In the event the client does not wish to receive account statements the Company will require the client to submit such request in writing. The client at that time must designate an independent representative to receive those statements. A record of such request will be kept in the client s file. I. Definition of Independent Representative An independent representative is defined as a person that: 1. acts as agent for an advisory client and by law or contract is obligated to act in the best interest of the advisory client; 2. does not control, is not controlled by, and is not under common control with the Company; and 3. does not have, and has not had within the past two years a material business relationship with the adviser. Section V Custody Page 3

28 VI. CLIENT ACCOUNTS AND DOCUMENTS A. Client Contracts. The Company utilizes a written client contract, the general provisions of this contract are listed below and is called the Agreement for Investment Management Services. Advisers are required to complete the Agreement for Investment Management Services. 1. General Provisions. Agreement for Investment Management Services at a minimum have the following requirements: (a) (b) (c) (d) (e) (f) Agreement is not be assignable without written client consent; No Agreement provision or hedge clause may be used to waive the Company's compliance with the Advisers Act or other applicable regulations; Agreements may not provide the Company with compensation based upon capital appreciation; Agreements must include a signed acknowledgment by the client of receipt of all disclosure documents; and, All Agreements must be in writing and signed by both the client and an authorized representative of the Company; The Company will not vote proxies on behalf of client accounts. (See Section XX). B. Financial Planning, Portfolio Management & Fees: 1. Financial Planning and Consulting Services Bankers & Investors Co. may offer broad-based, consultative, and modular financial planning services. Broad-based financial planning will typically involve providing a variety of services, principally advisory in nature, to clients regarding the management of their financial resources based upon an analysis of their individual needs. Section VI Client Accounts and Documents Page 1

29 The process typically begins with an initial consultation. During or after the initial consultation, pertinent information about the client s personal and financial circumstances and objectives is collected. As required, Bankers & Investors Co. will conduct follow up interviews for the purpose of reviewing and/or collecting financial data. Once such information has been studied and analyzed, a written financial plan designed to achieve the client s expressed financial goals and objectives will be produced and presented to the client. Some clients may only require advice on a single aspect of the management of their financial resources. For these clients, Bankers & Investors Co. offers financial plans in a modular and/or consultative format that address only those specific areas of interest or concern, depending on each client s unique circumstances. Financial plans are based on the client s financial situation at the time the plan is presented and on financial information disclosed by the client to Bankers & Investors Co. Clients are advised that certain assumptions may be made with respect to interest and inflation rates and use of past trends and performance of the market and economy. Past performance is in no way an indication of future performance. Bankers & Investors Co. cannot offer any guarantees or promises that the client s financial goals and objectives will be met. As the client s financial situation, goals, objectives, or needs change, the client must notify Bankers & Investors Co. promptly. a) Financial planning and/or consulting fees will be charged in one of two ways: i) As a fixed fee, typically ranging from $250-$1,500, depending on the nature and complexity of each client s circumstances. 50% of this fee may be due upon signing the financial planning or consulting Section VI Client Accounts and Documents Page 2

30 agreement, with the balance due upon presentation of the financial plan or consulting work to the client. ii) On an hourly basis, up to $250 per hour, depending on the nature and complexity of each client s circumstances, as well as the individual conducting the work. If appropriate, an estimate for total hours may be determined at the start of the advisory relationship. 50% of the estimated fee may be due upon signing the planning or consulting agreement, with the balance (based on actual hours) due upon presentation of the plan to the client. Financial planning and consulting services will be rendered within six months of the date of contract; therefore, under no circumstances will the Firm require prepayment of a fee more than six months in advance and in excess of $500. An estimate of the total cost will be determined at the start of the advisory relationship. In limited circumstances, the cost/time could potentially exceed the initial estimate. In such cases, Bankers & Investors Co. will notify the client and may request that the client pay an additional fee. Additionally, the fees for the financial planning and consulting services are negotiable and, in the Firm s discretion, all or part of such fees may be waived or lowered where the client engages the Firm to perform other services. If a financial planning or consulting client executes recommended securities transactions through associated persons of Bankers & Investors Co. in their separate capacities as registered representatives of a broker dealer (or insurance carrier), these individuals will earn commissions which are separate and distinct from fees charged for advisory services. Section VI Client Accounts and Documents Page 3

31 In the Firm s discretion, financial planning or consulting fees may be offset with commissions earned in such capacity. Clients may act on Bankers & Investors Co. s recommendations by placing securities transactions with any brokerage firm the client chooses. The client is under no obligation to act on Bankers & Investors Co. s financial planning recommendations. Moreover, if the client elects to act on any of the recommendations, the client is under no obligation to implement the financial plan through Bankers & Investors Co. If the disclosure brochure - Part II of the Form ADV - is not delivered to the client within 48 hours prior to the client entering into the financial planning or consulting agreement, the client may terminate the agreement within five business days of the date of acceptance without penalty. If the client received the disclosure documents 48 hours in advance or if the five-day grace period has expired, either party may terminate the agreement upon written notice to the other party. Any unearned fee will be refunded to the client. C. PORTFOLIO MANAGEMENT SERVICES Bankers & Investors Co. provides discretionary and non-discretionary portfolio management services where the investment advice provided is custom tailored to meet the needs and investment objectives of the client. Generally the Firm requires a minimum account size of $30,000 to establish an advisory account with the Firm; however, such minimum may be waived or lowered in the Firm s discretion. Subject to any written guidelines that the client may provide, Bankers & Investors Co. may be granted discretion and authority to manage the Section VI Client Accounts and Documents Page 4

32 account. Where such discretion is granted, Bankers & Investors Co. is authorized to perform various functions, at the client s expense, without further approval from the client. Such functions include the determination of securities to be purchased/sold, the amount of securities to be purchased/sold, the broker or dealer to be used, and the commission rates to be paid for their account. Once the portfolio is constructed, Bankers & Investors Co. provides ongoing monitoring and rebalancing of the portfolio as changes in market conditions and client circumstances may require. Where the Firm Bankers & Investors Co. enters into non-discretionary arrangements with clients, the Firm will obtain client approval prior to the execution of a trade. The annual fee will be charged as a percentage of assets under management, according to the following schedule and is negotiable: Assets Under Management Fee Up to $200, % $200,001 - $500, % $500,001 - $750, % $750,001 - $1,000, % In excess of $1,000, % Typically, the annual fee for portfolio management services is billed quarterly, in advance, based upon the market value of the assets on the last day of the previous quarter. Bankers & Investors Co. will either invoice the client directly for management fees or payment will be made by the qualified custodian Section VI Client Accounts and Documents Page 5

33 holding the client s funds and securities provided the client provides written authorization permitting the fees to be paid directly from their account. Further, the qualified custodian agrees to deliver an account statement at least quarterly directly to the client showing all disbursements from the account. The client is encouraged to review their account statements for accuracy. Bankers & Investors Co. will have electronic access to or will receive a duplicate copy of the statement that was delivered to the client. If the disclosure brochure - Part II of the Form ADV - is not delivered to the client within 48 hours prior to the client entering into the portfolio management agreement, the client may terminate the agreement within five business days of the date of acceptance without penalty. If the client received the disclosure documents 48 hours in advance or if the five-day grace period has expired, either party may terminate the agreement upon 30-day written notice to the other party. Any unearned fee will be refunded to the client. D. PENSION CONSULTING SERVICES Bankers & Investors Co. will provide pension-consulting services to employee benefit plans and their fiduciaries based upon an analysis of the needs of the plan. In general, these services may include an existing plan review, assistance in the development of a retirement plan, evaluation of retirement plan vendors, asset allocation advice, portfolio management services, communication and education services to plan participants, investment performance monitoring, and/or ongoing consulting. Section VI Client Accounts and Documents Page 6

34 The Firm will be compensated with a fee based upon the assets managed by the Firm as stated above and is negotiable. The fees and terms will be clearly set forth in the executed agreement for services. The amount of the fees charged to the client will be based on the scope and complexity of the qualified plan and the requested services. An estimate of the total cost will be determined at the start of the advisory relationship. The final fee shall be directly dependent upon the facts and circumstances of the client s financial situation and the complexity of the pension consulting services provided. Under no circumstance will the Firm require payment more that six months in advance in excess of $500. All client accounts are regulated under the Employee Retirement Income Securities Act ( ERISA ). The Firm will provide consulting services to the plan fiduciaries as described above. Typically, the named plan fiduciary must make the ultimate decision as to retaining the services of such investment advisers as the Firm recommends. The plan fiduciary is free to seek independent advice about the appropriateness of any recommended services for the plan. If the disclosure brochure - Part II of the Form ADV - is not delivered to the client within 48 hours prior to the client entering into the pension consulting agreement, the client may terminate the agreement within five business days of the date of acceptance without penalty. If the client received the disclosure documents 48 hours in advance or if the five-day grace period has expired, either party may terminate the agreement upon 30-day written notice to the other party. Any unearned fee will be refunded to the client. Section VI Client Accounts and Documents Page 7

35 E. SELECTION OF OTHER ADVISERS Bankers & Investors Co. may recommend that clients utilize the services of a third party investment adviser ( TPA ) to manage a portion of, or their entire portfolio. All TPAs that the Firm recommends to its clients must be registered as investment advisers with either the Securities and Exchange Commission or with the appropriate state authority(ies). After gathering information about the client s financial situation and objectives, an IAR of Bankers & Investors Co. will make recommendations regarding the suitability of a TPA or investment style based on, but not limited to, the client s financial needs, investment goals, tolerance for risk, and investment objectives. Upon selection of a TPA(s), Bankers & Investors Co. will monitor the performance of the TPA(s) to ensure their performance and investment style remains aligned with the investment goals and objectives of the client. Bankers & Investors Co. will share in the fee paid by the client to the TPA. Clients who are referred to TPAs will receive full disclosure, including services rendered and fee schedules, at the time of the referral by delivery of a copy of the relevant TPA s Form ADV Part II or equivalent disclosure document. In addition, if the investment program recommended to a client is a wrap fee program, the client will also receive the Schedule H or equivalent wrap fee brochure provided by the sponsor of the program. Fees paid by the client to the TPA are established and payable in accordance with the Form ADV Part II or other equivalent disclosure document provided by each TPA to whom the client is referred and these fees may or may not be negotiable. Such compensation may differ depending upon the individual agreement Bankers & Investors Co. has Section VI Client Accounts and Documents Page 8

36 with each TPA. As such, Bankers & Investors Co. or its IARs may have an incentive to recommend one TPA over another TPA with whom it has less favorable compensation arrangements or other advisory programs offered by TPAs with which it has no compensation arrangements. Clients may be required to sign an agreement directly with the TPA(s) selected. The client, the Firm or the TPA, in accordance with the provisions of those agreements, may terminate the advisory relationship. If the TPA is compensated in advance, the client will typically receive a pro rata refund of any prepaid advisory fees upon termination of an advisory agreement. F. General Information on Advisory Services and Fees The fees charged are calculated as described above, and are not charged on the basis of a share of capital gains upon, or capital appreciation of, the funds, or any portion of the funds of an advisory client (15 U.S.C. 80b-5(a)(1)). Bankers & Investors Co. does not represent, warrant, or imply that the services or methods of analysis employed by the Firm can or will predict future results, successfully identify market tops or bottoms, or insulate clients from losses due to market corrections or declines. Bankers & Investors Co. shall never have custody of any client funds or securities, as the services of a qualified and independent custodian will be used for these asset management services. Section VI Client Accounts and Documents Page 9

37 Advice offered by Bankers & Investors Co. may involve investment in mutual funds. Clients are hereby advised that all fees paid to Bankers & Investors Co. for investment advisory services are separate and distinct from the fees and expenses charged by mutual funds (described in each fund s prospectus) to their shareholders. These fees will generally include a management fee and other fund expenses. Further, there may be transaction charges involved with purchasing or selling of securities. Bankers & Investors Co. does not share in any portion of the brokerage fees/transaction charges imposed by the custodian holding the client funds or securities. The client should review all fees charged by mutual funds, Bankers & Investors Co., and others to fully understand the total amount of fees to be paid by the client. G. Protecting the confidentiality of client information; Protecting its customers private information is important to Bankers & Investors Co. Therefore, the Firm has instituted policies and procedures to ensure that customer information is kept private and secure. Bankers & Investors Co. does not disclose any non-public personal information about its customers or former customers to any non-affiliated third parties except as required by or permitted by law. In the course of servicing a client s account, Bankers & Investors Co. may share some information with its service providers, such as transfer agents, custodians, broker dealers, accountants, consultants, and attorneys. Bankers & Investors Co. restricts internal access to non-public personal information to those employees who need access to such information in order to provide products or services to a particular client. Bankers & Investors Co. also maintains physical, electronic, and procedural safeguards to protect client information. Section VI Client Accounts and Documents Page 10

38 H. Reports to be provided to clients; Client accounts are monitored on an ongoing basis. Jerrod L. Foresman, President and Chief Compliance Officer of Bankers & Investors Co. will be responsible for the overall supervisory review process for the Firm. IARs of the Firm will conduct regular account reviews on a schedule agreed upon with the client, but no less than quarterly. Clients will generally be provided with a written request to update their financial goals, investment objectives, and personal financial situation on an annual basis. Clients are encouraged to contact Bankers & Investors Co. with any questions or changes in financial situation or investment guidelines as necessary. Triggering factors that may stimulate additional reviews include, but are not limited to, significant market corrections, large deposits or withdrawals from an account, and the client s request for an additional review. Clients who engage the Firm only for financial planning or consulting services may be charged a separate fee for meetings with their IAR. Clients should read carefully the agreement with the Firm to determine the amount of such separate fees, if any. At a minimum, clients will receive monthly and/or quarterly reports from the custodian holding their funds and securities. The Firm may prepare quarterly performance reports and/or additional reports in conjunction with client meetings and account reviews. I. Address for sending notifications; Questions regarding this policy should be directed to Jerrod L. Foresman, President/Chief Compliance Officer at (913) N. 78 th Street, Suite G3, Kansas City, KS Section VI Client Accounts and Documents Page 11

39 J. Procedures and time required to terminate the contract; If the disclosure brochure - Part II of the Form ADV - is not delivered to the client within 48 hours prior to the client entering into an agreement, the client may terminate the agreement within five business days of the date of acceptance without penalty. If the client received the disclosure documents 48 hours in advance or if the five-day grace period has expired, either party may terminate the agreement upon written notice to the other party, for Pension and Portfolio Management Services either party may terminate the agreement upon 30-day written notice to the other party. Any unearned fees will be refunded to the client. K. Other Disclosures. Where applicable, the following additional disclosures are provided in client contracts: (a) (b) Generally, clients grant Bankers & Investors Co. complete discretion over the selection and amount of securities to be bought or sold, the broker or dealer to be used, and the commission rates to be paid for their account without obtaining their prior consent or approval. However, the Firm s investment authority may be subject to specified investment objectives, guidelines, and/or conditions imposed by the client. For example, a client may specify that the investment in any particular stock or industry should not exceed specified percentages of the value of the portfolio and/or restrictions or prohibitions of transactions in the securities of a specific industry. clients may amend these limitations as required. Such amendments must be submitted in writing. In limited circumstances, where Bankers & Investors Co. manages an account on a non-discretionary basis, the Firm will seek client approval prior to implementing changes in the client account. Bankers & Investors Co. is registered as a broker dealer and, as such, employs registered representatives to act as agents on behalf of Bankers & Investors Co. in that capacity. Bankers & Investors Co. Section VI Client Accounts and Documents Page 12

40 also holds an insurance producer license, whereby it can offer insurance products from a variety of product sponsors. Bankers & Investors Co. and its registered representatives can effect transactions in securities, investment company products, and/or insurance products for its clients and earn compensation for these activities. Such compensation may include commissions and/or 12b-1 fees for the sale of investment company products. Bankers & Investors Co. expects that clients of its investment adviser entity will also be clients of Bankers & Investors Co. in its capacities as a broker dealer. Clients are instructed that they are under no obligation to use the services of Bankers & Investors Co., or any of its registered representatives for brokerage or insurance products and/or services; and that the fees charged by Bankers & Investors Co. for advisory services are separate and distinct from any fees charged to the clients for brokerage or insurance products and/or services. (c) (d) IARs of Bankers & Investors Co. who are registered representatives are subject to various rules, which may restrict such registered individuals from conducting securities transactions away from Bankers & Investors Co. and its clearing broker. Therefore, clients are advised that IARs of Bankers & Investors Co. may be limited to conducting securities transactions through Bankers & Investors Co. and its clearing firm. Clients are advised that lower commissions and fees may be available from other brokers. Clients may utilize the broker dealer of their choice and have no obligation to purchase or sell securities through Bankers & Investors Co. Bankers & Investors Co. may recommend that clients utilize the services of a third party investment adviser ( TPA ) to manage a portion of, or their entire portfolio. All TPAs that the Firm recommends to its clients must be registered as investment advisers with either the Securities and Exchange Commission or with the appropriate state authority(ies). Section VI Client Accounts and Documents Page 13

