INTRODUCTION
This Vident Code of Ethics (“Code”) applies to employees, directors, and officers of the following Covered Companies, which may be referred to collectively herein as “Vident”:
| 1. | Vident Advisory, LLC, (“VA”) a Securities and Exchange Commission (“SEC”) registered investment adviser based in Alpharetta, Georgia |
| 2. | Vident Investment Advisory, LLC (“VIA”), a SEC registered investment adviser based in Alpharetta, Georgia |
| 3. | Vident Financial, LLC, (“VF”), the parent company of VA and VIA, based in Alpharetta, Georgia |
This Code does not apply to any other entities.
VA’s CCO is the relevant CCO with respect to the applicability of the Code to employees, directors, and officers of VA and VF. VIA’s CCO is the relevant CCO with respect to the applicability of the Code to employees, directors, and officers of VIA.
Please refer to Appendix A for the definitions of capitalized terms that are not otherwise defined in
the Code.
| 1. | OVERVIEW |
| 1.1 | Code of Ethics |
Vident has adopted this Code pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and Rule 204A-1 thereunder and Rule 17j-1 under the Investment Company Act of 1940 Act (the “1940 Act”). This Code establishes standards of business conduct and outlines the policies and procedures that Reporting Persons (as defined in Appendix A) must follow to prevent fraudulent, manipulative or improper practices or transactions. This Code is maintained and administered by Vident’s Chief Compliance Officers (“CCOs”) and the Code of Ethics Manager (“Code Manager”). The CCOs, Code Manager and any person designated by the CCOs to assist in administering the Code of Ethics (“Compliance Designee”) are collectively referred herein as the “Code Team”. Please see Appendix B for Code Team Contact Information.
1.2 Standards of Business Conduct
Reporting Persons must always observe the highest standards of business conduct and follow all applicable laws and regulations. Reporting Persons may never:
| · | Use any device, scheme or artifice to defraud a client; |
| · | Make any untrue statement of a material fact to a client or mislead a client by omitting to state a material fact; |
| · | Engage in any act, practice or course of business that would defraud or deceive a client; |
| · | Engage in any manipulative practice with respect to a client; |
| · | Engage in any inappropriate trading practices, including price manipulation; or |
| · | Engage in any transaction or series of transactions that may give the appearance of impropriety. |
This Code does not attempt to identify all possible fraudulent, manipulative or improper practices or transactions, and literal compliance with each of its specific provisions will not shield Reporting Persons from liability for personal trading or other conduct that violates a fiduciary duty to clients.
1.3 Applicability of this Code of Ethics
“Reporting Persons” are subject to all provisions of this Code.
Important Note: All references to “Reporting Persons” in the guidelines, prohibitions, restrictions, and duties set forth in this Code should be interpreted to also refer, as the context requires, to Immediate Family Members (as defined in Appendix A) of such persons. “You” or “your” should be interpreted to refer, as the context requires, to Reporting Persons and/or the Immediate Family Members of such persons.
1.4 Reporting Person Duties
As a Reporting Person, you are expected to:
| · | Be ethical; |
| · | Act professionally; |
| · | Exercise independent judgment; |
| · | Comply with applicable Federal Securities Laws; |
| · | Avoid, mitigate or appropriately resolve conflicts of interest, and situations which create the perception of a conflict of intertest. A conflict of interest exists when financial or other incentives |
motivate a Reporting Person to place their or Vident’s interest ahead of a Vident Client Account. For more information on conflicts of interest, see Section 2.1 of this Code and other applicable VA or VIA conflicts of interest policies. ;
| · | Promptly report violations or suspected violations of the Code and/or any Vident compliance policy to the Code Team; and |
| · | Cooperate fully, honestly and in a timely manner with any Code Team investigation or inquiry. |
Reporting Persons are required to submit all requests and reports to the Code Manager via COMPLIANCE ALPHA (formerly ELF), the transaction monitoring system for the Code.
