EX 19.1
AEROVATE THERAPEUTICS, INC.
AMENDED AND RESTATED
Statement of Company POLICY on
Insider Trading and Disclosure
This memorandum sets forth the policy of Aerovate Therapeutics, Inc. (the “Company”) regarding trading in the Company’s securities as described below and the disclosure of information concerning the Company. This Statement of Company Policy on Insider Trading and Disclosure (the “Insider Trading Policy”) is designed to prevent insider trading or the appearance of impropriety, to satisfy the Company’s obligation to reasonably supervise the activities of Company personnel, and to help Company personnel avoid the severe consequences associated with violations of insider trading laws. It is your obligation to understand and comply with this Insider Trading Policy. Please contact George Eldridge, the Company’s Chief Financial Officer and Compliance Officer at (617) 443-2400 or legal@aerovatetx.com, if you have any questions regarding the policy.
A.To Whom does this Insider Trading Policy Apply?
This Insider Trading Policy is applicable to the Company’s directors, officers, employees, and designated consultants and contractors, and continues to apply following the termination of any such individual’s service to or employment with the Company until any material, nonpublic information possessed by such individual has become public or is no longer material. The same restrictions that apply to you also apply to (a) your spouse, significant other, child, stepchild, parent, stepparent, sibling, grandchildren, grandparent or other family member, in each case, living in the same household, (b) your children or your spouse’s children who do not reside in the same household as you but are financially dependent on you, (c) any of your family members who do not reside in your household but whose transactions are directed by you and (d) to any investment fund, trust, retirement plan, partnership, corporation or other entity over which you have the ability to influence or direct investment decisions concerning securities. You are responsible for ensuring compliance with this Insider Trading Policy by all such persons affiliated with you.
All members of the Board of Directors and designated officers, employees and consultants also must comply with the Company’s Special Trading Procedures for Insiders (the “Trading Procedures”), which supplement and shall be deemed a part of this Insider Trading Policy.1 Generally, the Trading Procedures require the pre-clearance of all transactions in the Company’s securities by such persons. You will be notified if you are required to comply with the Company’s Trading Procedures.
In the event that you leave our Company for any reason, this Insider Trading Policy will continue to apply to you, and other persons who have a relationship with you who are subject to this policy, until the later of: (1) the first trading day following the public release of earnings for
1 Please refer to the Special Trading Procedures for Insiders.
the fiscal quarter in which you leave our Company or (2) the first trading day after any material nonpublic information known to you has become public or is no longer material.
B.What is Prohibited by this Insider Trading Policy?
It is generally illegal for any director, officer, employee or consultant of the Company to buy or sell the securities of the Company or derivatives relating to the securities of the Company while in the possession of material, nonpublic information about the Company. It is also generally illegal for any director, officer, employee or consultant of the Company to disclose material, nonpublic information about the Company to others who may trade on the basis of that information. These illegal activities are commonly referred to as “insider trading.”
Your failure to observe this Insider Trading Policy could lead to significant legal problems, including fines and/or imprisonment, and could have other serious consequences, including the termination of your employment or service relationship with the Company.
Prohibited Activities
When you know or are in possession of material, nonpublic information about the Company, you generally are prohibited from the following activities:
| ● | trading in the Company’s securities, which includes common stock, options to purchase common stock, any other type of securities that the Company may issue (such as preferred stock, convertible debentures, warrants, exchange-traded options or other derivative securities), and any derivative securities that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, direct or indirect, to profit from any change in the value of the Company’s securities, except for trades made pursuant to plans approved by the Compliance Officer in accordance with this policy that are intended to comply with Rule 10b5-1 under the Exchange Act; |
| ● | having others trade for you in the Company’s securities; |
| ● | giving trading advice of any kind about the Company except that you should, when appropriate, advise others not to trade if doing so might violate the law or this Insider Trading Policy; and |
| ● | disclosing the material, nonpublic information about the Company to anyone else who might then trade, or recommending to anyone that they purchase or sell the Company’s securities when you are aware of material, nonpublic information (these practices are known as “tipping”). |
As noted above, these prohibitions also apply to (a) your spouse, significant other, child, stepchild, parent, stepparent, sibling, grandchildren, grandparent or other family member, in each case, living in the same household; (b) your children or your spouse’s children who do not reside in the same household as you but are financially dependent on you, (c) any of your family members who do not reside in your household but whose transactions are directed by you and (d) any investment fund, trust, retirement plan, partnership, corporation or other entity over which you have the ability to influence or direct investment decisions concerning securities.
