Investment Adviser Code of Ethics
Rule 204A-1 under the Investment Advisers Act of 1940 ("Advisers Act") requires all investment advisers registered with the Securities and Exchange Commission ("SEC") to adopt codes of ethics that set forth standards of conduct and require compliance with federal securities laws. Charles Schwab & Co., Inc. ("CS&Co.") is an investment adviser registered with the SEC with respect to various investment adviser products and services, such as the wrap programs or financial plans. To this end, CS&Co. hereby adopts this code of ethics ("Adviser Code"). This Adviser Code incorporates by reference the Charles Schwab Corporation ("CSC") Compliance Policies and Standards and the Broker Dealer Compliance Manual (collectively, the "Compliance Policies and Standards")1, which set forth the standards of business conduct that are required of personnel of The Charles Schwab Corporation and its operating subsidiaries, including CS&Co.
This Adviser Code applies to all CS&Co. employees, any individuals registered with CS&Co. as Investment Adviser Representatives ("IAR"), or other persons identified by the Investment Adviser Chief Compliance Officer ("CCO"), or designee, who are considered "Supervised Persons" under the Advisers Act. The Advisers Act defines "Supervised Person" to mean any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser.
This Adviser Code is intended to reflect fiduciary principles that govern the conduct of CS&Co. and its Supervised Persons in those situations where CS&Co. acts as a Registered Investment Adviser as defined under the Advisers Act in providing investment advice to clients ("advisory clients"). This Adviser Code is supplementary to Supervised Persons' duty to comply with The Charles Schwab Corporation Code of Business Conduct and Ethics, as applicable.
A. Standard of Conduct and Compliance with Laws, Rules and Regulations
All Supervised Persons are responsible for, and have agreed as a requirement of their employment or registration as an Investment Adviser Representative ("IAR"), to review, be familiar with, and comply with this Adviser Code and the Compliance Policies and Standards.
Supervised Persons must comply with all laws, rules and regulations applicable to the business in which they engage, including among others, securities, banking and other federal, state and local laws. Although not expected to know the details of each law governing CS&Co.'s business, each Supervised Person is expected to be familiar with and comply with the company-wide policies and procedures, as they apply to his or her business unit and, when in doubt, to seek advice from supervisors, Compliance, or other appropriate personnel.
The Adviser Code is based upon the principle that Supervised Persons owe a fiduciary duty to their clients to conduct their affairs in such a manner as to (i) avoid serving their own personal interests ahead of clients, (ii) avoid taking inappropriate advantage of their position with the company and (iii) avoid, and, where appropriate, mitigate any actual or potential conflicts of interest or any abuse of their position of trust and responsibility. The provisions of the Adviser Code are not all-inclusive. Rather, they are intended as a guide for Supervised Persons in their conduct. In situations where there is uncertainty as to the intent or application of the Adviser Code, the Supervised Person is advised to consult with their supervisors, managers, or other appropriate personnel.
B. Protection of Material Non Public Information
It is unlawful to trade in any security on the basis of material non-public (or inside) information or to disclose such information to others who may profit from it. This applies to all types of securities, including equities, options, debt, and mutual funds. Supervised Persons must review and comply with the Charles Schwab Corporation Misuse and Sharing of Information Policy, which defines Material Non-Public Information, as well as all applicable policies referenced therein.
Rule 204A-1 of the Advisers Act requires all "Access Persons" of an investment adviser registered with the SEC to report, and the investment adviser to review, their personal securities transactions and holdings periodically. The Advisers Act defines "Access Person" to mean any supervised person of an investment adviser who (1) has access to nonpublic information regarding any advisory client's purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund (i.e., any mutual fund advised by an affiliate of CS&Co.), or (2) is involved in making securities recommendations to advisory clients in advisory accounts, or who has access to such recommendations that are nonpublic. The CCO, or designee, may designate other individuals as Access Persons as appropriate.