In addition to COMPLIANCE ALPHA, Reporting Persons can contact the Code Team for requests, assistance and ad-hoc issues.
Training for COMPLIANCE ALPHA will be provided to Reporting Persons by the Code Manager.
All Reporting Persons, as a condition of employment, must acknowledge in writing (or electronically) receipt of this Code and certify, within 10 calendar days of becoming subject to the Code and annually thereafter, that they have read, understand, and will comply with the Code. Violations of the Code may result in disciplinary actions, including disgorgement, fines and even termination, as determined by the Code Team.
The Code and your fiduciary obligations generally require you to put the interests of Vident clients ahead of your own. The Code Team may review and take appropriate action concerning instances of conduct that, while not necessarily violating the letter of the Code, give the appearance of impropriety.
1.5 Reporting Persons’ Obligation to Report Violations
Reporting Persons are expected to report any concerns regarding ethical business conduct, suspected or actual violations of the Code, or any non-compliance with applicable laws, rules, or regulations to the Code Team. Reports will be treated confidentially to the extent reasonably possible and will be investigated promptly and appropriately. No retaliation may be taken against a Reporting Person for providing information in good faith about such violations or concerns.
Examples of violations or concerns that Reporting Persons are expected to report include, but are not limited to:
| • | Fraud or illegal acts involving any aspect of our business; |
| • | Concerns about accounting, auditing, or internal accounting control matters; |
| • | Material omissions or misstatements in SEC filings; and |
| • | Any activity that is prohibited by the Code. |
1.6 Vident’s Duties and Responsibilities to Reporting Persons
To help Reporting Persons comply with this Code, the Code Manager will:
| • | Identify and maintain current listings of Reporting Persons; |
| • | Notify Reporting Persons in writing of their status as such and the Code requirements; |
| • | Make a copy of the Code available and require initial and annual certifications that Reporting Persons have read, understand, and will comply with the Code; |
| • | Make available a revised copy of the Code if there are any material amendments to it (and, to the extent possible, prior to their effectiveness) and require Reporting Persons to certify in writing (or electronically) receipt, understanding, and compliance with the revised Code; |
| • | From time to time, provide training sessions to facilitate compliance with and understanding of the Code and keep records of such sessions and the Reporting Persons in attendance; and |
| • | Review the Code with the CCOs at least once a year to assess its adequacy and effectiveness. |
1.7 Quarterly Board Reports
On a quarterly basis, the relevant CCO or Code Manager shall submit to the respective relevant board of the applicable Reportable Funds (the “Board(s)”) a written report describing violations of or waivers from the Code and any sanctions imposed in response to violations.
1.8 Recordkeeping
This Code, a record of each violation of the Code and any action taken as a result of the violation, a copy of each report and certification/acknowledgment made by a Reporting Person pursuant to the Code, lists of all persons required to make and/or review reports under the Code, and a copy of any pre-clearance given or requested pursuant to the Code shall be preserved with the applicable Covered Company’s records, as appropriate, for the periods and in the manner required by the Advisers Act and 1940 Act.
| 2. | REPORTABLE PERSONAL SECURITIES TRANSACTIONS |
| 2.1 | Resolving Conflicts of Interest |
When engaging in Reportable Securities Transactions, there might be conflicts between the interests of a Vident Client Account and a Reporting Person’s personal interests. Any conflicts that arise in connection with such Reportable Securities Transactions must be resolved in a manner that does not inappropriately benefit the Reporting Person or adversely affect Vident Client Accounts. Reporting Persons shall always place the financial interests of the Vident Client Accounts before personal financial and business interests.