This Insider Trading Policy does not apply to (1) an exercise of an employee stock option when payment of the exercise price is made in cash or (2) the withholding by the Company of shares of stock upon vesting of restricted stock or upon settlement of restricted stock units to satisfy applicable tax withholding requirements if (a) such withholding is required by the applicable plan or award agreement or (b) the election to exercise such tax withholding right was made by the Insider in compliance with the Trading Procedures.
The Policy does apply, however, to the use of outstanding Company securities to constitute part or all of the exercise price of an option, any sale of stock as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.
These prohibitions continue whenever and for as long as you know or are in possession of material, nonpublic information. Remember, anyone scrutinizing your transactions will be doing so after the fact, with the benefit of hindsight. As a practical matter, before engaging in any transaction, you should carefully consider how enforcement authorities and others might view the transaction in hindsight.
Prohibition on Trading in Securities of Other Companies
This policy’s prohibitions against insider trading and tipping also apply to trading in securities of other companies, including the Company’s customers, suppliers, partners and other enterprises with which we are working (such as when negotiating an acquisition, investment or other transaction that could be material to the other company). Whenever, during the course of your service to or employment by the Company, you become aware of material nonpublic information about another company, including any confidential information that is reasonably likely to affect the market price of that company’s securities (for example, discussions of licensing a product or acquiring that other company), neither you nor your Affiliated Persons may trade in any securities of that company, give trading advice about that company, tip or disclose that information, pass it on to others, or engage in any other action to take advantage of that information.
If your work regularly involves handling or discussing confidential information of one of our partners, suppliers or customers, you should consult with the Compliance Officer before trading in any of that company’s securities.
Definition of Material, Nonpublic Information
This Insider Trading Policy prohibits you from trading in the Company’s securities if you are in possession of information about the Company that is both “material” and “nonpublic.”
What is “Material” Information?
Information about the Company is “material” if it could reasonably be expected to affect the investment or voting decisions of a stockholder or investor, or if the disclosure of the information could reasonably be expected to significantly alter the total mix of information in the marketplace about the Company. In simple terms, material information is any type of
information that could reasonably be expected to affect the market price of the Company’s securities. Both positive and negative information may be material. While it is not possible to identify all information that would be deemed “material,” the following items are types of information that should be considered carefully to determine whether they are material:
| ● | developments regarding any programs in preclinical or clinical development, including recent regulatory interaction and/or data that have been recently generated from ongoing or recently completed preclinical or clinical trials; |
| ● | developments regarding the intellectual property and/or freedom to operate for any of the current programs or product candidates under development; |
| ● | projections of future earnings or losses, or other earnings guidance; |
| ● | earnings or revenue that are inconsistent with the consensus expectations of the investment community; |
| ● | potential restatements of the Company’s financial statements, changes in auditors or auditor notification that the Company may no longer rely on an auditor’s audit report; |
| ● | pending or proposed mergers, acquisitions, tender offers, joint ventures or dispositions of significant assets; |
| ● | changes in management or the Board of Directors; |
| ● | actual or threatened litigation or governmental investigations or major developments in such matters; |
| ● | cybersecurity risks and incidents, including the discovery or significant vulnerabilities or breaches; |
| ● | developments regarding products, customers, suppliers, orders, contracts or financing sources (e.g., the acquisition or loss of a contract); |
| ● | changes in dividend policy, declarations of stock splits, or public or private sales of additional securities; |
| ● | potential defaults under the Company’s credit agreements or indentures, or the existence of material liquidity deficiencies; and |
| ● | bankruptcies or receiverships. |
The Securities and Exchange Commission (the “SEC”) has stated that there is no fixed quantitative threshold amount for determining materiality, and that even very small quantitative changes can be qualitatively material if they would result in a movement in the price of the Company’s securities.
What is “Nonpublic” Information?
Material information is “nonpublic” if it has not been disseminated in a manner making it available to investors generally. To show that information is public, it is necessary to point to some fact that establishes that the information has become publicly available, such as the filing of a report with the SEC, the distribution of a press release through a widely disseminated news or wire service, or by other means that are reasonably designed to provide broad public access. Before a person who possesses material, nonpublic information can trade, there also must be adequate time for the market as a whole to absorb the information that has been disclosed. For the purposes of this Insider Trading Policy, information will be considered public after the close of trading on the first full trading day following the Company’s public release of the information.