41 After gathering information about the client s financial situation and objectives, an IAR of Bankers & Investors Co. will make recommendations regarding the suitability of a TPA or investment style based on, but not limited to, the client s financial needs, investment goals, tolerance for risk, and investment objectives. Upon selection of a TPA(s), Bankers & Investors Co. will monitor the performance of the TPA(s) to ensure their performance and investment style remains aligned with the investment goals and objectives of the client. Bankers & Investors Co. will share in the fee paid by the client to the TPA. Clients who are referred to TPAs will receive full disclosure, including services rendered and fee schedules, at the time of the referral by delivery of a copy of the relevant TPA s Form ADV Part II or equivalent disclosure document. In addition, if the investment program recommended to a client is a wrap fee program, the client will also receive the Schedule H or equivalent wrap fee brochure provided by the sponsor of the program. Fees paid by the client to the TPA are established and payable in accordance with the Form ADV Part II or other equivalent disclosure document provided by each TPA to whom the client is referred and these fees may or may not be negotiable. Such compensation may differ depending upon the individual agreement Bankers & Investors Co. has with each TPA. As such, Bankers & Investors Co. or its IARs may have an incentive to recommend one TPA over another TPA with whom it has less favorable compensation arrangements or other advisory programs offered by TPAs with which it has no compensation arrangements. Clients may be required to sign an agreement directly with the TPA(s) selected. The client, the Firm or the TPA, in accordance with the provisions of those agreements, may terminate the advisory relationship. If the TPA is compensated in advance, the client will typically receive a Section VI Client Accounts and Documents Page 14

42 pro rata refund of any prepaid advisory fees upon termination of an advisory agreement. (e) Bankers & Investors Co. is a corporation formed under the laws of the State of Missouri. K. Paperwork Requirements for Compliance RIA business is closely scrutinized, highly regulated, and requires many documents. The procedure for any document your client signs is to send the original to the B&I office, give the customer a copy, and keep a copy for your own files. It is important to fill out all forms completely and accurately. One Agreement for Investment Management Services can serve a client in many ways. For example, a married couple may sign one Agreement for Investment Management Services, but require three exhibits: one for a joint account, one for the husband s IRA, and one for the wife s IRA. An IRA at SWS and at a variable annuity company will require two exhibits. Additionally, if the accounts are discretionary, please complete one Trading Authorization form for each exhibit completed. (a) RIA Documents You May Need Samples of the forms listed are available at the home office. Either the Agreement for Investment Management Services or the Agreement for Financial Planning Services must be reviewed with and signed by each client. If a section does not apply, you may cross it out and write N/A in the margin. You and your client(s) should initial the change. Be sure to choose either discretion or non-discretion if you are using the Agreement for Investment Management Services form. A New Account Form, must be completed for each RIA account as well. Section VI Client Accounts and Documents Page 15

43 The Form ADV Part II is a disclosure document that must be given to all clients for whom you do investment advisory business, whether or not you charge them fees. Every time our ADV is updated, the latest version will be ed to each IAR. Please be sure the version you are using is the most up-to-date version available. The Trading Authorization Form must be completed for each discretionary client. These are not required for non-discretionary accounts. (b) Keeping Your RIA Business in Compliance Certain information on each fee account must be provided to the Home Office. The following forms should always be mailed to thehome Office: Original Agreement for Investment Management Services or Agreement for Financial Planning Services (keep a copy) Original New Account Forms (keep a copy) (c) RIA Advertising All advertising and sales literature must be submitted to and approved by the Compliance department. Documents that need to be submitted include: Presentations Marketing Brochures Marketing Commentaries Performance Report Templates Any other form of advertising Essentially, any and all documents used with the public must be submitted to the Compliance department. Section VI Client Accounts and Documents Page 16

44 VII. ADVERTISING A. Regulation. The Company's advertising practices are regulated by the State of Missouri under rules specific to this item. Generally these rules prohibit the Company from engaging in fraudulent, deceptive, or manipulative activities. These rules also prohibit the making of any material omission, untrue statement of a material fact, or any statement that is otherwise false or misleading. In appraising advertisements by investment advisers the regulators will not only look to the effect that an advertisement might have on careful and analytical persons but will also look at the advertisements possible impact on those unskilled and unsophisticated in investment matters. B. Prohibited References. 1. Use of the Term "Investment Counsel". The term investment counsel may not be used unless: (a) (b) the person's principal business is acting as an investment adviser; and a substantial portion of their business consists of providing continuous advice as to the investment of funds on the basis of the individual needs of each client. 2. Use of the Designation "RIA". Neither the Company nor any person associated with the Company may use the designation of "RIA" after their name. 3. Other Prohibitions. It is unlawful for the Company to represent that it has been sponsored, recommended or approved, or that its abilities or qualifications have been passed upon by any federal or state governmental agency. C. Definition of Advertising. Advertising is defined to include: any written communication addressed to more than one person, or any notice or announcement in any publication or by radio, television, or electronic media which offers securities analysis or reports or offers any investment advisory Section VII Advertising Page 1

45 services regarding securities. This broad definition includes standardized forms, form letters, the Company's brochures, podcasts or any other materials designed to maintain existing clients or to solicit new clients. D. Review and Approval. The CCO will be responsible for reviewing and approving all advertising material prior to use. The signing and dating of the advertising copy shall indicate approval. In addition, the CCO is the Media Relations Spokesperson (MRS) for press matters and would give the approval for interviews, articles and other media contacts. E. Testimonials. 1. General Prohibition. Rule 206(4)-1 generally prohibits using advertisements that include testimonials of any kind. 2. Definition. While Rule 206(4)-1 does not specifically define the term "testimonial", it generally includes any favorable statement made by a current or former advisory or financial planning client. 3. Exceptions (a) Third Party Reports. The Company may use bona fide, unbiased third-party reports, even if the Company has paid the third party to verify its performance. (b) Dalbar Ratings. Unless otherwise limited by regulation, the ratings received by the Company in client surveys conducted by Dalbar, Inc., may be used consistent with the SEC s no-action letter on the subject. (c) Use of Advisory Client List. The Company may include a list of advisory clients in an advertisement, provided that: i. Each client to be named has consented to the Company s use of their name in the advertisement; Section VII Advertising Page 2

46 ii. iii. iv. The Company does not use performance-based criteria to determine which clients to include on the list; Each list includes a disclaimer to the effect that "it is not known whether the listed clients approve or disapprove of the Company or the advisory services provided"; and, Each list includes disclosure about the objective criteria used to determine which clients were included on the list. F. Past Recommendations. 1. List of Recommendations. Advertisements that refer directly or indirectly to past specific recommendations of the Company shall not be used unless the advertisement sets out (or offers to furnish) a list of all recommendations made by the Company within at least the prior one-year period. The list must include the following: (a) (b) (c) (d) (e) (f) The name of each security recommended; The date the security was recommended; Whether the advice was to buy, sell or hold; The market price at the time the recommendation was made; The price at which the recommendation was to be acted upon; and, The current market price of the security. 2. Disclosure. The following disclosure must appear (in typeface at least as large as the largest print used in the text) on the first page of the list: It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. Section VII Advertising Page 3

47 G. Use of Graphs, Charts and Formulas. 1. Restriction. Advertisements must not be written so as to suggest in any way, that any graph, chart, formula, or other device offered can, by itself, guide the investor as to what securities to buy or sell or when to buy or sell them. 2. Disclosure. If the advertisement represents that a graph, chart, formula, or other device can assist an investor with stock selection or timing decisions, then the advertisement must prominently disclose the limitations and difficulties regarding its use. 3. Charges. If a report, analysis, or other service is furnished free of charge, the product or service must be entirely free, and without direct or indirect conditions or obligations. H. Performance Advertising 1. Use of Performance Data. Although performance data is not required to be disclosed as part of an advertisement, if it is in fact used, the information must be presented accurately and fairly and approved by the CCO. 2. Disclosures. (a) Model or Actual. When including either model or actual performance data in an advertisement, the following disclosures shall be made: i. The effect of material market or economic conditions on the results portrayed; ii. iii. All advisory fees, brokerage commissions or other client paid expenses; The extent that performance was influenced by reinvestment of dividends; Section VII Advertising Page 4

48 iv. All material relevant factors when comparing results to an index; v. All material conditions, objectives, and investment strategies used to obtain the performance advertised; and, vi. The potential for loss where the potential for profit is also discussed. (b) Model Only. Where only model performance factors are used, the following additional disclosures shall also be prominently made: i. All limitations inherent in model results particularly that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on the Company s decision making if the Company were actually managing client money; ii. iii. iv. Where applicable, any material changes in investment strategies or conditions during the period portrayed; Where applicable, that some or all of the strategies reflected in the model results are not currently offered by the Company; and, Where applicable, that the Company's clients had actual investment results, which were materially different from those shown in the model. (c) Actual Performance Results for Selected Group of Clients. If the results are only for a selected group of clients, the basis on which the selection was made and the effect of this practice on the results shown (if material) must also be disclosed. Section VII Advertising Page 5

49 3. "Net of Fees" Requirement for Performance Advertising. All advertisements must reflect the deduction of advisory fees, brokerage commissions, and other client paid expenses with the following exceptions: (a) (b) Performance results may be calculated without fees paid to a custodian, where the client generally selects and pays the custodian fee. Gross performance results may be used, but only in one-on-one presentations to wealthy individuals, pension funds, universities, and other institutions, provided that the Company furnishes the following disclosures: i. That the performance results do not reflect the deduction of fees; ii. iii. iv. That the client's return will be reduced by the advisory fees and other expenses; The Company's fees as shown in Part II of the Company's Form ADV; and, An example (table, chart, graph or narrative) showing the effect of the compounded advisory fees over a number of years on the value of the client's portfolio. 4. Use of Representations Involving AIMR Compliance. Representations regarding AIMR compliance are strictly prohibited other than approved by the CCO in advance. 5. Record Keeping Requirements for Performance Advertising. (a) Responsibility. The CCO is responsible for maintaining all performance advertising records at a readily accessible location and in accordance with applicable laws, rules and regulations. Section VII Advertising Page 6

50 (b) Time. At a minimum, all performance advertisements and all documents and supporting records included in the performance figures advertised must be maintained for not less than five years from the end of the fiscal year in which the performance advertisement was last published. I. Use of Hedge Clauses. 1. Permitted Use. Advertisements, correspondence, and other literature generated by the Company may contain hedge clauses or legends that pertain to the reliability and accuracy of the information furnished. 2. Disclosure. The following disclosure must be provided when using hedge clauses: "The information contained herein has been obtained from sources believed to be reliable but the accuracy of the information cannot be guaranteed." 3. Restrictions. Advisers Act Section 215 Under no circumstances shall any legend, condition, stipulation or provision be written so as to create, in the mind of the investor, a belief that the person has given up some or all of their legally entitled rights or protections. Additionally, the Company shall not use any hedge clause that would seek to relieve the Company from compliance with any securities or advisory laws, rules or regulations. In the opinion of the SEC, the use of such hedge clauses may violate the Company's fiduciary duties to its clients. J. Interviews with the Media. The Media Relation Spokesperson ( MRS ) will be responsible for overseeing any contact with the media. All advisory personnel who wish to have discussions with the media shall request permission in writing, from the MRS prior to any interview. Advisory personnel should be cautioned when discussing investment strategies, past or current performance, future performance or any particular product in articles, press releases or interviews. All such communications should be done in general terms. Advisory personnel should not discuss any portfolio holdings that the Company intends to sell or purchase or any securities recently traded Section VII Advertising Page 7

51 (within 7 days). Advisory personnel should at no time discuss Company clients or any information deemed confidential. Further, advisory personnel should not discuss regulatory actions, litigation or investigations. The CCO in conjunction with the Company s counsel should address discussions involving these types of actions. Section VII Advertising Page 8

52 VIII. DISCLOSURE REQUIREMENTS A. Responsibility. The Company is required to disclose information regarding their business practices to both regulators and members of the public. The CCO is responsible for ensuring that the Company meets all disclosure requirements required by applicable laws, rules and regulations. The information and procedures contained within this section (and throughout this manual) should be used as a guide in determining what needs to be disclosed, how it is to be disclosed, and when it must be disclosed. B. Brochure Rule. Advisers Act Rule Client Copy. All clients must be furnished either a copy of Part II of Form ADV or a written document containing at least the information required in Part II (Including both "No" answers and "Yes" answers disclosed on Form ADV). 2. Initial Delivery. a. The brochure must be delivered at least 48 hours prior to entering into a contract; or, b. At the time of entering into the contract, provided that the client is given the right to terminate the contract, without penalty, within five (5) business days of signing the contract. 3. Annual Delivery. a. On an annual basis, the Company must either deliver, or offer to deliver without charge, a copy of the current Disclosure Brochure. See Appendix B. b. If the client requests a copy of the Disclosure Brochure, it must be mailed to the client within seven (7) days. c. Delivery of Part II of the Form ADV may be sent via providing that; Section VIII Disclosure Requirements Page 1

53 (i) (ii) (iii) (iv) the client is capable of receiving delivery in such a manner; the Company receives written consent from the client that the client wishes to receive delivery of the annual offer to deliver, as well as the actual delivery of the brochure via (privacy issues); the Company requests a read confirmation and receives such confirmation from the client, and; the Company keeps a copy of the read confirmation in the client s file. C. Disciplinary Disclosure. Advisers Act Rules 206(4) - 4(a)(2) All material facts which relate to legal or disciplinary events that are material to the client's evaluation of the Company's integrity or ability to meet its contractual obligations must be disclosed promptly to clients and to prospective clients not less than 48 hours before entering into an advisory agreement with the Company or at the time of the agreement if the client has the right to terminate the agreement within five (5) business days after entering into the agreement. The following facts, among others, are considered material: 1. Court Proceedings (Criminal and Civil) Disclosure should be made for a period of ten (10) years from the time of the event. a. If applicable, that the Company or any member of its senior management has been permanently or temporarily enjoined from engaging in investment-related activities; b. If applicable, that the Company or any member of its senior management has been convicted of or has plead guilty or nolo contendere to a felony or misdemeanor involving an investment related business; fraud; making false statements or omissions; wrongful taking of property; bribery; forgery; counterfeiting; or, extortion; and, Section VIII Disclosure Requirements Page 2

54 c. If applicable, that the Company or any member of its senior management was found to have been involved in a violation of an investment-related statute or regulation. 2. Regulatory Proceedings. Disclosure should be made for a period of ten (10) years from the time of the event. a. If applicable, that the Company or an associated person of the Company caused an investment related business to lose its authorization to conduct business or was found to have violated an investment-related statute or regulation and was subject to an order denying, suspending, or revoking its ability to do business or engage in investment-related activities; or, b. If applicable, that the Company or an associated person of the Company received a fine in excess of $2,500 in a self-regulatory proceeding. D. Financial Disclosure. Advisers Act Rules 206(4)-4(a)(1) 1. Requirements. The Company must disclose any facts or circumstances which might reasonably impact the Company's ability to meet its contractual commitments to clients, where the Company: a. has discretionary authority over or custody of client assets; or, b. requires pre-payment of fees of more than $500, six months or more in advance. 2. Examples. Examples of information that must be disclosed includes: a. the likelihood of bankruptcy or insolvency; b. an event that would occupy the Company's time so that its ability to manage client assets would be impaired; or c. an event that is material to an evaluation of the Company s integrity or its ability to meet contractual commitments to clients. Section VIII Disclosure Requirements Page 3

55 E. Wrap Fee Program Disclosures (Third Party Investment Advisors) Advisers Act Rule Forms. Schedule H to Form ADV outlines information required to be disclosed in narrative format in a separate brochure. 2. Delivery. The wrap-fee brochure must be provided to clients in addition to the Form ADV Part II (or, "general brochure"). Initial and annual delivery requirements are the same as those required for Part II of Form ADV. 3. Brochure Disclosures. Disclosures required in the wrap-fee program brochure, include, but are not limited to: a. Fees and Compensation; b. A description of how the program managers are selected and reviewed; c. Certain information about portfolio manager performance; and, d. Any restrictions on the ability of clients to contact and consult with portfolio managers. F. Compensation. 1. Fee Schedule. All material information regarding fees must be disclosed to the client (i.e. refund provisions, negotiability, etc.). G. Privacy Notice Disclosures. At the inception of the client relationship, and annually thereafter, the Company will deliver a copy of its privacy notice, as addressed in the Privacy Policy section of this manual. H. Electronic Delivery of Disclosure Information. The Company may deliver the following disclosure information to clients, using electronic formats approved by the Company: 1. The Company's Brochure (Advisers Act Rule 204-3); Section VIII Disclosure Requirements Page 4