Examples of inappropriate resolutions of conflicts are:
| • | Taking an investment opportunity away from a Vident Client Account to benefit a portfolio or personal account in which a Reporting Person has Beneficial Ownership; |
| • | Using your position to take advantage of available investments for yourself; |
| • | Front running a Vident Client Account by trading in Reportable Securities (or Equivalent Securities) ahead of the Vident Client Account; |
| • | Taking advantage of information or using Vident Client Account portfolio assets to affect the market in a way that personally benefits you or a portfolio or personal account in which you have Beneficial Ownership; and |
| • | Engaging in any other behavior determined by the Code Team to be, or to have the appearance of, an inappropriate resolution of a conflict. |
2.2 Reportable Securities Accounts and Transactions
Reporting Persons must report all Reportable Securities Accounts and Reportable Securities Transactions to the Code Manager via COMPLIANCE ALPHA (see Section 1.4). Reportable Securities Accounts include accounts of Immediate Family Members and accounts in which a Reporting Person is a Beneficial Owner.
There are three types of reports: (1) an initial holdings report that is filed upon becoming a Reporting Person or establishing any Reportable Securities Account, (2) a quarterly transaction report, and (3) an annual holdings report.
Each broker-dealer, bank, or fund company, where a Reporting Person has a Reportable Securities Account will be required to setup their accounts in COMPLIANCE ALPHA so they are received electronically. All accounts that have the ability to hold Reporting Securities must be included even if the account does not have holdings of Reportable Securities at the time of reporting.
| 1. | Initial Holdings Report. Within 10 business days of becoming a Reporting Person: |
| · | All Reportable Securities Accounts and Managed Accounts, including broker name and account number information must be reported by each Reporting Person to the Code Manager via COMPLIANCE ALPHA. |
| · | A recent statement (electronic or paper) for each Reportable Securities Account and Managed Account must be submitted by each Reporting Person to the Code Manager. |
| · | All holdings of Reportable Securities in Reportable Securities Accounts and Managed Accounts must be inputted by each Reporting Person into an Initial Holdings Report via COMPLIANCE ALPHA. The information in the report must be current as of a date no more than 45 calendar days prior to the date of becoming a Reporting Person. |
| 2. | Quarterly Transactions Reports. Within 30 calendar days of each calendar quarter end: |
| · | Each Reporting Person must submit via COMPLIANCE ALPHA to the Code Manager a report showing all Reportable Securities Transactions made in his/her Reportable Securities Accounts during the quarter. A request for this report will be generated by COMPLIANCE ALPHA with notification of due dates and sent to Reporting Persons via email. A report must be submitted by each Reporting Person even if there were not any Reportable Securities Transactions during the quarter. |
| · | Each Reporting Person must certify as to the correctness and completeness of this report. |
| · | This report and certification must be submitted to the Code Manager within one business day immediately before the weekend or holiday if the 30th day falls on a weekend or holiday. |
| 3. | Annual Holdings Reports. Within 30 calendar days of each calendar year end: |
| · | All holdings of Reportable Securities in all Reportable Securities Accounts must be reported by each Reporting Person to the Code Manager via COMPLIANCE ALPHA. The information in the report must be current as of a date no more than 45 calendar days prior to when you submit the report. |
| · | Each Reporting Person must certify as to the correctness and completeness of this report. |
| · | This report and certification must be submitted to the Code Manager within one business day immediately before the weekend or holiday if the 30th day falls on a weekend or holiday. |
2.3 New Accounts
Each Reporting Person must submit a request for approval of a Reportable Securities Account or Managed Account (including those of Immediate Family Members) to the Code Manager within 10 business days of receiving the account number or prior to executing a transaction requiring pre-clearance, whichever occurs first.