For example, if the Company announces material information of which you are aware before trading begins on a Tuesday, the first time you can buy or sell Company securities is the opening of the market on Wednesday. However, if the Company announces this material information after trading begins on that Tuesday, the first time that you can buy or sell Company securities is the opening of the market on Thursday.
C. | What are the Penalties for Insider Trading and Noncompliance with this Insider Trading Policy? |
Both the SEC and the national securities exchanges, through the Financial Industry Regulatory Authority (“FINRA”), investigate and are very effective at detecting insider trading. The SEC, together with the U.S. Attorneys, pursue insider trading violations vigorously. For instance, cases have been successfully prosecuted against trading by employees in foreign accounts, trading by family members and friends, and trading involving only a small number of shares.
The penalties for violating insider trading or tipping rules can be severe and include:
| ● | disgorgement of the profit gained or loss avoided by the trading; |
| ● | payment of the loss suffered by the persons who, contemporaneously with the purchase or sale of securities that are subject of such violation, have purchased or sold, as applicable, securities of the same class; |
| ● | payment of criminal penalties of up to $5,000,000; |
| ● | payment of civil penalties of up to three times the profit made or loss avoided; and |
| ● | imprisonment for up to 20 years. |
The Company and/or the supervisors of the person engaged in insider trading may also be required to pay civil penalties of up to the greater of $1,525,000 (subject to periodic inflation adjustments)2 or three times the profit made or loss avoided, as well as criminal penalties of up to $25,000,000, and could under certain circumstances be subject to private lawsuits.
Violation of this Insider Trading Policy or any federal or state insider trading laws may subject the person violating such policy or laws to disciplinary action by the Company up to and including termination. The Company reserves the right to determine, in its own discretion and on the basis of the information available to it, whether this Insider Trading Policy has been violated. The Company may determine that specific conduct violates this Insider Trading Policy, whether or not the conduct also violates the law. It is not necessary for the Company to await the
2 | The civil penalty for a control person’s involvement in insider trading violations is set forth in Section 21A(a)(3) of the Exchange Act (15 U.S. Code 78u-1(a)(3)) as $2.17 million. The SEC adjusts this number for inflation annually, as required by the Federal Civil Penalties Inflation Adjustment Act, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (28 U.S.C. 2461). Please refer to https://www.sec.gov/enforce/civil-penalties-inflation-adjustments.htm prior to using this Insider Trading Policy to confirm the civil penalty amount. Note also that the criminal penalties described in this section of the Insider Trading Policy are set forth in Section 32 of the Exchange Act and are not subject to periodic inflation adjustments. |
filing or conclusion of a civil or criminal action against the alleged violator before taking disciplinary action.
D. | Does the Company have any Other Policies Regarding Confidential Information? |
The Company also has strict policies relating to safeguarding the confidentiality of its internal, proprietary information and the use of social media and other online platforms. These policies include procedures regarding identifying, marking and safeguarding confidential information and employee confidentiality agreements. You should comply with these policies at all times.
E. | How Do You Report a Violation of this Insider Trading Policy? |
If you violate this Insider Trading Policy or any federal or state laws governing insider trading, or know of any such violation by any director, officer or employee of the Company, you must report the violation immediately to the Compliance Officer. However, if the conduct in question involves the Compliance Officer, or if you have reported such conduct to the Compliance Officer and you do not believe that he or she has dealt with it properly, or if you do not feel that you can discuss the matter with the Compliance Officer, you may raise the matter with the Chief Financial Officer or the Chief Executive Officer.
F. | Is This Insider Trading Policy Subject to Modification? |
The Company may at any time change this Insider Trading Policy or adopt such other policies or procedures which it considers appropriate to carry out the purposes of its policies regarding insider trading and the disclosure of Company information. Notice of any such change will be delivered to you by regular or electronic mail (or other delivery option used by the Company) by the Company. You will be deemed to have received, be bound by and agree to revisions of this Insider Trading Policy when such revisions have been delivered to you, unless you object to any revision in a written statement received by the Compliance Officer within two (2) business days of such delivery.
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Adopted by the Board of Directors on September 14, 2023.
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Please sign, date and deliver the attached acknowledgment to the Company’s Chief Financial Officer after you have read this Policy.
AEROVATE THERAPEUTICS, Inc.
Acknowledgment
I acknowledge that I have reviewed and understand the Aerovate Therapeutics, Inc. Insider Trading Policy last updated September 14, 2023 (the “Policy”) and agree to abide by the provisions of the Policy.
Signature Name (Printed or typed) Position Date |
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