56 2. The client's consent to assignment of an advisory contract under Advisers Act Section 205(a)(2); 3. Disclosure and client consent for principal transactions under Advisers Act Section 206(3); 4. Disclosure and client consent for agency cross transactions under Advisers Act Rule 206(3)-2; and, 5. Such other types of disclosure information as permitted by current laws, rules and regulations. Section VIII Disclosure Requirements Page 5

57 IX. ELECTRONIC COMMUNICATIONS A. Supervisory Responsibility. The CCO shall be responsible for ensuring that the Company s electronic communications systems are being utilized solely for authorized business purposes in conformance with applicable laws, rules and regulations. This policy extends to off-hours usage of electronic communications systems and where permitted, to communications concerning Company business on home, personal, or other electronic communications systems whether owned by the Company, the employee or otherwise. As used in this policy, the term "electronic communications" includes, but is not necessarily limited to business communications made through any of the following media: 1. Telephone (including Internet telephony devices and related protocols); 2. Electronic mail ( ); 3. Facsimile, including e-fax services; 4. The Internet, including the Web, file transfer protocols ( FTP"), Remote Host Access, etc.; 5. Video teleconferencing; and, 6. Internet Relay Chat ("IRC"), bulletin boards and similar news or discussion groups. B. Policies. The following summarizes the key points of the Company's electronic communications policy. 1. The Company's electronic communications systems are to be used for business purposes only. 2. Without the prior consent of the CCO, electronic communications with clients, regulators or the public concerning Company business are permitted only on Company communications systems. Section IX Electronic Communications Page 1

58 3. Electronic communications are not private and may be monitored, reviewed and recorded by the Company. 4. No employee, other than specifically authorized personnel, is permitted to post anything on the Company's Web site. 5. Without the pre-approval of the CCO, no employee may post any information concerning the Company, its business, or clients to the Internet (or similar third-party system), containing references to the Company, communications involving investment advice, references to investment-related issues or information or links to any of the fore mentioned. C. Review. The CCO shall review the Company s use of electronic communications at regular and frequent intervals to ensure the following: 1. Notice. That electronic notifications to customers are sent in a timely manner and are adequate to properly convey the message; 2. Access. That customers who are provided with information electronically are also given access to the same information as would be available to them in paper form; 3. Evidence of Delivery. That procedures ensure that delivery obligations are met when using electronic mail which includes obtaining of the customer s informed consent; 4. Security. That reasonable precautions have been taken to ensure the integrity, confidentiality and security of information sent through electronic means and that such precautions have been tailored to the medium used; and, 5. Consent. That prior to sending personal financial information electronically, the Company has obtained the informed consent of the recipient (unless responding to a request for information made electronically). Section IX Electronic Communications Page 2

59 D. Advertising and Sales Literature. Where an electronic medium is used to disseminate advertisements for the Company s services or other information that is not subject to a delivery requirement, it will be subject to the same requirements that apply to such communications made in paper form. E. Disclosure Information. Covered in Section VIII of this manual. F. Standards for Internet and Communications. 1. Electronic Communications are not private or reliable. Electronic communications may be widely disseminated. Electronic communications may not be suitable, and should not be used for communications that must remain confidential or private. Contents of external messaging should be limited to information that is already in the public domain. There should be no expectation of privacy in electronic communications. Due to the nature of electronic communications systems in general, there is no guarantee that a message or other electronic communication will reach its destination in a timely manner or that it will reach its destination at all. 2. Communications must conform to appropriate business standards and the law. Users of the Company's electronic communications systems are expected to follow appropriate business communication standards. Use must comply with all applicable international, federal, state, and local laws. The following guidelines apply: a. Electronic communications should contain the most recent, valid information available. b. Communications received with inappropriate content must be deleted/discarded immediately. c. Unauthorized dissemination of proprietary information is prohibited. Section IX Electronic Communications Page 3

60 d. Unauthorized copying or transmitting software or other materials protected by copyright law is prohibited. e. Non-Company sponsored electronic communications systems should not be used for Company business without prior approval from the CCO. f. Access to each employee's computer, telephone and other electronic communications systems should be reasonably safeguarded. Passwords should be kept in a secure location. g. Encrypted electronic communications may only be initiated or opened with prior approval for the CCO. h. Personnel must preserve electronic communications sent and received according to Company and regulatory requirements. Firm polices for record retention apply to electronic communications in the same manner as they apply to any other written communications. i. Communications with the public may require pre-approval in accordance with other Company policies. If in doubt, it is the employee's responsibility to check with the CCO before disseminating information via electronic or conventional means. j. Electronic communications through the Company's systems are the property of the Company. The Company reserves the right to monitor, audit, record or otherwise retain electronic communications at any time for appropriate business usage, standards and compliance with this policy, applicable laws and regulations. G. Maintenance. As part of routine maintenance, messages shall be maintained on the Company s server for a period of two years and thereafter stored on other electronic media for an additional period of three years. Section IX Electronic Communications Page 4

61 H. Licensing. Care must be taken to ensure that electronic communications directed to a person in a particular state comply with the securities law of that state, including without limitations, requirements that the Company has first registered in that state or has otherwise qualified for an exemption or exclusion from such requirement. The Company's electronic communications systems must not be used to attempt to effect any transaction in securities, or to render investment advisory services for compensation in any state in which the Company is not properly registered. Section IX Electronic Communications Page 5

62 X. TRADE ERROR PROCEDURES The following procedures provide guidance on how basic trading errors will be handled and identify the person or persons to whom issues regarding trading errors or potential trading errors should be directed to ensure that they are handled promptly and appropriately. A. Definition of Trade Error A trading error is a deviation from the applicable standard of care in the placement, execution, or settlement of a trade for a client account. In general, the following types of errors would be considered trading errors for the purposes of these Procedures if the error resulted from a breach in the duty of care that the Company owes to the client under the particular circumstances: 1. The purchase or sale of the wrong security or wrong amount of securities; 2. The over allocation of a security; 3. Purchase or sale of a security in violation of client investment guidelines or other failure to follow specific client directives; and 4. Purchase of securities not legally authorized for the client s account. For purposes of these Procedures, the following types of errors are not deemed to be trading errors: 1. Good faith errors in judgment in making investment decisions for clients; 2. Errors caught and corrected before execution; 3. Ticket re-writes and similar mistakes that mis-describe properly executed trades; and 4. Errors made by persons other than the Company (e.g. broker-dealers). Section X Trade Error Procedures Page 1

63 B. Policy An overriding principle in dealing with a trading error made by the Company (or any other party to the trade other than the client) is that the client never pays for losses resulting from such errors. In adherence to Section 28(e) of the Securities Exchange Act of 1934, as amended, the Company does not soft dollar trading errors. In general, when the error and responsible party are identified, the trade is broken immediately, if possible, and the error is corrected the same day. A credit is then issued by the Company to the appropriate party (i.e. client, etc.) in the amount of the loss, if any. Violations of these procedures are viewed as unacceptable by the management of the Company and may result in written sanctions, monetary penalties, or loss of position. Any questions regarding error correction, policy or procedures should be directed to the CCO. C. Trade Error Notification Procedures Procedures to be followed in the event a potential trading error is identified include the following: 1. Correct the error immediately in the best interest of the client and in a manner consistent with the Policy outlined above. 2. A memo will be written by the CCO identifying: (1) the date of the trading error, (2) the account(s) involved, (3) the security involved (including CUSIP), (4) a brief description of the error, and (5) the amount of the gain or loss. 3. Payments made to clients as a result of trade error correction are to be recorded in the Company s accounting records. 4. The CCO should determine if a pattern of errors exists that should otherwise be addressed. 5. The Company will maintain a record of all trade error reports for a period of five (5) years. Section X Trade Error Procedures Page 2

64 XI. CODE OF ETHICS: SAMPLE POLICY CODE OF ETHICS A. Introduction This is the Code of Ethics (the Code ) of Bankers & Investors Company, Inc. (the "Company" or the Firm ). The Company s Policies on Insider Trading and Personal Securities Transactions are included in the Code. Things You Need to Know to Use This Code: 1. Terms in boldface under Item C. Definitions of this section have special meanings as used in this Code. To understand the Code, you need to read the definitions of these terms. 2. There are three Reporting Forms that an Associated Person must complete under this Code. Additional information on, and copies of, these Reporting Forms is included below. You can also get copies of the Reporting Forms from the CCO. 3. The CCO has the authority to grant written waivers of the provisions of this Code in appropriate instances. However: a. the Company expects that waivers will be granted only in rare instances, and b. some provisions of the Code that are mandated by law cannot be waived. 4. For purposes of this Code, all shareholders or other beneficial owners of the Company are considered an Associated Person of the Company. 5. The CCO will review the terms and provisions of this Code at least annually and make amendments as necessary. Any amendments will be distributed to all Associated Persons of the Company, and shall Section XI Code of Ethics Page 1

65 require each Associated Person to provide in writing their receipt, understanding and acceptance of the change(s). 6. If you have any doubt or uncertainty about what this Code requires or permits, you should ask the CCO. Please do not guess at the answer. B. General Principles The Company is a fiduciary for its investment advisory clients. Because of this fiduciary relationship, it is generally improper for the Company or its employees to: 1. use for their own benefit (or the benefit of anyone other than the client) information about the Company s trading or recommendations for client accounts; or 2. take advantage of investment opportunities that would otherwise be available for the Company s clients. Also, as a matter of business policy, the Company wants to avoid even the appearance that the Company, its employees or others receive any improper benefit from information about client trading or accounts or from our relationships with our clients or with the brokerage community. The Company expects all employees to comply with the spirit of the Code, as well as the specific rules contained in the Code. The Company treats violations of this Code (including violations of the spirit of the Code) very seriously. If you violate either the letter or the spirit of this Code, the Company may take disciplinary measures against you, including, without limitation, imposing penalties or fines, reducing your compensation, demoting you, requiring unwinding of the trade, requiring disgorgement of trading gains, suspending or terminating your employment, or any combination of the foregoing. Section XI Code of Ethics Page 2

66 Improper trading activity can constitute a violation of this Code. However, you can also violate this Code by failing to file required reports, or by making inaccurate or misleading reports or statements concerning trading activity or securities accounts. Your conduct can violate this Code even if no clients are harmed by your conduct. C. Definitions These terms have special meanings in this Code of Ethics: 1. Supervised Person. This term includes directors, officers and partners of the Company, as well as any other person occupying a similar status or performing similar functions. The Company may also include in this category temporary workers, consultants, independent contractors and anyone else designated by the CCO. For purposes of the Code, such outside individuals will generally only be included in the definition of a supervised person if their duties include access to certain types of information, which would put them in a position of sufficient knowledge to necessitate their inclusion under the Code. The CCO shall make the final determination as to which of these are considered supervised persons. 2. Access Person. All Access Persons are also Supervised Persons. An Access Person is (i) one who has access to nonpublic information regarding any client s purchase or sale of securities, is involved in making securities recommendations to clients, or has access to such recommendations that are nonpublic, (ii) each member of the Family/Household (as defined below) of such person that is directly employed by the Company, and (iii) each person to whom such person contributes support. All of the Company s directors, officers, and partners are presumed to be access persons. Section XI Code of Ethics Page 3

67 3. Associated Person. For purposes of this Code, all Supervised Persons and Access Persons are collectively referred to as Associated Persons. 4. Advisory Client. Any person to whom or entity to which the Company serves an investment adviser, renders investment advice or makes any investment decisions for a fee is considered to be a client. 5. Beneficial Ownership. Means any opportunity, directly or indirectly, to profit or share in the profit from any transaction in securities. Beneficial Ownership is a very broad concept. 6. Chief Compliance Officer. Jerrod L. Foresman, or another person that is designated to perform the functions of CCO when he is not available. For purposes of reviewing the CCO's own transactions and reports under this Code, the functions of the CCO are performed by Brent M. Weisenborn. 7. Covered Securities. Means anything that is considered a "security" under the Investment Company Act of 1940, except: a. Direct obligations of the U.S. Government. b. Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt obligations, including repurchase agreements. c. Shares of open-end investment companies that are registered under the Investment Company Act (mutual funds). This is a very broad definition of security. It includes most kinds of investment instruments, including things that you might not ordinarily think of as "securities," such as: Exchange traded funds; Options on securities, on indexes and on currencies; Investments in all kinds of limited partnerships; Section XI Code of Ethics Page 4

68 Investments in foreign unit trusts and foreign mutual funds; and Investments in private investment funds and hedge funds. If you have any questions or doubt about whether an investment is considered a security or a Covered Security under this Code, ask the CCO. 8. Non-Reportable Securities. Specifically exempt from the definition of Covered Securities are: treasury securities; bank certificates of deposits, commercial paper, etc.; money market fund shares; shares of open-end mutual funds that are not advised or sub-advised by the Company; and units of a unit investment trust ( UIT ) if the UIT is invested exclusively in unaffiliated mutual funds. 9. Members of your Family/Household Include: a. Your spouse or domestic partner (unless they do not live in the same household as you and you do not contribute in any way to their support). b. Your children under the age of 18. c. Your children who are 18 or older (unless they do not live in the same household as you and you do not contribute in any way to their support). d. Any of these people who live in your household: your stepchildren, grandchildren, parents, stepparents, grandparents, brothers, sisters, parents-in-law, sons-in-law, daughters-in-law, brothers-in-law and sisters-in-law, including adoptive relationships. Comment: There are a number of reasons why this Code covers transactions in which members of your Family/Household have Beneficial Ownership. First, the SEC regards any benefit to a person that you help support financially as indirectly benefiting you because it could reduce the amount that you might otherwise Section XI Code of Ethics Page 5

69 contribute to that person's support. Second, members of your household could, in some circumstances, learn of information regarding the Company s trading or recommendations for client accounts, and must not be allowed to benefit from that information. D. Guidelines for Professional Standards All Associated Persons must at all times reflect the professional standards expected of those engaged in the investment advisory business, and shall act within the spirit and the letter of the federal, state and local laws and regulations pertaining to investment advisers and the general conduct of business. These standards require all personnel to be judicious, accurate, objective and reasonable in dealing with both clients and other parties so that their personal integrity is unquestionable. 1. All Associated Persons are required to report any violation of the Code, by any person, to the CCO or other appropriate person of the Company immediately. Such reports will be held in confidence. 2. Associated persons must place the interests of Advisory Clients first. All Associated Persons must scrupulously avoid serving their own personal interests ahead of the interests of the Company's Advisory Clients. In addition, Associated Persons must work diligently to ensure that no client is preferred over any other client. 3. All Associated Persons are naturally prohibited from engaging in any practice that defrauds or misleads any client, or engaging in any manipulative or deceitful practice with respect to clients or securities. 4. No Associated Person may serve on the board of directors of any publicly traded company without prior written permission by the CCO, or other appropriate personnel. 5. Associated persons must conduct all personal securities transactions in full compliance with this Code. Doubtful situations always should be resolved in favor of Advisory Clients and in cooperation with the CCO. Technical compliance with the Code's provisions shall not Section XI Code of Ethics Page 6

70 automatically insulate from scrutiny any securities transactions or actions that could indicate a violation of the Company's fiduciary duties. 6. Personal transactions in securities by Associated Persons must be accomplished so as to avoid even the appearance of a conflict of interest on the part of such personnel with the interests of the Company s clients. Likewise, Associated Persons must avoid actions or activities that allow (or appear to allow) a person to profit or benefit from his or her position with the Company at the expense of clients, or that otherwise bring into question the person s independence or judgment. 7. Associated persons are prohibited from accepting compensation for services from outside sources without the specific prior written permission of the CCO or other appropriate personnel. 8. When any Associated Person faces a conflict or potential conflict between their personal interest and the interests of clients, they are required to immediately report the conflict to the CCO for instruction regarding how to proceed. 9. The recommendations and actions of the Company are confidential and private matters. Accordingly, the Company has adopted a Privacy Policy to prohibit the transmission, distribution or communication of any information regarding securities transactions in client accounts or other non-public information, except to broker/dealers or other bona fide service providers in the ordinary course of business. In addition, no information obtained during the course of employment regarding particular securities (including internal reports and recommendations) may be transmitted, distributed, or communicated to anyone who is not affiliated with the Company, without the prior written approval of the CCO. E. Personal Trading Policies Section XI Code of Ethics Page 7