Confidentiality
Vident will use reasonable efforts to ensure that the electronic reports submitted to the Code Team as required by this Code are kept confidential. Reports required to be submitted pursuant to the Code will be selectively
reviewed by members of the Code Team and possibly senior executives or legal counsel on a periodic basis to seek to identify improper trading activity or patterns of trading and to otherwise seek to verify compliance with this Code. Data and information may be provided to Reportable Fund officers and trustees and will be provided to government authorities upon request or others if required to do so by law or court order.
| 2.4 | Trading Restrictions and Prohibitions |
| A. | Reporting Persons. All Reporting Persons and their Immediate Family Members must comply with the following trading restrictions and prohibitions: |
| • | All Reporting Persons must pre-clear transactions of certain Reportable Securities in Reportable Personal Security Accounts, (including those of Immediate Family Members and accounts for which the Reporting Person is a Beneficial Owner) as described in the table that follows in Section 2.6. |
| • | IPOs, Private Placements and Initial Coin Offerings (“ICO”) |
Reporting Persons are prohibited from purchasing shares in an IPO.
Reporting Persons may, subject to pre-clearance requirements, purchase shares in a Private Placement.
Reporting Persons are prohibited from purchasing virtual “coins” or “tokens” in an ICO.
| • | Exchange Traded Funds (“ETFs”) |
All Reporting Persons must disclose and report all holdings in ETFs. Purchases and sales of ETFs require pre-clearance.
| • | Selling securities short (or any derivative having the same economic effect as a short sale) are prohibited. |
| • | Investment Clubs |
Reporting Persons may not participate in the activities of an Investment Club.
| • | Attempts to Manipulate the Market |
Reporting Persons must not execute any transactions intended to raise, lower, or maintain the price of any Reporting Security or to create a false appearance of active trading.
| • | Currency Accounts (including Cryptocurrencies) |
Reporting Persons do not need to report accounts established to hold foreign currency or cryptocurrencies, provided no Reporting Securities can be held in the account.
2.5 How to Pre-Clear Reporting Personal Securities Transactions
Reporting Persons must follow the steps below to pre-clear trades for themselves and their Immediate Family Members:
1. Request Authorization. A request for authorization of a transaction that requires pre- clearance must be entered using COMPLIANCE ALPHA. Reporting Persons
Remember! Don’t place an order with your broker/dealer
until you receive approval to make the trade.
may only request pre-clearance for market orders or same day limit orders. Verbal pre-clearance requests are not permitted.
2. Have the Request Reviewed and Approved. After receiving the electronic request, the Code Manager or designate via COMPLIANCE ALPHA will notify Reporting Persons if the trade has been approved or denied.
3. Trading in Foreign Markets. A request for pre-clearance of a transaction in a local foreign market that has already closed for the day may be granted with authorization to trade on the following day because of time zone considerations. Approval will only be valid for that following trading day in that local foreign market.
4. Approval of Transactions.
| • | The Request May be Refused. The Code Team may refuse to authorize a Reporting Person’s Reportable Personal Securities Transaction and need not give an explanation for the refusal. Reasons for refusing your Reportable Securities Transactions may be confidential. |
| • | Authorizations Expire. Any transaction authorization is effective until the close of business of the same trading day for which the authorization is granted (unless the authorization is revoked earlier). If the order for the transaction is not executed within that period, you must obtain a new pre- clearance authorization before placing a new transaction order. |
2.6 Summary of What Reporting Persons and their Immediate Family Need to Report Quarterly and Pre-Clear
The table below serves as a reference to use in determining what Reporting Persons need to report on quarterly transactions reports and must pre-clear when executing a trade. If you have questions about any types of Securities not shown below, please contact a member of the Code Team listed in Appendix B. |
Report? |
Pre-Clear? | |
| Equity Securities | Yes | Yes | |
| Corporate Debt Securities | Yes | Yes | |
| Investment Trusts | Yes | Yes | |
| Municipal Bonds | Yes | Yes | |
| Options on Reportable Securities | Yes | Yes | |
| Self-directed Reportable Securities transactions in Automatic Investment Plans | Yes | No | |