The "Personal Activities and Disclosures Standards" details the disclosure obligations surrounding personnel's securities accounts and the in-house brokerage requirements that apply to all personnel. The standards include a prohibition on participation in IPOs and limitations on private placements, including the requirement to receive pre-clearance prior to the purchase or sale in a private securities transaction. In addition to the policies outlined in the above-referenced standards, CS&Co. Access Persons are required to disclose all outside securities accounts in which they have beneficial ownership2 that can hold or transact in covered securities3, which may include Schwab 529s, HSA accounts and employer sponsored retirement plan accounts.
Access Persons are prohibited from using nonpublic information regarding portfolio holdings, model changes, or client transactions for their personal benefit. Specifically, Access Persons are prohibited from using advance knowledge to trade ahead of or otherwise benefit from such knowledge.
Access Persons, excluding Independent Trustees, may not trade in securities included on The Charles Schwab Corporation's "Restricted List" for their own benefit or the benefit of CS&Co. when the restriction indicates that it applies to all personnel. This restriction also applies to Covered Persons1 and personal accounts over which the Access Person has control. Before trading, personnel must check to see if the security is on the Restricted Securities List.
The Investment Adviser Chief Compliance Officer, or designee, maintains a list of each CS&Co. Access Person and will promptly notify any new Access Person of their responsibilities under the Adviser Code.
Personnel Holdings and Transaction Reports
1. Access Persons Requirements
Once identified, each Access Person must disclose and regularly provide Holdings Reports and Transaction Reports for any account held outside of CS&Co. in which they have a direct or indirect beneficial ownership and through which reportable securities can be purchased, sold or held.
Access Persons are subject to personal trade reviews as determined by the Investment Adviser Chief Compliance Officer or designee.
Access Persons are not required to separately submit Holdings Reports, Transaction Reports, trade confirms or statements for accounts held at CS&Co.
2. Holdings Reports
This report must be submitted:
- no later than 10 days after the person becomes an Access Person, and the information must be current as of a date no more than 45 days prior to the date the person becomes an Access Person, and
- thereafter, within 45 calendar days of the end of each calendar year.
The report must reflect current holdings, and, at a minimum, include:
- the title and type of security, and, as applicable, the exchange ticker symbol or CUSIP number, number of shares, and principal amount;
- the name of any firm in which any securities are held; and
- the date the Access Person submits the report.
3. Transaction Reports (Account Statements)
This report must be submitted no later than 30 days after the end of each calendar quarter.
Monthly or quarterly account statements can be used to satisfy the Transaction Report disclosure requirements, provided the account statement(s) includes all transactions effected during the period and includes, at a minimum, all of the following:
- the date of each transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares and principal amount of each security involved;
- the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
- the price of security at which the transaction was effected;
- the name of the firm with or through which the transaction was effected; and
- the date the Access Person submits the report.
All Access Persons with outside accounts must certify each quarter whether any transaction was executed in those accounts.
4. Review of Transactions
Personal securities transactions and holdings of all Access Persons will be reviewed periodically, but no less than quarterly.
Each Supervised Person will be provided with a copy of this Adviser Code and any material amendments, and all Supervised Persons are required to provide Compliance with an acknowledgment of their receipt of the Adviser Code and any material amendments. This is generally completed as part of the annual disclosure process.
A Supervised Person can be subject to discipline if he or she violates this Adviser Code. For employees, discipline for violations may include termination of employment. If an IBL or their employee violates this Code, the discipline may include termination of the Franchise Agreement. Any Supervised Person who knows of, or reasonably believes there is, a violation of applicable laws or this Adviser Code, must report that information immediately to the CCO, Corporate Responsibility Officer, or the Ombudsperson. A Supervised Person should not conduct preliminary investigations, unless authorized to do so by the Compliance Department. Anyone who in good faith raises an issue regarding a possible violation of law, regulation or company policy or any suspected illegal or unethical behavior will be protected from retaliation. If you have violated this Adviser Code, however, making a report will not protect you from the consequences of your actions. You can be subject to discipline up to and including termination of employment, or termination of your franchise agreement, if you violate this Adviser Code or fail to report violations that come to your attention.
Rule 204-2(a) (12) and (13) of the Advisers Act requires advisers to keep copies of all relevant material relating to the Adviser Code. Supplemental policies are reflected in the CS&Co. Investment Adviser Compliance Program Procedures.