71 1. General Information. The following policies and procedures apply to all accounts owned or controlled by an Associated Person, those accounts owned or controlled by members of the Associated Person s immediate family, including any relative by blood or marriage living in the same household, and any account in which the Associated Person has any beneficial interest, such as a trust account, certain investment pools in which you might participate, and certain accounts that others may be managing for you. These accounts are collectively referred to as covered accounts. Any account in question should be addressed with the CCO immediately to determine if it is a covered account. 2. Reporting Requirements. You must file the reports described below, even if you have no holdings, transactions or accounts to list in the reports. Copies of all reporting forms may be obtained from the CCO. a. Initial Holdings Reports. No later than 10 calendar days after you become an employee (or within 10 days of the adoption of this Code if you were already an employee at the time of its adoption), you must file an Initial Holdings Report with the CCO. See Exhibit A. The Initial Holdings Report requires you to list all brokerage accounts and securities owned or controlled by you, or members of your Family/Household. It also requires you to list all brokers, dealers and banks where you maintained an account in which any securities (not just Covered Securities) were held for the direct or indirect benefit of you or a member of your Family/Household on the date you became an employee (or on the date this Code was adopted, if you were already an employee on such date). Section XI Code of Ethics Page 8

72 Each Associated Person shall instruct the broker for these accounts covered accounts to send duplicate confirmations and brokerage statements for the covered accounts to the Company, c/o the CCO. Each Associated Person must notify the CCO of any updates or changes to his or her covered accounts within 10 days of such update or change. The Initial Holdings Report also requires you to confirm that you have read and understand this Code, that you understand that it applies to you and members of your Family/Household. b. Quarterly Transaction Reports. No later than 30 calendar days after the end of March, June, September and December each year, you must file a Quarterly Transaction Report with the CCO. See Exhibit B. The Quarterly Transaction Report requires you to list all transactions during the most recent calendar quarter in Covered Securities in which you (or a member of your Family/Household) had Beneficial Ownership. It also requires you to list all brokers, dealers and banks where you or a member of your Family/Household established an account in which any securities (not just Covered Securities) were held during the quarter for the direct or indirect benefit of you or a member of your Family/Household. This requirement is satisfied by your instructing the custodian for these accounts to send duplicate confirmations and all periodic brokerage account statements for the covered accounts to the Company, c/o the CCO. c. Annual Holdings Reports. By January 31st of each year, you must file an Annual Holdings Report with the CCO. The Annual Holdings Report requires you to list all Covered Securities in which you (or a member of your Section XI Code of Ethics Page 9

73 Family/Household) had Beneficial Ownership as of December 31st of the prior year. It also requires you to list all brokers, dealers and banks where you or a member of your Family/Household maintained an account in which any securities (not just Covered Securities) were held for the direct or indirect benefit of you or a member of your Family/Household on December 31st of the prior year. You may satisfy this requirement by providing contemporaneous duplicate copies of periodic account statements as described in Section 2 above. See Exhibit C. The Annual Holdings Report also requires you to confirm that you have read and understand this Code, have complied with its requirements, and that you understand that it applies to you and members of your Family/Household. 3. Exemptions from Reporting a. Non-reportable securities. Rule 204A-1 specifically excludes the following from the definition of Covered Securities: (i) Direct Obligations of the US Treasury; (ii) Bankers acceptance, Certificates of deposit, commercial paper, and the like; (iii) (iv) (v) Money market fund shares; Shares of open end mutual funds, as long as the Company nor any affiliate serves as the adviser or subadviser to the fund; Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are advised or sub-advised by the Company. Section XI Code of Ethics Page 10

74 4. Restricted List. Certain transactions in which the Company engages may require, for either business or legal reasons that any client accounts or proprietary accounts do not trade in certain securities for specified time periods. A security will be designated as restricted if the Company is involved in a transaction that places limits on the aggregate position held by the accounts in that security, or if trading in a security should be restricted for any other reason. The Company s restricted list will be maintained by the CCO. It generally will not be circulated. It is the employee s responsibility to determine whether a security is on the Company s restricted list prior to the execution of any security transactions. 5. Principal Transactions. Neither the Company nor an employee may engage in principal transactions between a proprietary account and a client account without first obtaining the prior written approval of the CCO and the consent of the client. 6. Private Placements. No Employee may acquire, directly or indirectly, beneficial ownership of any security in a private placement without the prior approval of the CCO. A Personal Securities Trading Request Form should be used for this purpose (See Exhibit D ). The CCO shall promptly notify the employee of approval or denial of clearance to trade by indicating such action on the Personal Securities Trading Request Form and returning it to the employee. 7. Initial Public Offerings. No employee may acquire, directly or indirectly, beneficial ownership of any security in an initial public offering without the prior approval of the CCO. A Personal Securities Trading Request Form submitted for this purpose should be submitted to the CCO before the Employee places an indication of interest in the initial public offering with a broker (See Exhibit D ). The CCO shall promptly notify the employee of approval or denial of clearance to Section XI Code of Ethics Page 11

75 trade by indicating such action on the Personal Securities Trading Request Form and returning it to the employee. 8. Manipulative Practices. Section 9(a)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act ) makes it unlawful for any person, acting alone or with others, to effect a series of transactions in any security registered on a national securities exchange creating actual or apparent active trading in such security or raising or depressing the price of the security, for the purpose of inducing the purchase or sale of such security by others. Rule 10b-5 under the Exchange Act has been interpreted to proscribe the same type of trading practices in OTC securities. The thrust of these prohibitions against manipulative trading practices is that no employee should, alone or with others, for either a client account or a proprietary account: (i) engage in trading or apparent trading activity for the purpose of inducing purchases or sales by others; or (ii) engage in trading or apparent trading activity for the purpose of causing the price of a security to move up or down, and then take advantage of such price movement by buying or selling at such artificial price level. Of course, buy or sell programs may cause stock prices to rise or fall, and price changes resulting from supply and demand factors are not prohibited. Rather, Section 9 below prohibits activity where there is a purpose to affect the price of a security artificially through trading or apparent trading, not where such change is an incidental result of a change in supply, demand, or in the intrinsic value of a security. 9. Client Priority. Clients must always receive the best price, in relation to employees, on same day transactions. Employees of the Company must first give priority on all purchases and sales of securities to the Company s clients, prior to the execution of transactions for their Section XI Code of Ethics Page 12

76 proprietary accounts, and personal trading must be conducted so as not to conflict with the interests of a client. While the scope of such actions cannot be exactly defined, they would always include each of the following prohibited situations: a. contemporaneously purchasing the same securities as a client without making an equitable allocation of the securities to the client first, on the basis of such considerations as available capital and current positions, and then to the account of the employee; b. knowingly purchasing or selling securities, directly or indirectly, in such a way as to personally injure a client s transactions; c. using knowledge of securities transactions by a client to profit personally, directly or indirectly, by the market effect of such transactions; and d. giving to any person information not generally available to the public about contemplated, proposed or current purchases or sales of securities by or for a client account, except to the extent necessary to effectuate such transactions. 10. Case-by-Case Exemptions. Because no written policy can provide for every possible contingency, the CCO may consider granting additional exemptions from the Prohibitions on Trading on a case-bycase basis. Any request for such consideration must be submitted by the covered person in writing to the CCO. Exceptions will only be granted in those cases in which the CCO determines that granting the request will create no actual, potential or apparent conflict of interest. All exceptions will be granted in writing. 11. Review of Personal Trading Information. All confirmations, statements and other information regarding personal securities Section XI Code of Ethics Page 13

77 transactions and personal account holdings will be reviewed at least quarterly to monitor compliance with this policy. Such reviews will be conducted by the CCO or a designee that shall report the findings of the review to the CCO with documentation to substantiate the review maintained in the Company s compliance files. The Company reserves the right to require any employee to reverse, cancel or freeze, at the employee s expense, any transaction or position in a specific security if the Company believes the transaction or position violates its policies or appears improper. The Company will keep all such information confidential except as required to enforce this policy or to participate in any investigation concerning violations of applicable law. 12. Pre-Clearance for Personal Securities Transactions a. Bankers & Investors does not require pre-clearance for Personal Securities Transactions other than Private Placements or IPO s. b. When any employee recommends that a security be bought or sold for a client account, such employee must disclose to the CCO if a position in that security is then held in the employee s proprietary account. The CCO may restrict such Employee from buying or selling the position from any proprietary account until a specified period of time after the orders for client accounts have been filled and there is no buying or selling program in progress. F. Insider Trading The purpose of these policies and procedures (the Insider Trading Policies ) is to educate our Associated Persons regarding insider trading, and to detect and prevent insider trading by any person associated with the Company. The term insider trading is not defined in the securities laws, but generally refers Section XI Code of Ethics Page 14

78 to the use of material, non-public information to trade in securities or the communication of material, non-public information to others. 1. Prohibited Activities. All Associated Persons of the Company, including contract, temporary, or part-time personnel, or any other person associated with the Company are prohibited from the following activities: a. trading or recommending trading in securities for any account (personal or client) while in possession of material, non-public information about the issuer of the securities; or b. communicating material, non-public information about the issuer of any securities to any other person. The activities described above are not only violations of these Insider Trading Policies, but also may be violations of applicable law. 2. Reporting of Material, Non-Public Information. Any Associated Person who possesses or believes that she or he may possess material, non-public information about any issuer of securities must report the matter immediately to the CCO. The CCO will review the matter and provide further instructions regarding appropriate handling of the information to the reporting individual. 3. Definitions a. Material Information. Material information generally includes: b. any information that a reasonable investor would likely consider important in making his or her investment decision; or c. any information that is reasonably certain to have a substantial effect on the price of a company s securities. Section XI Code of Ethics Page 15

79 Examples of material information include the following: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems and extraordinary management developments. d. Non-Public Information. Information is non-public until it has been effectively communicated to the market and the market has had time to absorb the information. 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. e. Insider Trading. While the law concerning insider trading is not static, it generally prohibits: (1) trading by an insider while in possession of material, non-public information; (2) trading by non-insiders while in possession of material, nonpublic information, where the information was either disclosed to the non-insider in violation of an insider s duty to keep it confidential or was misappropriated; and (3) communicating material, non-public information to others. f. Insiders. The concept of insider is broad, and includes all employees of a company. In addition, any person may be a temporary insider if she/he enters into a special, confidential relationship with a company in the conduct of a company s affairs and as a result has access to information solely for the company s purposes. Any person associated with the Adviser may become a temporary insider for a company it advises or for which it performs other services. Temporary insiders may also include the following: a company s attorneys, accountants, consultants, bank lending officers and the employees of such organizations. Section XI Code of Ethics Page 16

80 4. Penalties for Insider Trading. The legal consequences for trading on or communicating material, non-public information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he/she does not personally benefit from the violation. Penalties may include: a. civil injunctions b. jail sentences c. revocation of applicable securities-related registrations and licenses d. 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 e. fines for the employee 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. f. In addition, the Company s management will impose serious sanctions on any person who violates the Insider Trading Policies. These sanctions may include suspension or dismissal of the persons involved. G. Sanctions All disciplinary responses to violations of the Code shall be administered by the Chief Compliance Officer, subject to approval by the President of the Company. Determinations regarding appropriate disciplinary responses will be administered on a case-by-case basis. H. Certification Upon the Company s adoption of this Code and annually thereafter, all Associated Persons are required to certify in writing his or her understanding and continuing acceptance of, as well as agreement to abide by, the guidelines Section XI Code of Ethics Page 17

81 and polices set forth herein. Additionally, any change or modification to the Code will be distributed to all Associated Persons and they will be required to certify in writing their receipt, understanding and acceptance of the change(s). Section XI Code of Ethics Page 18

82 ACCESS PERSONS AND EMPLOYEES As of August, 2008 NAME TITLE ACKNOWLEDGEMENT OF RECEIPT OF CODE OF ETHICS ACCESS PERSON Jerrod L. Foresman President & CEO Yes Yes Brent Weisenborn Director / Principal Yes Yes Steve Hook Director Yes Yes Joseph Borich Advisor Yes Yes Nick Bott Advisor Yes Yes Joseph Bartkoski Advisor Yes Yes David Stangohr Advisor Yes Yes Kelly Goodburn Advisor Yes Yes J.P. Hildebrand Advisor Yes Yes Section XI Code of Ethics Page 19

83 AGREEMENT TO ABIDE BY CODE OF ETHICS This agreement is entered into by and between Bankers & Investors Company, Inc. (the Company ) and the employee whose name and signature is represented below (the Employee ). By signing this agreement, the Employee acknowledges that: 1. He or she has received a copy of the Company s Code of Ethics; 2. He or she has read and understands the information contained in the Code of Ethics; and, 3. He or she will abide by the Code of Ethics and any subsequent amendments thereto. To meet the disclosure requirements of SEC Rule 206(4)-4 under the Advisers Act, I further certify that I have disclosed all legal and disciplinary events for which I am, or have been, personally involved, including information regarding any actions or fines by any Self-Regulatory Organization. To comply with the personal securities transactions reporting policy and the Company s Code of Ethics, I further certify that I have directed each broker with whom I have an account to send to Bankers & Investors Company, Inc. s designated CCO duplicate copies of all periodic statements relating to my account(s) and have complied with the reporting requirements of the policy and code of ethics. Employee Please Print Date Signature Section XI Code of Ethics Page 20

84 Exhibit A INITIAL HOLDINGS FORM To: Chief Compliance Officer, Bankers & Investors Company, Inc. From: (Access Person/Associate) NOTE: IN LIEU OF THIS REPORT, YOU MAY SUBMIT DUPLICATE COPIES OF YOUR BROKERAGE STATEMENTS Re: Report of Personal Securities Holdings: As of, 200, I hold the following securities: Date Security Bought/Sold # Shares Price Broker [Use additional sheet if necessary] As of, 200, I do not have any direct or indirect Beneficial Ownership in any securities. Beneficial interest is understood to mean securities transactions in the accounts of my spouse, minor children, or other family members residing in my household. However, I agree to promptly notify Bankers & Investors Company, Inc. s designated CCO if I open such an account so long as I am employed by Bankers & Investors Company, Inc. Signed: Date: Report reviewed by: Date: Section XI Code of Ethics Page 21

85 Exhibit B QUARTERLY PERSONAL SECURITIES TRANSACTION REPORT To: Chief Compliance Officer, Bankers & Investors Company, Inc. From: (Access Person/Associate) NOTE: IN LIEU OF THIS REPORT, YOU MAY SUBMIT DUPLICATE COPIES OF YOUR BROKERAGE STATEMENTS Re: Report of Personal Securities Transactions pursuant to Rule 204-2(a)(12) of the Investment Advisers Act: During the quarter ending, I have purchased/sold the following securities: Date Security Bought/Sold # Shares Price Broker [Use additional sheet if necessary] During the above period, I have not purchased or sold any securities in my personal brokerage account or in any account in which I have a direct or indirect beneficial interest. Beneficial interest is understood to mean securities transactions in the accounts of my spouse, minor children, or other family members residing in my household. During the above period, I have not opened any personal securities brokerage account that I have not disclosed to Bankers & Investors Company, Inc. I do not currently have a personal securities brokerage account. However, I agree to promptly notify Bankers & Investors Company, Inc. if I open such an account so long as I am employed by Bankers & Investors Company, Inc. Signed: Date: Report reviewed by: Date: Section XI Code of Ethics Page 22

86 Exhibit C ANNUAL HOLDINGS FORM To: Chief Compliance Officer, Bankers & Investors Company, Inc. From: (Access Person/Associate) Re: Report of Personal Securities Holdings: As of, 200, I have already disclosed securities accounts maintained by me or by any member of my immediate family or household to Bankers & Investors Company, Inc. and any new account information is attached to the back of this certificate. As of, 200, I do not have any direct or indirect Beneficial Ownership in any securities. Beneficial interest is understood to mean securities transactions in the accounts of my spouse, minor children, or other family members residing in my household. However, I agree to promptly notify Bankers & Investors Company, Inc. if I open such an account so long as I am employed by Bankers & Investors Company, Inc. Signed: Date: Report reviewed by: Date: Section XI Code of Ethics Page 23

87 ANNUAL CERTIFICATION OF COMPLIANCE WITH THE COMPANY'S PERSONAL SECURITIES TRANSACTIONS DISCLOSURE AND CODE OF ETHICS I certify that during the year ended as of the date written below, in accordance with Bankers & Investors Company, Inc. s policies and procedures on Personal Securities Transactions and the Company s Code of Ethics: 1. I have fully disclosed all securities holdings in which I have, or a member of my immediate family has, a beneficial interest. 2. I have reported all securities transactions in which I have, or any member of my immediate family has, a beneficial interest except for transactions exempt from pre-clearance or for which I have received an exception in writing from the CCO. 3. I have complied with the Code of Ethics in all other respects. Signature Print Name Dated:, 200 Section XI Code of Ethics Page 24