| Virtual Coins or Tokens acquired through an Initial Coin Offering (“ICO”) or those acquired through a secondary token offering | Yes | Yes | |
| Closed-End Funds | Yes | Yes | |
| Private Placements | Yes | Yes | |
| ETFs and options on ETFs | Yes | Yes | |
| Robo advisor accounts | Yes | No | |
| Money Market Mutual Funds | No | No | |
| Short Term Cash Equivalents | No | No | |
| U.S. Government Bonds (direct obligations) | No | No | |
| U.S. Treasuries/Agencies (direct obligations) | No | No | |
| Securities Purchased through automatic transactions in Automatic Investment Plans | Yes | No |
| Mutual Funds not managed by a Covered Company | No | No | |
Banker’s Acceptances, bank certificates of deposit, commercial paper & High- Quality Short-Term Debt Instruments, including repurchase agreements | No | No | |
| 529 Plans | Yes | No | |
| 401(k) plans that do not and cannot hold Reportable Funds or Reportable Securities | Yes | No | |
| Transactions in Managed Accounts | Yes | No | |
| Cryptocurrencies (e.g., Bitcoin) | No | No | |
| Reportable Securities purchased through Automated Investment Plans | Yes | No | |
| Gifting Reportable Securities to any account outside your Reportable Securities Account | Yes | Yes | |
| Receipt of Reportable Securities as a gift | Yes | No |
2.7 Ban on Short-Term Trading
There is a ban on short-term trading. Reporting Persons are not permitted to buy and sell, or sell and buy, the same Reportable Security (or Equivalent Security) that has been pre-cleared within 30 calendar days; this will be considered short-term trading.
| • | This prohibition is measured on a Last in – First out (“LIFO”) basis. |
| • | Pre-clearance requests will be automatically denied in COMPLIANCE ALPHA if they are within the 30-day holding period. |
Reporting Persons may be required to disgorge any profits the Reporting Person makes from any sale before the 30-day period expires.
The ban on short-term trading does not apply to transactions that involve:
| • | Reportable Securities not requiring pre-clearance (e.g., mutual funds that are not Reportable Funds, although they typically impose their own restrictions on short-term trading); |
| • | Commodities, futures (including currency futures), options on futures and options on currencies; |
| • | Automated purchases and sales that were done as part of an Automatic Investment Plan. However, any self- directed purchases or sales outside the pre-set schedule or allocation of the Automatic Investment Plan, or other changes to the pre-set schedule or allocation of the Automatic Investment Plan, within a 30-day holding period, are subject to the 30-day ban on short term trading; or |
| • | Cash sweep vehicles, including money market funds. |
| • | Transactions in Managed Accounts |
| 2.8 | Employee Compensation Related Accounts |
| 1. | 401(k) Plans |
Initial Holding Report (to be submitted in COMPLIANCE ALPHA):
| • | Reporting Persons who have an established Vident Simple IRA are required to report their balances in Reportable Funds or Reportable Securities as part of the Initial Holdings Reporting process. |
| • | 401(k) Plans and IRA’s that are external to Vident are required to be reported if the 401(k) Plan or IRA is capable of holding Reportable Funds or Reportable Securities. |
Quarterly Transaction Report (to be submitted in COMPLIANCE ALPHA):
| • | Reporting Persons are required to report self-directed transactions in Reporting Funds or Reportable Securities in a Vident Simple IRA that occurred outside of the previously reported investment allocations. |
| • | Reporting Persons are required to report transactions in Reportable Funds or Reportable Securities in 401(k) plans held outside of Vident. |
| • | Reporting Persons are not required to report bi-weekly payroll contributions, periodic company matches, or profit-sharing contributions. |
Annual Holdings Report (to be submitted in COMPLIANCE ALPHA):
| • | Reporting Persons are required to update their holdings in a Vident Simple IRA in their Annual Holdings Report |
| • | If an external 401(k) account holds Reportable Funds or Reportable Securities, Reporting Persons are required to update these holdings in their Annual Holdings Report. |
| 3. | CODE VIOLATIONS |
| 3.1 | Investigating Code Violations |
The Code Manager or designee is responsible for investigating any suspected violation of the Code. This includes not only instances of violations against the letter of the Code, but also any instances that may give the appearance of impropriety. Reporting Persons are expected to respond to Code Manager inquiries promptly. The Code Manager is responsible for reviewing the results of any investigation of any reported or suspected violation of the Code. The Code Manager will report the results of each investigation to the relevant CCO. Violations of the Code may also be reported to the Reporting Person’s supervisor.
