Investment Advisor Code of Ethics
Rule 204A-1 under the Investment Advisers Act of 1940 ("Advisers Act") requires all investment advisors 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 advisor registered with the SEC with respect to various investment advisor products and services, including but not limited to Schwab Private Client ("SPC") Managed Account Services, Schwab Managed Portfolios ("SMP"), Schwab Intelligent Portfolios ("SIP"), and Schwab Intelligent Advisory ("SIA"). To this end, CS&Co. hereby adopts this code of ethics ("Advisor Code"). This Advisor Code incorporates by reference the Charles Schwab Corporation Compliance Manual and the Broker-Dealer Compliance Manual ("Compliance Manuals")*, which set forth the standards of business conduct that are required of employees of the Charles Schwab Corporation and/or CS&Co.
This Advisor Code applies to all CS&Co. employees, and any individuals registered with CS&Co. as Investment Adviser Representatives (“IAR”), who are considered 'Supervised Persons' under the Advisers Act Rules. 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 advisor, or other person who provides investment advice on behalf of the investment advisor and is subject to the supervision and control of the investment advisor.
This Advisor 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 Advisor as defined under the Advisers Act in providing investment advice to clients ("advisory clients"). This Advisor Code is supplementary to Supervised Persons’ duty to comply with the Charles Schwab Corporation Code of Business Conduct, as applicable.
- Standard of Conduct and Compliance with Laws, Rules and Regulations
- Protection of Material Non-Public Information
- Personal Securities Trading
- Access Persons Requirements
- Holdings Reports
- Transactions Reports (Account Statements)
- Review of Transactions
- Compliance Certification
- Consequences for Failure to Comply and Reporting Certain Conduct
*For Independent Branch Leaders ("IBL") and other IBS personnel, any reference to the Compliance Manual denotes the Independent Branch Services Compliance Manual.
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 Advisor Representative ("IAR"), to review, be familiar with, and comply with this Advisor Code and the Compliance Manuals.
Supervised Persons must comply with all of the 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, managers or other appropriate personnel.
The 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 avoid (i) serving their own personal interests ahead of clients, (ii) taking inappropriate advantage of their position with the firm and (iii) any actual or potential conflicts of interest or any abuse of their position of trust and responsibility. The provisions of the 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 Code, the Supervised Person is advised to consult with their supervisors, managers or other appropriate personnel.
B. Protection of Material Non Public Information
Supervised Persons must review and comply with the Inside Information and Confidentiality of Information sections of the Compliance Manuals chapters "Inside Information & Information Barriers" and "Protecting Firm Information & Information Security Requirements." It is unlawful to trade in any security on the basis of material nonpublic (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. Please refer to the "Inside Information and Information Barriers" chapters of these Manuals for a definition of material nonpublic (or inside) information.
Rule 204A-1 of the Advisers Act requires all "Access Persons" of an investment advisor registered with the SEC to report, and the investment advisor to review, their personal securities transactions and holdings periodically. The Advisers Act defines "Access Person" to mean any supervised person of an investment advisor 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 "Employee Securities Accounts & Investments" chapters of the Compliance Manuals details the disclosure obligations surrounding employee securities accounts and the in-house requirements for all employees, including but not limited to prohibitions regarding trading in IPOs and private placements. In addition to the policies outlined in the above-referenced chapter, 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.
The Investment Advisor 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 Advisor Code.
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 securities can be purchased, sold, or held.
Access Persons are subject to personal trade reviews as determined by the Investment Advisor 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.
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2. Holdings Reports
This report must be submitted to the Investment Advisor Chief Compliance Officer or designee:
- 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, no later than the end of the first calendar quarter every 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
- the date the Access Person submits the report.
3. Transaction Reports (Account Statements)
This report must be submitted to the Investment Advisor Chief Compliance Officer or designee 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, 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 at which each security transaction was effected.
- the name of the firm through which the transaction was effected.
4. Review of Transactions
The Compliance Department will review personal securities transactions and holdings of all access persons periodically, but no less than quarterly.
The Compliance Department will provide each Supervised Person with a copy of this Advisor Code and any material amendments, and all Supervised Persons are required to provide Compliance with an acknowledgment of their receipt of the Advisor Code and any amendments. This is completed as part of the annual disclosure process.
All Access Persons with outside accounts must certify each quarter whether any transaction was executed in those accounts.
A Supervised Person can be subject to discipline, up to and including termination of employment (or in instances involving franchisees, termination of the franchise agreement), if he or she violates this Advisor Code. (IBLs and their employees who violate this Code may be subject to recourse by Schwab, up to and including termination of the Franchise Agreement ("FA"). Any Supervised Person who knows of, or reasonably believes there is, a violation of applicable laws or this Advisor Code, must report that information immediately to the 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 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 Code or fail to report violations that come to your attention.
Rule 204-2(a) (12) and (13) of the Advisers Act requires advisors to keep copies of all relevant material relating to the Advisor Code. Supplemental policies are reflected in the CS&Co. Investment Advisor Compliance Program.
Effective July 2018
1. "Beneficial Ownership" is interpreted in the same way as in determining whether a person has beneficial ownership of a security for purposes of Section 16 of the Securities Exchange Act of 1934, and includes ownership by any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in a security. For example, a person should consider himself or herself the beneficial owner of securities held by his or her spouse, his or her minor children, a relative who shares his or her home, or other persons by reason of any contract, arrangement, understanding or relationship that provides him or her with sole or shared voting or investment power. If any Access Person has a question about whether he or she beneficially owns a security, he or she should consult the Investment Advisor Chief Compliance Officer or designee.