88 XII. FEDERAL FILINGS The Company may be subject to the reporting requirements in the United States under certain provisions of the Securities Exchange Act of 1934, the Securities Act of 1933 and similar laws of other countries. Important reporting requirements of the 1993 and 1934 Act include the filing duties under: a. Section 13(d) - Requires a Beneficial Owner of more than five (5) percent of a class of publicly traded equity securities to file a report with the issuer, the SEC and those national securities exchanges where the securities trade within ten (10) days of the transaction resulting in beneficial ownership exceeding five (5) percent identifying, among other things, the source and amount of funds used for the acquisition and the purpose of the acquisition. The concept of beneficial ownership is defined broadly, and an investment adviser may be deemed to be the Beneficial Owner of shares held in client accounts (and shares held in proprietary accounts) if the investment adviser has or shares either of the following: (i) voting power, which includes the power to vote or direct the voting of the shares; or (ii) investment power, which includes the power to dispose or direct the disposition of such security. The rules under Section 13(d) require that a Schedule 13D be amended promptly to reflect material changes in the information included therein. b. Section 13(g) - Passive institutional investors, unless they have acquired more than 20 percent or more of a class of securities; Provides an alternative beneficial ownership reporting scheme for acquisitions by certain investment advisers and other institutional or passive investors who acquire securities in the ordinary course of their business and not for the purpose of changing or influencing control of the issuer. Qualified institutional investors may file Schedule 13G, as opposed to Schedule 13D, when their beneficial ownership of a company s outstanding stock exceeds five (5) percent. A qualified institutional investor, includes an investment adviser and a registered investment company, among others. A passive investor is an owner of securities other than a qualified institutional investor, who owns more than Section XII Federal Filings Page 1

89 five (5) percent of a class of outstanding registered securities, provided they do not own the securities for the purpose of changing or influencing control of the issuer, and they hold no more than twenty (20) percent of the class of securities. c. Section 13(f) - Institutional investment managers; Requires an investment adviser with investment discretion over $100 million or more of certain equity securities to file quarterly reports disclosing such holdings. The quarterly reports must be submitted on Form 13F, usually electronically. The reporting requirement commences in the last quarter of the calendar year in which an institutional investment adviser first has discretion over $100 million or more in so-called section 13(f) securities i.e., generally equity securities traded on exchanges or NASDAQ and certain convertible debt securities. Because the information included on Form 13F is often highly sensitive and may reflect an adviser s investment strategies or may otherwise be of great use to competitors, the rules and regulations under Section 13(f) provide for keeping this information confidential under certain circumstances. d. Section 16 - Directors, officers, and greater than ten (10) percent owners of publicly held companies; Section 16. Requires an investment adviser who is greater than a ten (10) percent shareholder of a publicly traded company to file certain disclosure reports and be subject to disgorgement of profits from purchases or sales of such equity securities within any six-month period. The purpose of Section 16(a) is generally aimed at preventing insiders (directors and officers and those who own a significant percentage of a company (10% or more)), from profiting on short term (less than 6 months) trading in securities in their company. The SEC, however, has included a number of exemptions from Section 16 for investment advisers who buy securities for a client without the purpose or effect of changing or influencing control of the securities issuer. Section XII Federal Filings Page 2

90 e. Rule 144A - The 1933 Act provides a non-exclusive safe harbor from a person being deemed to be an "underwriter" under the 1933 Act for certain resales of restricted or unregistered securities to specified categories of "qualified institutional buyers" or "QIBs". A registered investment adviser qualifies as a QIB if it is acting for its own account or the accounts of other QIBs and it in the aggregate owns and invests on a discretionary basis at least $100 million in securities of unaffiliated issuers. In addition, 144 securities transactions which are placed with a broker to execute a sale or directly with a market maker, may require the filing of Form 144. f. Form 3 - In general, insiders must file an initial Form 3 within 10 days of becoming subject to Section 16. g. Form 4 - Form 4 is used to report any non-exempt transaction in an issuer's equity securities and any exercise and conversions of derivative securities - whether exempt or not. This form must be filed by the end of the second day after the execution of the transaction. h. Form 5 - Form 5 is used to report exempt transactions and other transactions not previously reported. Joint filing is permitted in cases where more than one person subject to Section 16 is considered the beneficial owner of the same equity securities. THE ABOVE DESCRIPTIONS ARE ONLY GENERAL IN NATURE AND ANY QUESTIONS REGARDING SECTIONS 13(d), 13(f), 13(g), 16(a) OR RULE 144A AND FORMS 3, 4 AND 5 SHOULD BE DIRECTED TO QUALIFIED LEGAL COUNSEL. Section XII Federal Filings Page 3

91 XIII. PORTFOLIO MANAGEMENT A. Portfolio Management and Trading Process The Company provides both discretionary and non-discretionary management on a continuious basis. Upon signature of discretionary authourity the Company, through its IARs, shall invest and reinvest the securities, cash or other property held in the client s account in accordance with the client s stated investment objectives as identified by the client during initial interviews and information gathering sessions. The Company's IARs are granted discretion pursuant to authorization provided in the exectued agreement for services, which is maintained in the relavant client file. For non-discretionary accounts, the Company will obtain approval from the client prior to executing any transactions. Portfolio management services will not be rendered prior to the client entering into a written agreement for services, which shall be maintained in the requisite client file. When a transaction takes place, an IAR will create the order, route it to Southwest Securities, Inc. who will then execute the trade. The Company ensures that client accounts are managed according to the investment objectives of the client via the following process: The IAR offers several investment management services options in which IAR s actively manage client s assets continuously based on the client s individual financial and personal needs, investment objectives, time horizon, and risk tolerance. Using the information provided by the client, the Adviser/IAR will recommend a portfolio based on the asset allocation models designed to meet the individual client s financial needs, investment objectives, time horizon, and risk tolerance. The IAR, at the client s direction, may actively manage the client s assets on a discretionary or non-discretionary basis. B. Research Processes Research is conducted internally at each IAR s office utilizing information obtained from a wide variety of sources, and all professional staff members Section XIII Portfolio Management Page 1

92 actively participate in the IAR's research effort. Increasingly, the Internet and new databases provide a wealth of ideas and information to enhance research. The priority is for IARs to build up their knowledge and insights on an industry or company, and to exploit the vast wealth of information that is increasingly available. Industry research is used to supplement the IAR's own research efforts. Our IARs research investments on a as needed basis. Examples of on-line resources include CNBC.com, MSN.com, MorningStar.com, briefing.com etc. C. Valuation of Securities The Company will use information provided by the client s custodian as its main pricing source for purposes of valuing client portfolios, both for fee billing and investment performance calculation purposes. D. Account Statements The custodian (Southwest Securities,Inc.) holding the client s funds and securities will send the client a confirmation of every securities transaction and a brokerage statement at least quarterly. The Company may prepare quarterly performance reports and/or additional reports in conjunction with client meetings and account reviews. Additional information related to the Company s portfolio management and trading procedures is detailed in the executed agreement for services located in the specific client file, and in the Company s Form ADV Schedule F. E. Sub-Advisers Review The Company will utilize the services of sub-advises for account/portfolio management services. Prior to referring clients to any sub-adviser, the Company will conduct a due diligence review of the adviser. The review will consist of a presentation by the sub-adviser to the Company, additional gathering of material regarding the sub-adviser, including their Form ADV, registration status of firm, etc. Once all information has been collected, the Company will review the materials, and determine if the sub-adviser should Section XIII Portfolio Management Page 2

93 be utilized for account management services. Records of the review and final decision will be maintained in the Company s compliance files. F. Supervision of Sub-Advisers The Company will be responsible for supervising any sub-adviser to whom the Company may refer clients. This will be accomplished by doing the following: 1. Having the sub-adviser provide the Company with an annual certifications of compliance with the sub-adviser s policies and procedures governing the sub-adviser s responsibilities and with the federal securities laws; 2. Conducting periodic meetings with compliance personal of the subadviser; 3. Requiring the sub-adviser to provide notice of regulatory examinations and provide copies of any exam reports; then, implement procedures for follow-up on any troubling findings contained in the reports; and 4. Periodically reassess supervisory procedures applicable to the subadviser in light of: a. Changes in a sub-adviser s investment strategy or portfolio manager; b. Significant changes in the sub-adviser s business; c. Dramatic changes in market conditions; or d. Any other event likely to have a significant effect on the subadviser s operations. G. Block Trading The Firm may aggregates client transactions for discretionary accounts but does not aggregate transactions for non-discretionary accounts. Accordingly, clients Section XIII Portfolio Management Page 3

94 are hereby advised that different clients may receive different prices on securities transactions and may not be able to purchase or sell the same quantity of securities. In addition, clients who enter into non-discretionary arrangements with the Firm, may be charged higher commissions as compared to clients who enter into discretionary arrangements. Block trading (aggregation) is permitted where the following conditions are met: 1. Orders of two or more clients may be aggregated only if the Company has determined, on an individual basis, that the securities order is: a. in the best interests of each client participating in the order; b. consistent with the Company's duty to obtain best execution; and c. consistent with the terms of the investment advisory agreement of each participating client. 2. Any investment by one client shall not be dependent or contingent upon the willingness or ability of another client to participate in such transaction. 3. Separate documentation relating to the transaction shall be generated and maintained for each client participating in an aggregated trade. 4. The terms negotiated for the aggregated transaction should apply equally to each participating client. 5. The allocation of securities purchased or sold in an aggregated trade must be made in accordance with the Company s allocation procedures. 6. The price of the securities purchased or sold in an aggregated transaction shall be at the average share price for all transactions of the clients in that security on a given day, with all transaction costs shared on a pro rata basis. Section XIII Portfolio Management Page 4

95 7. A description of the Company s aggregation procedures shall be disclosed in its Form ADV. 8. The books and records of the Company will separately reflect, for each client for whom an order is aggregated, the securities held by, purchased and sold for that client. H. Restrictions on Principal Transactions and Agency Cross Transactions 1. Review. The CCO will review all transactions with clients in which the Company is acting as a principal or effecting cross transaction to ensure that such transactions comply with the following policies. In addition to the specific policies set forth below, no principal transaction, cross trade, or agency cross transaction shall be permitted unless the Company: 2. believes the transaction is in the best interest of the client; 3. believes the transaction fulfills the Company s duty of best execution with respect to the particular transaction for the advisory client; 4. has made appropriate disclosures to the client on Form ADV prior to entering into such a transaction; and 5. has complied in all respects with Section 206(3) of the Advisers Act, in the case of principal transactions and cross trades, and Rule 206(3)- 2 promulgated thereunder in the case of agency cross transactions, as each may be amended or supplemented. I. Principal Transactions. 1. Definition. A "principal transaction" is one in which the Company: (i), knowingly acting for its own account (i.e. from its own inventory), purchases a security from, or sells a security to, a client or (ii) acting as a broker for a person other than a client, knowingly arranges for any security to be purchased from, or sold to, such client without disclosing to our client in writing prior to the completion of the Section XIII Portfolio Management Page 5

96 transaction the capacity in which the Company is acting and obtaining the client's consent to the transaction. 2. Timing of Disclosure. The foregoing disclosure and consent requirements applicable to principal transactions must be satisfied in conjunction with, and prior to, each principal transaction (use of electronic media is permitted). A general consent is not sufficient to satisfy these requirements. 3. Disclosure Information. In addition to appropriate disclosure in the Company's Form ADV, to further insure that the Company has the informed consent of its client prior to effecting a principal transaction for such client, the request for the client's consent to a principal transaction must be in writing (electronic or otherwise) and contain the following specific information in clear and concise language: a. The capacity in which the Company is acting (e.g. principal or broker); b. The price at which the security will be purchased or sold to the client; c. The nature and extent of any compensation (mark-up, commission, or other financial benefit) the Company may receive in connection with the transaction; and d. The best price at which the Company reasonably believes the same transaction could be affected in an arm's length transaction with a disinterested third party. J. Agency Cross Transactions for an Advisory Client. 1. Definition. An agency cross transaction for an advisory client occurs when the Company acts as a broker for a transaction in which one of the Company's advisory clients is on one side of the transaction and another person is on the other side of the transaction. At no time shall Section XIII Portfolio Management Page 6

97 the Company effect an agency cross transaction in which the Company has recommended the transaction to a purchaser and a seller. 2. Requirements. In addition to appropriate disclosure in the Company's Form ADV, the Company may not act as a broker in an agency cross transaction for an advisory client unless it has complied with all of the following requirements: a. It has obtained the advisory client's prior written consent to engage in agency cross transactions on its behalf (general consent may suffice) after giving the client full written disclosure of the Company's potentially conflicting division of loyalties to the client and the other party to the transaction, and the fact that the Company may receive commissions from both parties to agency cross transactions; b. At or before the completion of an agency cross transaction, the Company has confirmed the transaction in writing, and such confirmation includes: (i) (ii) (iii) (iv) (v) a description of the nature of the transaction, the transaction date, an offer to furnish, upon request, the precise time of the transaction, the source and amount of all compensation the Company will receive in connection with the transaction, and a conspicuous statement informing the client that the written consent referred to in subparagraph 'a' above can be revoked at any time c. The Company undertakes to provide the advisory client, at least annually, a written disclosure statement of agency cross transactions which includes: Section XIII Portfolio Management Page 7

98 (i) (ii) (iii) the number of agency cross transactions that were effected for the client since the last such statement, the total amount of all remuneration received or to be received by the Company in connection with such transactions, and a conspicuous statement informing the client that the written consent referred to in subparagraph 'a' above can be revoked at any time. K. Cross Trades. 1. Definition. A cross trade occurs when the Company effects a transaction between two advisory clients (e.g., having Account A purchase securities directly from Account B). Such trades are most often done between index-based or model-driven accounts since such accounts often automatically purchase and sell securities to rebalance the account or change its holdings to reflect the components of the index or model. In a cross trade transaction, in contrast to an agency cross transaction, the Company receives no compensation other than its advisory fee. 2. Requirements. In addition to appropriate disclosure in the Company's Form ADV, the Company shall not effect a cross trade for advisory clients unless: 3. It has determined that no client will be disfavored by cross trading; 4. The trade is effected at a price determined by an independent pricing mechanism and such pricing mechanism is documented as to each cross trade; and 5. In the case of cross trades involving one or more client whose account contains employee benefit plan assets, no cross trades shall be effected without the pre-approval (in each instance) of the CCO. The CCO Section XIII Portfolio Management Page 8

99 shall not approve such cross trade until he or she has determined that the cross trade is not a "prohibited transaction" under Section 406(b) of ERISA or an exemption is obtained from the Department of Labor. L. Best Execution. Under applicable law, the Company owes a fiduciary duty to clients to obtain best execution of their brokerage transactions. 1. Background. In the SEC release on soft dollars (Release ), the SEC stated: "As a fiduciary, a money manager has an obligation to obtain best execution of clients' transactions under the circumstances of the particular transaction. The money manager must: execute securities transactions for clients in such a manner that the client's total cost or proceeds in each transaction is the most favorable under the circumstances. 2. Broker-Dealer Selection. The Company has a fiduciary duty to its clients to achieve best execution when it places trades with brokerdealers. Failure by the Company to fulfill its duty to clients to obtain best execution may have significant regulatory consequences. The Company's policies are modeled after the guidelines articulated by the SEC; specifically, it believes that, to a significant degree, best execution is a qualitative concept. In deciding what constitutes best execution, the determinative factor is not the lowest possible commission cost, but whether the transaction represents the best qualitative execution. In making this determination, the Company's policy is to consider the full range of the broker's services, including without limitation the value of research provided, execution capabilities, commission rate, financial responsibility, administrative resources and responsiveness. The following steps will be taken when selecting broker-dealers to execute client trades: a. The CCO will create a list of broker-dealers, ECNs, and crossing networks approved to execute client trades. This list Section XIII Portfolio Management Page 9

100 will set forth guidelines for the percentage of trades the Company will allocate to particular broker-dealers and other execution facilities. b. Periodically the CCO will review this list and compare it with actual allocations made over the past quarter or some other period. c. If significant deviations should occur, the CCO will investigate such deviations and the Company should consider revising the list. d. The CCO will periodically and systematically monitor and evaluate the execution and performance capabilities of the broker-dealers the Company uses. Monitoring methods will include, among other things, encouraging traders to obtain multiple price quotations for a trade from multiple sources and indicate them on the trade ticket; reviews of trade tickets, confirmations and other documentation incidental to trades, periodic meetings to solicit and review input from the Company's traders, portfolio managers and others. From timeto-time, quantitative performance data about broker-dealers will be acquired from the broker-dealers or third party evaluation services to assist the review process. The CCO will request periodically and review some or all of each brokerdealer(s) reports on order execution (SEC Rule 11Ac1-5) and order routing (SEC Rule 11Ac1-6) to ascertain whether the executing broker-dealer is routing client trades to market centers that execute orders at prices equal to or superior to those available at other market centers. Evidence of such reviews shall be appropriately documented. Section XIII Portfolio Management Page 10