3.2 Penalties
The Code Manager is responsible for deciding whether a violation is minor, substantive or serious. In determining the seriousness of a violation of this Code, the Code Manager will consider the following factors, among others and will escalate as needed to the applicable CCO:
| • | The degree of willfulness of the violation; |
| • | The severity of the violation; |
| • | The extent, if any, to which a Reporting Person profited or benefited from the violation; |
| • | The adverse effect, if any, of the violation on a Covered Company or a Vident Client Account; and |
| • | The Reporting Person’s history of prior violation(s) of the Code. |
For purposes of imposing sanctions, violations generally will be counted on a rolling 24-month period. However, the Code Manager (in consultation with the relevant CCO) reserves the right to impose a more severe sanction/penalty depending on the severity of the violation and/or taking into consideration violations dating back more than 24 months.
Any offenses as described below will be reportable to the Board(s). Penalties will be imposed as follows:
Minor Offenses:
| • | First minor offense – First written notice. |
| • | Second minor offense – Second written notice. |
| • | Third minor offense – One-month ban on all personal trading, fine, disgorgement and/or other action. |
Minor offenses may include, but are not limited to, the following: failure to timely submit quarterly transaction reports, failure to timely complete assigned training, failure to submit signed electronic acknowledgments of Code forms and certifications, and conflicting pre-clear request dates versus actual trade dates or other pre-clearance request errors.
Substantive Offenses:
| • | First substantive offense – Written notice, fine, disgorgement and/or other action. |
| • | Second substantive offense – 3-month Ban on all personal trading, fine, disgorgement and/or other action. |
| • | Third substantive offense – 6-month Ban on all personal trading, fine, disgorgement and/or other action. |
Substantive offenses may include, but are not limited to, the following: unauthorized purchase/sale of Reportable Securities as outlined in this Code, violations of short-term trading holding period (30-day rule), failure to request pre-clearance of transactions as required by the Code, and failure to timely report a reportable brokerage account. Other actions that may be taken in response to a substantive offense may include termination of employment and/or referral to authorities, depending on the seriousness of the offense.
Serious Offenses:
Engaging in insider trading or related illegal and prohibited activities such as “front running” and “scalping,” is
considered a “serious offense.” We will take appropriate steps, which may include fines, termination of employment and/or referral to governmental authorities for prosecution. The Code Manager will immediately inform the relevant CCO of any serious offenses.
Exceptions:
The Code Team may deviate from the penalties listed in the Code where the relevant CCO determines that a more or less severe penalty is appropriate based on the specific circumstances of that case. For example, a first substantive offense may warrant a more severe penalty if it follows two minor offenses. Any deviations from the penalties listed in the Code, and the reasons for such deviations, will be documented and/or maintained in the Code files.
3.3 Dismissal and/or Referral to Authorities
Repeated violations or a flagrant violation of the Code may result in immediate dismissal from employment. In addition, the Code Manager, the relevant CCO and/or senior management may determine that a single flagrant violation of the law, such as insider trading, will result in immediate dismissal and referral to authorities.
3.4 Exceptions to the Code
The Code Manager is responsible for enforcing the Code. The relevant CCO or Code Manager (or his or her designee) may grant certain exceptions to the Code, provided any requests and any approvals granted must be submitted and obtained, respectively, in advance and in writing. The relevant CCO or Code Manager may refuse to authorize any request for exception under the Code and is not required to furnish
any explanation for the refusal.