101 3. Factors Considered When Placing a Trade. The Company will consider the following factors, among others, when placing a trade for a client with a particular broker-dealer: a. Quality of overall execution services provided by the brokerdealer; b. Promptness of execution; c. Liquidity of the market for the security in question; d. Provision of dedicated telephone lines; e. Creditworthiness., business reputation and reliability of the broker-dealer; f. Research (if any) provided by the broker-dealer; g. Promptness and accuracy of oral, hard copy or electronic reports of execution and confirmation statements; h. Ability and willingness to correct trade errors; i. Ability to access various market centers, including the market where the security trades; j. The broker-dealer's facilities, including any software or hardware provided to the adviser; k. Any specialized expertise the broker-dealer may have in executing trades for the particular type of security; l. Commission rates; m. Access to a specific IPO or IPOs generally; n. Client referrals made by the broker-dealer to the Company; o. Ability of the broker-dealer to use ECNs to gain liquidity, price improvement, lower commission rates, and anonymity; p. Soft dollar policies of the broker-dealer; Section XIII Portfolio Management Page 11

102 q. The broker-dealer's ability to provide for step-out transactions 4. Reviewing Transactions and Prices. Periodically, the CCO shall review records on the Company's trade reporting system and compare the prices obtained in the trades with historical prices in the relevant markets. For example, the CCO may spot check a number of trades on a given day and compare the prices obtained with quote information obtained from it s quotation system. A record of such review should be kept in the appropriate file. 5. Conflicts of Interests. The Company will be sensitive to the following conflicts of interest when selecting broker-dealers to execute client trades, and where necessary, shall address such conflicts by disclosure, client consent, or other appropriate action: a. The receipt of soft dollars from a broker-dealer; b. Receiving client referrals from a broker-dealer; and c. Receiving IPO allocations from a broker-dealer. 6. Disclosure. The brokerage practices of the Company will be fully disclosed in the Company's Form ADV Part II, including a summary of factors the Company considers when selecting broker-dealers and determining the reasonableness of their commissions. M. Safe Harbor for Investment Advisory Programs. The Company's investment advisory programs shall be organized and operated in compliance with the safe harbor afforded by SEC Rule 3a-4 under the Investment Company Act of The foregoing safe harbor establishes certain policies and procedures pursuant to which the Company may provide investment advisory services to clients without being deemed to be an investment company and thereby required to register under, or otherwise comply with, the Investment Company Act of Section XIII Portfolio Management Page 12

103 1. Procedures. The CCO shall be responsible for documenting that the following procedures are strictly followed in the administration of all investment advisory programs and accounts: a. Each client shall (i) retain the indication of ownership of all securities and funds in their account and (ii) have the ability to impose reasonable restrictions on the management of their account; b. Each advisory account shall be managed on the basis of that client's individual financial situation, investment objectives, and instructions, taking into account any reasonable restrictions placed on the management of the account; c. At the time an advisory account is established, the Company shall obtain information from each client that is necessary to manage the client's account individually and in accordance with any reasonable restrictions placed on the management of the account; d. The person designated by the Company with overall responsibility for each advisory account and knowledge about the account and its management ("relationship manager") shall make him or herself reasonably available to each client for consultation; e. At least quarterly, the relationship manager shall (a) notify each advisory client in writing to contact the Company if (i) there have been any changes in the client's financial situation or investment objective, or (ii) the client wishes to modify existing restrictions or impose new restrictions on the management of the account, (b) provide the client with a means by which such contact may be made and (c) provide the client with a statement containing a description of all activity in the client's account; and Section XIII Portfolio Management Page 13

104 f. At least annually, the relationship manager shall contact the client to determine if (i) there have been any changes in the client's financial situation or investment objective, or (ii) the client wishes to modify existing restrictions or impose new restrictions on the management of the account. Section XIII Portfolio Management Page 14

105 XIV. ERISA CONSIDERATIONS Employee Retirement Income Security Act of 1974 / Release IA-2106 A. Responsibility. The CCO is responsible for ensuring that the Company complies with all laws, rules and regulations governing its activities under ERISA. The information and procedures contained in this section represents general guidelines to be followed by the CCO, and are not designed to be all inclusive of ERISA requirements or restrictions. B. Definition of ERISA Plan. Subject to certain exceptions, an ERISA plan will generally include any qualified retirement plan other than an IRA. C. Fiduciary Obligations under ERISA. 1. Definition of Fiduciary. Under ERISA, a fiduciary is any person who exercises discretionary authority or control involving management or disposition of plan assets; renders investment advice for a fee to the plan or its participants; or has any discretionary authority or responsibility for the administration of the plan. 2. Fiduciary Obligations. A fiduciary under ERISA must: a. act solely in the interest of the participants and their beneficiaries; b. offset the expenses of administration of the plan; c. act with the care, skill, prudence and diligence that a prudent man would use in the same situation; d. diversify plan investments to reduce the risk of large losses unless it is clearly prudent not to do so; and e. act according to the terms of the plan documents, to the extent the documents are consistent with ERISA. D. Prudent Man Standard. ERISA 404(a) Where the Company acts as an adviser to an ERISA plan, it must adhere to the "Prudent Man Standard" Section XIV ERISA Considerations Page 1

106 which generally requires that an adviser act solely in the interest of the plan using the skill, care, prudence, and diligence of a prudent man. The Prudent Man Standard considers the total performance of the entire portfolio rather than the actual performance of any particular investment. E. Appropriate Consideration. The Prudent Man Standard is deemed satisfied if the Company has given appropriate consideration to the facts and circumstances that it knows, or should know are relevant, including the role the investment plays in the plan's investment portfolio. This is often referred to as the "prudent expert" rule. F. Investment Policy Statement. 1. ERISA plans may be formulated to include an Investment Policy Statement which: a. defines the purpose of the plan; b. describes suitability; and c. establishes risk parameters, return requirements, and portfolio diversification standards. 2. The CCO and/or portfolio manager will review and be familiar with the Investment Policy Statement of any ERISA plan for which the Company acts as an adviser. G. Directed Brokerage (Soft Dollar Services). 1. Definition. ERISA plan sponsors may direct the Company to execute its securities transactions for the plan through certain broker-dealers in return for brokerage and research services. The term soft dollars describes an arrangement where an investment adviser with discretion receives brokerage and research services from a broker-dealer in exchange for credits generated by clients commissions. These soft dollar arrangements should comply with Section 28(e) of the 1934 Act and the SEC s Interpretive Release dated July 18, 2006, Section XIV ERISA Considerations Page 2

107 entitled Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of Requirements. ERISA requires the Company and the plan sponsors to act prudently and for a purpose that exclusively benefits the plan's beneficiaries. In addition, to rely on the safe harbor of Section 28(e) of the 1934 Act, the Company must make a good faith determination that the amount of commission is reasonable, given the value of services provided by the broker. H. Use of Affiliated Brokers. 1. Restrictions. ERISA prohibits certain transactions between ERISA plans and entities that have specified types of relationships with the plan. Entities in this category are referred to as, "Parties in Interest". For example, if the Company has investment discretion over plan assets, it cannot use the brokerage services of an advisory affiliate unless it qualifies for an exemption from the prohibition. 2. ERISA Exemptions. The following conditions must be met in order to qualify for an exemption against the prohibition against using an affiliated broker: a. The transaction must not be excessive under the circumstances, either in amount or in frequency; b. The transaction must be executed pursuant to a written authorization executed by a plan fiduciary who is independent of the Company or broker; c. The written authorization must be terminable at will by the plan without penalty; and, d. The affiliated broker must make annual disclosures to the authorizing fiduciary concerning, among other things, the total of all charges incurred by the plan that relate to securities transactions. Section XIV ERISA Considerations Page 3

108 I. Use of an Affiliated Mutual Fund. ERISA rules prohibit the Company from receiving a dual fee. As a result, the Company can only invest in shares of an affiliated mutual fund under certain conditions as outlined in ERISA Prohibited Transaction Exemption J. Responding to Tender Offers. ERISA does not require the Company to automatically tender shares to capture a premium over market value. Rather, the Company must weigh the offer against the underlying intrinsic value of the subject entity and the likelihood that a higher value will be realized by current management. K. ERISA Bonding Requirements. 1. Fidelity Bond. ERISA Section 412 requires advisers with discretion over plan assets to ensure that a fiduciary bond is in place to protect the plan against loss from acts of fraud or dishonesty. If the Company renders investment advice to an ERISA plan, but does not have discretionary authority, it is not required to be bonded solely because it provides investment advice. A fidelity bond is only required where the Company has custody, or has the power to exercise physical contact or control over the assets and the power to transfer to yourself or a third party, or to negotiate the assets for value on behalf of the plan. The Pension Protection Act increased ERISA s maximum bond amount from $500,000 to $1,000,000 for plans that hold employer securities. 2. Amount and Terms. Generally, the bond must be for not less than 10 percent of the funds handled, subject to a minimum of $1,000 and a maximum of $1,000,000. The fidelity bond cannot have a deductible, and each ERISA plan must be named as an insured party under the bond. Alternatively, if permitted by the ERISA plan employer, the Company should seek to obtain the necessary coverage under the employer's bond. L. Dual Fees. ERISA rules prohibit an adviser to an ERISA plan from imposing a dual fee. Generally this would prohibit the Company from Section XIV ERISA Considerations Page 4

109 receiving commissions or mutual fund "trails" from ERISA plan assets where the Company is also receiving an advisory fee. ERISA Prohibited Transaction Exemption 77-4 permits a pension fund adviser to invest ERISA plan assets in an investment company it sponsors only under specific conditions described therein. M. Self-Dealing. ERISA plan fiduciaries are prohibited under Section 406(b) of ERISA from participating in any self-dealing transactions. Under this rule, the Company may not, while acting as a fiduciary: 1. Handle any transaction involving plan assets for its own account; 2. Represent any party in any transaction involving plan assets where the party's interests are adverse to the interests of the plan or its beneficiaries; or 3. Receive any personal compensation from any party in connection with a transaction involving plan assets. N. Prohibited Transactions. 1. Prohibitions. ERISA Section 406(a) discusses certain prohibited transactions between fiduciaries and ERISA plans. Generally, fiduciaries are prohibited from: a. Engaging in any sale or exchange of assets between a party in interest and the plan; b. Involvement in any loan or extension of credit between a party in interest and the plan; c. Furnishing goods, services, or facilities between a party in interest and the plan; or, d. Transferring of any plan assets to a party in interest. 2. Exemptions. ERISA rules recognize certain prohibited transaction exemptions ("PTEs"). Among the most important of the exemptions are: Section XIV ERISA Considerations Page 5

110 a. The Broker-Dealer Exemption. Broker-dealers registered under the 1934 Act, that give investment advice solely incidental to their brokerage business and receive no special compensation for their advice, are exempt from the definition of an investment adviser. This exemption applies only to ERISA Section 406(b) transactions ("self dealing"). Under the Pension Protection Act, broker-dealers meet the definition of fiduciary adviser. They must acknowledge their fiduciary status in writing. b. The Commissioned Sales Exemption. This exemption permits certain commissioned sales people (insurance agents, brokers, and pension consultants) to receive commissions on security sales to ERISA plans, provided the specific conditions described in PTE are followed; c. The Independent Qualified Professional Asset Management Exemption. This exemption permits certain transactions between parties in interest and an investment fund, provided the conditions described in PTE are followed; and, d. The Securities Transactions and Commission Recapture Exemption. This exemption only applies to ERISA Section 406(b) transactions ("self dealing") and permits fiduciaries to make securities transactions, collect commissions and make agency cross trades, provided that the provisions of PTE are followed. e. Pension Protection Act Exemptions. The Pension Protection Act added an exemption allowing advisers and other parties in interest to participant-directed account plans, such as 401(k) plans, to provide investment advice to plan participants. The investment advice given by the fiduciary advisor must be Section XIV ERISA Considerations Page 6

111 provided under an "eligible investment advice arrangement." In addition, it must satisfy other requirements, including appropriate disclosure of the investment advice. An "eligible investment advice arrangement" is one that either: (i) provides that fees for the investment advice do not vary according to the investment option selected; and/or (ii) utilizes a computer model under an "investment advice program" as defined in the Pension Protection Act. The exemption is effective for transactions occurring after December 31, Records relating to the advice must be retained for six years. The Pension Protection Act also added a statutory exemption for block trades" of securities (or other property as determined by the DOL) between a plan and a non-fiduciary party in interest if: (i) the interest of the plan in the trade does not exceed 10% of the trade; (ii) the price is negotiated at arm's length; and (iii) the compensation is negotiated at arm's length. "Block trade" includes a trade of at least 10,000 shares or a trade with a market value of at least $200,000, which will be allocated across two or more unrelated client accounts of a fiduciary. This provision is effective immediately. Section XIV ERISA Considerations Page 7

112 XV. COMPLAINTS A. Supervisory Responsibility. The CCO shall be responsible for ensuring that all written and electronically transmitted customer complaints are handled in accordance with all applicable laws, rules and regulations and in keeping with the provisions of this section. B. Definition. The term complaint is generally defined as, any statement (whether delivered in writing, orally or electronically) of a customer or any person acting on behalf of a customer alleging a grievance involving the activities of those persons under the control of the Company in connection with the solicitation or execution of any transaction or the disposition of securities or funds of that customer. C. Handling of Customer Complaints. 1. Representatives and Employees. IARs must notify the CCO immediately upon learning of the existence of a customer complaint, and provide the CCO with all information and documentation in their possession relating to such complaint. IARs are expected to cooperate fully with the Company and with regulatory authorities in the investigation of any customer complaint. 2. Review. The Company takes any and all customer complaints seriously and the CCO shall promptly initiate a review of the factual circumstances surrounding any complaint (written, oral or electronic) that has been received. 3. Record Keeping Requirements. The Company shall maintain a separate file for all written, oral and electronically transmitted customer complaints in its Main Office, to include the following information: a. Identification of each complaint; b. The date each complaint was received; Section XV Complaints Page 1

113 c. Identification of each IAR servicing the account; d. A general description of the matter complained of; e. Copies of all correspondence involving the complaint; and f. The written report of the action taken with respect to the complaint. Section XV Complaints Page 2

114 XVI. CORRESPONDENCE A. Scope. The Company's policies on correspondence overlap with its more specific policies on advertising (See Section VII: Advertising) and electronic communications (See Section IX: Electronic Communications). These policies are additive and should be read in conjunction with each other in appropriate circumstances. B. Responsibility. The CCO shall be responsible for ensuring that all outgoing correspondence is approved, reviewed and retained in compliance with the following Company guidelines and the applicable laws, rules and regulations governing the activities of the Company. The CCO shall develop procedures to periodically review all correspondence and as necessary, to pre-approve certain correspondence in compliance with these policies. C. General Guidelines for Outgoing Correspondence. 1. Profit, loss, or other portfolio analyses should include a disclaimer that the client should only rely on customer statements provided by the firm or its custodians, and any analysis or calculation otherwise provided is subject to such statements and provided for convenience and information only. 2. Use of the Company's letterhead and other official stationery is limited to Company-related matters. 3. No material marked "For Internal Use" or something to this effect may be sent to anyone outside the Company. 4. No employee is authorized to make any statements or supply any information about a security that is the subject of a securities offering other than the information contained in offering materials that have been approved for such offering. Violations of this policy can subject the employee and the Company to severe civil and, in some cases, criminal liability. Section XVI Correspondence Page 1

115 D. General Guidelines Incoming Correspondence. 1. General. All incoming correspondence may be opened and reviewed by a designated reviewer appointed by the CCO or a supervisor. Correspondence subject to this policy includes letters, facsimiles, courier deliveries and other forms of communication, including communications marked "personal," "confidential," or words to this effect. 2. Procedures. a. Obvious non-client correspondence may be forwarded directly to the addressee. b. Requests for audit letters, references, verification of account positions and the like, will be forwarded directly to applicable personnel for handling and response. The addressee will receive a copy. c. Complaints will be immediately forwarded to the CCO and any supervisor for handling and reply. The addressee will receive a copy. d. Original client correspondence will be retained for the Company's files. The addressee will receive a copy. E. Approval. Review of correspondence shall be evidenced by (as applicable): 1. initialing and dating the Company s file copy of written correspondence; or, 2. electronically initialing and dating the Company s electronic file copy. F. Records. Copies of all reviewed correspondence shall be maintained at the Company's principal place of business for a period of not less than 5 years, or longer if required by applicable SEC or state regulations. Electronic correspondence may be retained in the format in which it was received. Section XVI Correspondence Page 2

116 G. Personal Mail. Employees should direct all personal mail to their home address. Personal mail may not be distinguishable from Company mail and is subject to the Company's incoming mail review policies. H. Electronic Mail. Please refer to Section IX, Electronic Communications, for additional policies. Incoming and outgoing is subject to the same review, retention, and pre-approval policies as paper correspondence and communications. I. Protective Legend. The Company will include the following protective legend on all summary account statements and/or fee invoices that it may prepare and forward to clients. The same protective legend should appear on all regular correspondence or newsletters that are sent to clients. This protective legend is designed to remind clients to notify the Company in the event of any changes to their financial position or investment objectives. Please contact Banker & Investors Company, Inc. if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request. Section XVI Correspondence Page 3

117 XVII. PRIVACY POLICY/REGULATION S-P The Company views protecting its customers private information as a top priority and, pursuant to the requirements of the Gramm-Leach-Bliley Act (the GLBA ), the Company has instituted the following policies and procedures to ensure that customer information is kept private and secure. The policy serves as formal documentation of the Company s ongoing commitment to the privacy of its customers. All employees will be expected to read, understand, and abide by this policy and to follow all related procedures to uphold the standards of privacy and security set forth by the Company. The Policy, and the related procedures contained within, is designed to comply with applicable privacy laws, including the GLBA, and to protect nonpublic personal information of the Company s customers. In the event of new privacy-related laws or regulations affecting the information practices of the Company, the Privacy Policy will be revised as necessary and any changes will be disseminated and explained to all personnel. A. Scope of Policy The Privacy Policy covers the practices of the Company and applies to all nonpublic personally identifiable information of our current and former customers. B. Overview of the Guidelines for Protecting Customer Information In Regulation S-P, the Securities and Exchange Commission (the SEC ) published guidelines, pursuant to section 501(b) of the GLBA, that address the steps a financial institution should take in order to protect customer information. The overall security standards that must be upheld are: 1. Ensure the security and confidentiality of customer records and information; 2. Protect against any anticipated threats or hazards to the security or integrity of customer records and information; and Section XVII Privacy Policies/Regulation S-P Page 1

118 3. Protect against unauthorized access to or use of customer records or information that could result in substantial harm or inconvenience to any customer. C. Employee Responsibility 1. Each employee has a duty to protect the nonpublic personal information of customers collected by the Company. 2. No employee is authorized to disclose or use the nonpublic information of customers on behalf of the Company. 3. Each employee has a duty to ensure that nonpublic personal information of the Company s customers is shared only with employees and others in a way that is consistent with the Company s Privacy Notice and the procedures contained in the Policy. 4. Each employee has a duty to ensure that access to nonpublic personal information of the Company s customers is limited as provided in the Privacy Notice and the Policy. 5. No employee is authorized to sell, on behalf of the Company or otherwise, nonpublic information of the Company s customers. 6. Employees with questions concerning the collection and sharing of, or access to, nonpublic personal information of the Company s customers must look to the Company s CCO for guidance. 7. Violations of these policies and procedures will be addressed in a manner consistent with other Company disciplinary guidelines. D. Types of Permitted Disclosures The Exceptions Regulation S-P contains several exceptions, which permit the Company to disclose customer information (the Exceptions ). For example, the Company is permitted under certain circumstances to provide information to nonaffiliated third parties to perform services on the Company s behalf. In addition, there are several ordinary course exceptions, which allow The Section XVII Privacy Policies/Regulation S-P Page 2

119 Company to disclose information that is necessary to effect, administer, or enforce a transaction that a customer has requested or authorized. A more detailed description of these Exceptions is set forth below. 1. Service Providers. The Company may from time to time have relationships with nonaffiliated third parties that require it to share customer information in order for the third party to carry out services for the Company. These nonaffiliated third parties would typically represent situations where the Company or its employees offer products or services jointly with another financial institution, thereby requiring the Company to disclose customer information to that third party. Every nonaffiliated third party that falls under this exception is required to enter into an agreement that will include the confidentiality provisions required by Regulation S-P, which ensure that each such nonaffiliated third party uses and re-discloses customer nonpublic personal information only for the purpose(s) for which it was originally disclosed. 2. Processing and Servicing Transactions. The Company may also share information when it is necessary to effect, administer, or enforce a transaction for our customers or pursuant to written customer requests. In this context, Necessary to effect, administer, or enforce a transaction means that the disclosure is required, or is a usual, appropriate, or acceptable method: 3. To carry out the transaction or the product or service business of which the transaction is a part, and record, service, or maintain the consumer's account in the ordinary course of providing the financial service or financial product; 4. To administer or service benefits or claims relating to the transaction or the product or service of which it is a part; Section XVII Privacy Policies/Regulation S-P Page 3

120 5. To provide a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product to the consumer or the consumer's agent or broker; or 6. To accrue or recognize incentives or bonuses associated with the transaction that is provided by the Company or any other party. E. Sharing as Permitted or Required by Law. The Company may disclose information to nonaffiliated third parties as required or allowed by law. This may include, for example, disclosures in connection with a subpoena or similar legal process, a fraud investigation, recording of deeds of trust and mortgages in public records, an audit, or examination, or the sale of an account to another financial institution. The Company has taken the appropriate steps to ensure that it is sharing customer data only within the above noted Exceptions. The Company has achieved this by understanding how the Company shares data with its customers, their agents, service providers, parties related to transactions in the ordinary course or joint marketers. F. Safeguarding of Client Records and Information The Company has implemented internal controls and procedures designed to maintain accurate records concerning customers personal information. The Company s customers have the right to contact the Company if they believe that Company records contain inaccurate, incomplete, or stale information about them. The Company will respond in a timely manner to requests to correct information. To protect this information, The Company maintains appropriate security measures for its computer and information systems, including the use of passwords and firewalls. Additionally, the Company will use shredding machines, locks and other appropriate physical security measure to safeguard client information stored in Section XVII Privacy Policies/Regulation S-P Page 4

121 paper format. For example, employees are expected to secure client information in locked cabinets when the office is closed. The Company protects confidential client information including but not limited to consumer report or any compilation of consumer report information derived from a consumer report by maintaining some information in locked filing cabinets and shredding such information when then information is no longer needed by the Company. G. Security Standards The Company maintains physical, electronic, and procedural safeguards to protect the integrity and confidentiality of customer information. Internally, the Company limits access to customers nonpublic personal information to those employees who need to know such information in order to provide products and services to customers. All employees are trained to understand and comply with these information principles. H. Privacy Notice The Company has developed a Privacy Notice, as required under Regulation S-P, to be delivered to customers initially and on an annual basis. The notice discloses the Company s information collection and sharing practices and other required information and has been formatted and drafted to be clear and conspicuous. The notice will be revised as necessary any time information practices change. A copy of the Company s Privacy Notice is included at Appendix D. I. Privacy Notice Delivery 1. Initial Privacy Notice - As regulations require, all new customers receive an initial Privacy Notice at the time when the customer relationship is established, for example on execution of the agreement for services. Section XVII Privacy Policies/Regulation S-P Page 5

122 2. Annual Privacy Notice - The GLBA regulations require that disclosure of the Privacy Policy be made on an annual basis. The Company will deliver its annual Privacy Notice in conjunction with the annual offer of its Form ADV Part II. J. Revised Privacy Notice Regulation S-P requires that the Company amend its Privacy Policy and distribute a revised disclosure to customers if there is a change in the Company s collection, sharing, or security practices. Section XVII Privacy Policies/Regulation S-P Page 6

123 XVIII. CASH PAYMENT FOR CLIENT SOLICITATION Rule 206(4)-3 of the Advisers Act permits the payment of cash referral fees to individuals and companies (hereafter, solicitors ) who recommend prospective clients to a registered investment adviser. The Rule provides, among other things, that there be a written agreement between the adviser and the solicitor, which clearly defines the duties and responsibilities of the solicitor with respect to his/her referral activities on behalf of the adviser. In addition to the agreement between the adviser and the solicitor, the solicitor must also prepare a written disclosure document, which explains to the prospective client the terms under which the solicitor is working with the adviser and the fact that he/she is being compensated for the referral activities. It is the responsibility of the CCO to ensure that the activities of any solicitor working on behalf of Company s be carried out pursuant to a written agreement, which complies with the provisions of Rule 206(4)-3. In addition, the CCO must exercise due diligence to determine that the solicitor is acting in conformity with the written agreement with the Company, including any specific instructions issued by the Company. A. The Written Solicitation Agreement This is an agreement between the adviser and the solicitor and is generally not given to prospective clients. It must address the following: 1. The specific solicitation activities to be engaged in by the solicitor on behalf of the investment adviser and the compensation to be received; 2. An agreement by the solicitor to follow the instructions of the adviser and to comply with the provisions of the Advisers Act; 3. An agreement by the solicitor to provide prospective referral clients a copy of the advisers ADV or other disclosure document at the time of the solicitation; 4. An agreement by the solicitor to give the prospective client a copy of the solicitor s separate disclosure document as described more fully below at Item B. Section XVIII Cash Payment for Client Solicitation Page 1

124 B. Solicitor s Written Disclosure Document A disclosure statement must be given to the prospective client at the time of solicitation. This must be given by the solicitor, but a second copy may also be given by the adviser to the prospective clients at the time of entering into the advisory agreement. The document must disclose: 1. The name of the solicitor; 2. The name of the investment adviser; 3. The nature of the relationship between the adviser and the solicitor; 4. A statement that the solicitor is being compensated for referring the client to the adviser; 5. The terms of the compensation arrangement between the adviser and the solicitor; and, 6. Whether or not the client is going to have to pay more in fees than he/she would otherwise have to pay had there been no solicitor s compensation. C. Instructions the Solicitor must follow Any undertaking to compensate a solicitor for referring clients to the Company must be evidenced by a written agreement containing the following instructions to the solicitor: [The pronoun, you in these instructions is intended as the name of the solicitor or the name of the business through which the solicitor conducts business.] The following instructions to a solicitor may be used in the Company s written agreement or in a separate document: For a cash fee, you have agreed to solicit prospective clients for the advisory services provided by the Company. In doing so you have also agreed to comply with the following instructions: Section XVIII Cash Payment for Client Solicitation Page 2

125 1. Whenever you begin to solicit any client for the Company s services, or whenever you refer any client to Company, please furnish the name of the prospective client, in writing, to Company. This may avoid potential conflicts between other solicitors competing for the same client(s). 2. You must furnish the prospective clients with a copy of both Part II of the Company s Form ADV (or other written disclosure statement) AND the Solicitor s Written Disclosure Document describing the arrangement between you and the Company. Copies of those documents will be provided. 3. You must obtain and deliver to the Company a signed and dated Acknowledgment of Receipt from the prospective client attesting that he/she has received from you both of the disclosure documents described above. Please have the prospective client sign two copies of the Acknowledgment of Receipt, one copy of which is for the prospective client and the other is to be delivered promptly to the Company. 4. Your activities on behalf of the Company should be limited to client solicitation. You are not authorized to enter into any undertaking or agreement, or to render any investment advice, on behalf of the Company. 5. Failure to follow these instructions may delay any compensation otherwise due to you under our Written Agreement. If you have any questions regarding these instructions, or any other aspect of our solicitation agreement, please contact the Company s CCO. Section XVIII Cash Payment for Client Solicitation Page 3

126 XIX. ANTI-MONEY LAUNDERING The Company s CCO, Jerrod L. Foresman, will also act as the Company s Anti-Money Laundering (AML) compliance officer. It will be the AML compliance officer s responsibility to assure that the Company s AML polices and procedures are being followed. It will be the AML compliance officer s responsibility to update and keep current these AML policies and procedures. The Company, as a matter of policy, will not be party to any transaction and will not facilitate any transaction with any person(s) or entity(ies) (Prohibited Person) listed on the web site maintained by the Office of Foreign Assets Control ( relating thereto. If the AML compliance officer learns that any Prohibited Person is, or is attempting to become, involved in any transaction with respect to the services which the Company provides, the AML compliance officer shall immediately report such transaction to the Office of Foreign Assets Control. A. Money Laundering - Definition Money laundering is the attempt to disguise the source of proceeds derived from illegal activity including drug trafficking, terrorism, organized crime, fraud and many other crimes. Generally, it involves the following three phases: 1. Placement: the physical disposal of cash obtained from illegal activities. This can include deposits into banks, brokers, currency exchanges and casinos. 2. Layering: the use of numerous layers of financial transactions to conceal the source of proceeds of criminal activity. 3. Integration: the arrangement for the laundered proceeds to re-enter the legitimate economy. B. Responsibility 1. At a minimum, it will be the AML compliance officer s responsibility to: Section XIX Anti-Money Laundering Page 1

127 2. Prevent the Company from being used to launder money or finance terrorist activities, including but not limited to achieving compliance with applicable provisions of the Bank Secrecy Act (BSA) and the Financial Crimes Enforcement Network s (FinCEN) implementing regulations and the AML regulations of other countries and jurisdictions with authority over any transaction to which the Company is a party. The AML compliance officer will periodically review the types of services the Company provides and the nature of its clients in order to identify the Company s vulnerability to any money laundering activities and amend these policies and procedures that would reasonably address such issues. 3. Provide, at least annually, training for any employee involved in managing client assets. The AML compliance officer will create a list of these individuals. These employees will be made aware of BSA requirements relevant to their functions and trained in recognizing possible signs of money laundering that could arise in the course of their duties. The AML compliance officer will evaluate the effectiveness of such training programs and make adjustment in the program(s) offered as needed. Further, the AML compliance officer will document such training sessions by recording the names of those individuals attending and the dates of attendance. 4. Report suspicious activity to the appropriate government officials when, in the opinion of the AML compliance officer, such reporting is required under applicable law. Section XIX Anti-Money Laundering Page 2

128 XX. PROXY VOTING/CLASS ACTION LAWSUITS PROXY VOTING A. Bankers & Investors Company, Inc. does not vote Proxies. Bankers & Investors Co. will not vote proxies on behalf of client accounts. Although, on rare occasions and only at the client s request, Bankers & Investors Co. may offer clients advice regarding corporate actions and the exercise of proxy voting rights. Clients owning shares of common stock or mutual funds must exercise their own right to vote as a shareholder. The Adviser will keep a record of: 1. any advice given to a client regarding proxy voting. 2. any proxy material received on behalf of a client and the steps taken to forward such material to the client. B. CLASS ACTION LAWSUITS From time to time, securities held in client accounts could be the subject of class action lawsuits. Bankers & Investors Co. has no obligation to determine if securities held by clients are subject to a pending or resolved class action lawsuit. It also has no duty to evaluate a client s eligibility or to submit a claim to participate in the proceeds of a securities class action settlement or verdict. Furthermore, Bankers & Investors Co. has no obligation or responsibility to initiate litigation to recover damages on behalf of clients who may have suffered losses due to actions, misconduct, or negligence by corporate management of issuers whose securities are held by clients. Section XX Proxy Voting/Class Action Lawsuits Page 1

129 Notification Procedures Re: Securities Class Action Lawsuits Where the Company receives written or electronic notice of a securities class action lawsuit, settlement or verdict, the notification procedure is as follows: 1. All notices, proof of claim forms and other materials will be forwarded upon receipt to the CCO, or a person designated by the CCO. 2. The CCO, or the designated person, will log in the notices, proof of claim forms, and other materials. 3. The CCO, or the designated person, will verify whether the Company has discretion over the account(s) in which the securities are held. 4. The CCO, or the designated person, will forward all documentation and proof of claim forms received to the client. Electronic mail is acceptable where appropriate, and the client has authorized contact in this manner. 5. The Company will retain records of these notifications in accordance with Rule under the Investment Advisers Act of The Company has no obligation or responsibility to initiate litigation to recover damages on behalf of clients who may have been injured as a result of actions, misconduct or negligence by corporate management of issuers whose securities are held by clients. Section XX Proxy Voting/Class Action Lawsuits Page 2

130 Appendix A ACKNOWLEDGEMENT OF RECEIPT AND ACCEPTANCE I,, hereby acknowledge receipt of Bankers & Investors Company Inc. s Compliance Manual. I agree to abide by and accept the policies and procedures contained herein. Employee Date

131 Appendix B Annual Disclosure/Brochure Offer Letter 1300 N. 78 th Street, Suite G3 Kansas City, KS Phone: Fax: (Date) Name of Client Address City, State, Zip Dear Name of. Client: Pertinent securities laws require us to make available to you every year the latest version of our disclosure "brochure" which has been prepared in accordance with applicable federal and/or state regulations. Additionally, as a registered investment adviser we are required to adopt a code of ethics, and provide a copy of our code of ethics to clients on request. If you wish to receive a copy of our brochure and/or code of ethics, please sign and date the bottom of this letter, and return it to our attention via fax , or at the above address via US Mail. Also enclosed is a copy of our current privacy policies which we are required to deliver to all existing clients annually. Please contact Bankers & Investors Company if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. As always, we welcome your questions and comments at any time. Very truly yours, Bankers & Investors Company, Inc. I do want you to deliver a copy of your current disclosure brochure. I do want you to deliver a copy of your current code of ethics. Signed: Dated:

132 A Summary of: Bankers & Investors Co. Business Continuity Plan (BCP) Updated By: Jerrod L. Foresman, President March 2008 (A full version is located at B&I s main office) I. Emergency Contact Persons Our firm s emergency contact persons are as follows: Jerrod Foresman, (913) , JForesman@BankersInvestors.com, President/CEO Anna Gerkovich, (913) , agerkovich@bankersinvestors.com, Operations Cathy Detherage, (816) cathyd@mokancomm.net, Compliance Consultant The names will be updated in the event of a material change, and our Executive Representative and our Compliance Consultant will review them within 17 business days of the end of each quarter. Rule: FINRA Rule 3520 II. Firm Policy Our firm s policy is to respond to a Significant Business Disruption (SBD) by safeguarding employee s lives and firm properly, making a financial and operational assessment, quickly recovering and resuming operations, protecting all of the firm s books and records, and allowing our customers to transact business. In the event that we determine we are unable to continue our business, we will assure customers prompt access to their funds and securities. We will accomplish this through proactive measures in conjunction with all business partners, e.g. Southwest Securities, Inc. A. Significant Business Disruptions (SBD s) Our plan anticipates two kinds of SBD s, internal and external. Internal SBD s affect only our firm s ability to communicate and do business, such as a fire in our building. External SBD s prevent the operation of the securities markets or a number of firms, such as a terrorist attack, a city flood, or a wide-scale regional disruption. Our response to any external SBD s relies more heavily on other organizations and systems, especially on the capabilities of our clearing firm.

133 B. Approval and Execution Authority Jerrod Foresman, President, a registered principal, is responsible for approving the plan and for conducting the required review. Jerrod Foresman has the authority to execute this plan. C. Plan Location and Access Our firm will maintain copies of its BCP plan and the annual reviews, plus any changes that have been made to it for inspection. An electronic copy of our plan is located on Security Bank s main T-1 server, aka SNB-MAN-DC01 (SBKC s domain controller server). All of Bankers & Investors Co. shared, back office files, folders can be located under this domain address. Please see the attached BCP Binder discussing further details. III. IV. Business Description Our firm conducts business in equity, fixed income, and Life and Health Insurance products. We do not conduct business in derivate products such as Limited Partnerships, Oil and Gas Programs, etc Our firm is an introducing firm and does not perform any type of clearing function for itself or others. Furthermore, we do not hold customer funds or securities. We accept and enter orders. All transactions are sent to our clearing firm, which executes our orders, compares them, allocates them, clears and settles them. With the exception of those customers who decide to go direct with an investment, our clearing firm maintains our customers accounts, and delivers funds and securities. With directed customer requests, the principal of the firm has sole authority to grant inquiry access only to its customer who maintain an account with said clearing firm, which may be accessed 24\7 via the world wide A user password is assigned to the account based upon customer choosing. Our clearing firm is Southwest Securities, Inc., Southwest Securities, Inc., 1201 Elm Street, Suite 3500, Dallas, Texas 75270, phone#(214) , address: jcuster@swst.com, website address is Our clearing firm has given us an alternative contact in the event it cannot be reached: 866-SWS-5BCP ( ). Office Locations The attached BCP Binder shows a comprehensive list of all offices of individuals affiliated with Bankers & Investors Company in bank offices. Our employees may travel to that office by means of foot, car and bus. We engage in order taking and entry at most of these locations. We engage in order taking and entry at all locations, except at Mr. Steve Hook s office. Mr. Hook serves as an active board member on Bankers & Investors Co. Executive Board. As we do not clear our own trades, most mission critical systems are housed at Southwest Securities, Inc. As the OSJ office of Bankers & Investors Co., the SBKC office at 1300 N. 78 th Street, Suite G3, Kansas City, KS 66112, we house all required books and records as it pertains to all client accounts and operational backup. The systems utilized to maintain our client records, including but not limited to,

134 commission statements, various spread sheets, software programs, etc are monitored, maintained and protected by SBKC s IT Data Center at SBKC 701 Minnesota Ave. Kansas City, KS location, 3 rd Floor. V. Alternative Physical Locations of Employees In the event of an SBD, we will move our staff from affected offices to the closest of our unaffected office locations see the attached BCP Binder for a list of offices also in Section IV of this BCP. Rule: FINRA Rule 3519(c)(6) VI. VII. Customer s Access to Funds & Securities Our firm does not maintain custody of customer s funds or securities, which are maintained at our clearing firm, Southwest Securities, Inc. or at individual investment companies chosen by our customers through direct account participation. In the event of an internal or external SBD, if telephone service is available, our registered persons will take customer orders directly on behalf of our customers. Once available, Bankers & Investors Co. will make this information available to customers through its disclosure policy located on its website BankersInvestors.com. If SIPC determines that we are unable to meet our obligations to our customers or if our liabilities exceed our assets in violation of Securities Exchange Act Rule 15c3-1, SIPC may seek to appoint a trustee to disburse our assets to customers. We will assist SIPC and the trustee by providing our books and records identifying customer accounts subject to SIPC regulation. Data Back-up and Recovery Our firm maintains its primary hard copy books and records and its electronic records at 1300 N. 78 th Street, Suite G3, Kansas City, KS Jerrod L. Foresman, President, (913) , is responsible for the maintenance of these books and records. Our firm maintains the following document types and forms that are not transmitted by our clearing firm: WinOps Commission Statement, back up and reports Forms Documents on disc, see the attached BCP Binder (duplicate maintained at compliance consultant office, 901 Baltimore St. in Kansas City, MO.) WSP s one at each Branch, OSJ, and Baltimore St. office All procedures and policies, regulatory paperwork and SEC and FINRA required filings. All the firm s proprietary network files, including WinOps software used for generating commissions, is backed up nightly to Security Bank s network T1 server. Most, if not all, pertinent operational documents of the firm are backed up on SBKC s main database server and can be located on

135 Bankers & Investors Co. shared network drive: SNB-MAN-DC01, My Documents Shared on dct-man-mt01\bno(s:), B&I forms, FIA Forms, Invoices, Referrals, Rep Code Info, etc As noted in Security Bank s Server Backup Procedures, step #7, references the fact that the IT Department of SBKC make special arrangements for off-site network backup delivery to the holding company s Valley View Bank affiliate for storage. (see BCP Binder) Randall Miller, VP of SBKC s IT Help Desk may be contacted for further explanation and insight on this matter. He can be contacted directly at (913) Furthermore, SBKC s Server Backup Procedures specifically makes mention of the scheduling frequency of said backup tapes. In the event of an internal or external SBD that causes the loss of our paper records, we will physically recover them from our various bank branches, where our registered representatives maintain customer account records for all their past and present customers. In the meantime, Bankers & Investors Company back office staff will strive to automate and provide for electronic storage of all essential backup, paperwork via SBKC s T1 Server Network. If our primary site is inoperable, we will continue operations from our back-up site or an alternative location. For the loss of electronic records, we will either physically recover the storage media or electronically recover data from our back-up site, or, if our primary site is inoperable, continue operations from our back-up site or an alternative location. Rule: FINRA Rule 3510 (C) (1) VIII. Financial & Operational Assessments A. Operational Risks In the event of an SBD, we will immediately identify what means will permit us to communicate with our customers, employees, critical business partners, critical banks, critical counterparties, and regulators. Although the effects of an SBD will determine the means of alternative communication, the communications options we will employ will include telephone voic , our website, secure , and calling programs. In addition, we will retrieve our key activity records as described in the section above titled, Data Back-up and Recovery. Rules: NASD Rules 3510 (c)(3) & (f)(2) B. Financial & Credit Risks In the event of an SBD, we will determine the value and liquidity of our investments and other assets to evaluate our ability to continue to fund our operations and remain in capital compliance. We will contact our clearing firm, critical banks, and investors to apprise them of our financial status. If we determine that we may be unable to meet our obligations to those counterparties or otherwise continue to fund our operations, we will request additional financing from our bank or our other credit sources to

136 fulfill our obligations to our customers and clients. If we cannot remedy a capital deficiency, we will file appropriate notices with our regulators and immediately take appropriate steps, including convening a special Executive Board Meeting with all current members to determine the appropriate course of action. Rules: FINRA 3510({c)(3), (c)(8), & (f)(2) IX. Mission Critical Systems Our firm s mission critical systems are those that ensure prompt and accurate processing of securities transactions, including order taking, entry, execution, comparison, allocation, clearance and settlement of securities transactions, the maintenance of customer accounts, access to customer accounts, and the delivery of funds and securities. The systems include: Southwest Securiities website and other order entry systems located at We have primary responsibility for establishing and maintaining our business relationships with our customers and have sole responsibility for our mission critical functions of order taking and entry. Our clearing firm provides, through contract, the execution, comparison, allocation, clearance and settlement of securities transactions, the maintenance of customer accounts, access to customer accounts, and the delivery of funds and securities. Our clearing firm contract provides that our clearing firm will maintain a business continuity plan and the capability to execute that plan. (See Our clearing firm represents that it will advise us of any material changes to its plan that might affect our ability to maintain our business. In the event our clearing firm executes its plan, it represents that it will notify us of such execution and provide us equal access to services as its other customers. If we reasonably determine that our clearing firm has not or cannot put its plan in place quickly enough to meet our needs, or is otherwise unable to provide access to such services, our clearing firm represents that it will assist us in seeking services from an alternative source. Our clearing firm represents that it backs up our records at a remote site. Our clearing firm represents that it operates a back-up operating facility in a geographically separate area with the capability to conduct the same volume of business as its primary site. Our clearing firm has also confirmed the effectiveness of its back-up arrangements to recover from a wide scale disruption by testing. Recovery time objectives provide concrete goals to plan for and test against. They are not, however, hard and fast deadlines that must be met in every emergency situation, and various external factors surrounding disruption, such as time of day, scope of disruption, and status of critical infrastructure-particularly telecommunications-can affect actual recovery times. Recovery refers to the restoration of clearing and settlement activities after wide scale disruption. Our clearing firm has the following SBD

137 recovery time and resumption objectives: recovery within 6 hours; and resumption time of the same business day. A. Our Firm s Mission Critical Systems Order Taking Currently, our firm receives orders from customers via telephone or during face to face interviews, and to a lesser extent through the U.S. Postal Service. During an SBD, either internal or external, we will continue to take orders through any of these methods described that are available and reliable, and in addition, as communications permit, we will inform our customers when communications become available to them what alternatives they have to send their orders to us. Customers will be informed of alternatives by phone. If necessary, we will advise our customers to place orders directly with our clearing firm at Southwest Securities, Inc. Order Entry Currently, our firm enters orders electronically and sending them to our clearing firm electronically or telephonically. In the event, of an internal SBD, we will enter and send records to our clearing firm by the fastest means available, which includes fax or overnite courier. In the event of an external SBD, we will maintain the order in electronic format, and deliver the order to the clearing firm by the fastest means available when it resumes operations. In addition, during an internal SBD, we may need to refer our customers to deal directly with our clearing firm for order taking and entry. B. Mission Critical Systems Provided by Our Clearing Firm Our firm relies, by contract, on our clearing firm to provide order execution, order comparison, order allocation, and the maintenance of customer accounts, delivery of funds and securities, and access to customer accounts. Rule: FINRA 3510 (c) & (f)(1) X. Alternate Communications Between the Firm and Customers, Employees and Regulators A. Customers We now communicate with our customers using the telephone, U.S. Mail, and in person visits at our firm or its various (bank) branches. We do not utilize or instant messaging services for customer communications. In the event of an SBD, we will assess which means of communication are still available to us, and use the means closest in speed and form (written or oral) to the means that we have used in the past to communicate with the other party. Rule: FINRA 3510 (c)(4)

138 B. Employees We now communicate with our employees using telephone, , and in person. In the event of an SBD, we will assess which means of communication are still available to us, and use the means closest in speed and form (written or oral) to the means that we have used in the past to communicate with the other party. Jerrod Foresman will be responsible for communication with all employees in the event of an internal or external SBD. Jerrod Foresman is responsible for determining which method of communication, telephone, , or in person communication will be implemented based upon the circumstances of the event. A special telephone list is maintained by Jerrod Foresman should the means of communication enlisted require telephonic communication. Rule: FINRA 3510 (c)(5) C. Regulators We are currently members of the following SRO s: MSRB, FINRA, SEC. We communicate with our regulators using U.S. Mail and telephone. In the event of an SBD, we will assess which means of communication are still available to us, and use the means closest in speed and form (written or oral) to the means that we used in the past to communicate with the other party. Rule: FINRA 3510 (c)(9) XI. Critical Business Constituents, Banks, Counter Parties A. Business Constituents We have contacted our critical business constituents, and determined the extent to which we can continue our business relationships with them in light of the internal or external SBD. We will quickly establish alternative arrangements if a business constituent can no longer provide the needed goods or services when we need them because of a SBD to them or our firm. Our major suppliers are: Southwest Securities, Inc., previously identified in the body of this document, Tech Mate, Mr. Rod Lueck, 6657 W. Ottawa Ave. Suite A-10, Littleton, CO Phone: (303) , or (303) techmate@opsplus.com Rule: FINRA 3510 (c)(7)

139 B. Banks We have contacted our banks and lenders to determine if they can continue to provide the financing (none at this time) that we will need in light of the internal or external SBD. The bank maintaining our operating account is: Security Bank of KC, 701 Minnesota Ave., Kansas City, KS Phone: (913) Mr. Rich Sutton, Branch Manager. Rule: NASD 3510 (c)(7) C. Counter Parties We have contacted our critical counter parties, such as other broker dealers or institutional customers to determine if they will be able to carry out our transactions with them in light of the internal or external SBD. Where the transactions cannot be completed, we will work with our clearing firm or contact those counter parties directly to make alternative arrangements to complete those transactions as soon as possible. Rule: FINRA 3510 (a) & (c) (7) XII. Regulatory Reporting Our firm is subject to regulation by: SEC, FINRA, FDIC. We now file reports with our regulators using paper copies in the U.S. Mail, and electronically using fax, , and the Internet. In the event of an SBD, we will check with the SEC, FINRA, and other regulators to determine which means of filing are still available to us, and use the means closest in speed and form (written or oral) to our previous filing method. In the event that we cannot contact our regulators, we will continue to file required reports using the communication means available to us. The following is a list of where Bankers & Investors Co. sends its independent annual audit for regulatory review: Securities & Exchange Comm Securities&Exchange Comm Division of Market Regulation Central Regional Office th Street, NW 1801 California Street,Suite 4800 Washington, DC Denver, CO FINRA, Inc. FINRA, Inc Key West Avenue 12 Wyandotte Plaza Rockville, MD West 12 th Street Kansas City, MO Rule: FINRA 3510 (c)(8)

140 XII. XIV. XV. Disclosure of Business Continuity Plan We disclose in writing the existence of our BCP to customers at the time of account opening. We also post a summary of our BCP on our website, We will also mail the BCP in its entirety to our customers upon formal written request. The firm s plan is subject to periodic modification and review by Bankers & Investors Co. Executive Board. This plan has been specifically authorized and customized with reference to Bankers & Investors Co. specific business type and contingency situations. Rule: FINRA 3510 {e} Updates and Annual Review Bankers & Investors Co. will update our BCP whenever we have a material change to operations, structure, business or location or to those of our clearing firm. In addition, our firm will review this BCP annually, to modify it for changes in our operations, structure, business, or location or those of our clearing firm. Rule: FINRA 3510 (b) Senior Manager Approval I have approved this Business Continuity Plan as reasonably designed to enable our firm to meet its obligations to customers in the event of an SBD. Rule: FINRA 3510 (d) Date: Jerrod L. Foresman, President

141 Bankers & Investors Co. Privacy Policy Notice 2008 In the normal course of business, we collect, retain and use information about you to serve your financial needs, administer your account(s) and inform you of products and services that may be of interest. This data, known as non-public personal information, may be collected from several sources, but comes primarily from your new account application form or from other sources provided by you. This information includes your name, address and Social Security number that you may have provided on such forms. In addition, we maintain records of transactions and holdings. We provide information about current or former clients from the sources described above to parties as described below: To other companies as necessary to process your business. For example, we transmit your account and transactional information to the company that prints your account statements. Third parties must limit their use of the information to the purpose for which it was provided. Mutual Fund companies would receive your personal information when an application is submitted directly to them. Where required or permitted by law or regulation. i.e. response to subpoena, court order or regulatory demand. Also, the law permits response to a request for information about you from a consumer-reporting agency. As authorized by you. You may direct us, for example, to send your account statements and trade confirmations to a third party. Confidentiality and Security. We restrict access to information about you to those authorized agents and employees who need the information in order to provide products or services to you. We maintain your records in our office and maintain physical and procedural safeguards that comply with regulatory bodies standards to maintain the confidentiality of your information. Option to Opt Out and Change Notices. If for any reason at any time in the future, we find it necessary to disclose any of your personal information in a way that is inconsistent with this policy, we will give you advance notice of the proposed change and the opportunity to opt out of such disclosure N. 78th St., Ste. G3 Kansas City, KS (913) A non-bank affiliate of Valley View Financial Group