1. ETHICAL CONDUCT AND PROFESSIONAL PRACTICE
Our Code of Ethics (Code) applies to all Wellington Management personnel worldwide. The Code describes the standard of conduct we require of our personnel and sets forth certain restrictions on activities, such as personal trading and gifts and entertainment. Compliance with the Code is a condition of employment for all personnel. A serious violation of the Code or related policies may result in dismissal. A copy of the entire document is available upon request.
Wellington Management seeks excellence in its personnel, the products and services we offer, the way we meet our ethical and fiduciary responsibilities, and the working environment we create. All personnel are required to put our clients’ interests above our own. Our firm’s policies and procedures reflect this principle with respect to conducting the firm’s business.
2. PERSONAL TRADING
All Wellington Management, personnel are considered “access persons” under our Code. They must preclear their personal transactions in covered securities prior to execution, except as specifically exempted under the Code. Some personal securities transactions that are not subject to preclearance must nonetheless be reported, including transactions in open-end mutual funds and variable insurance products that we manage. The Code’s restrictions on personal trading apply to accounts over which an access person and/or certain immediate family members have investment discretion, or from which they enjoy economic benefits. Portfolio managers are subject to additional restrictions on their personal transactions.
The preclearance process tests proposed transactions against a number of substantive restrictions designed to prevent our personnel from taking advantage of our firm’s investment activity on behalf of our clients. We prohibit all personnel from buying or selling securities issued by broker/dealers that are approved for execution of client trades or by securities markets or exchanges on which we trade on behalf of clients. Likewise, we do not allow our personnel to engage in personal transactions involving the direct purchase of any security in an IPO. All personnel are required to provide quarterly reports and certifications regarding their securities transactions and annual reports regarding their securities holdings
3. MANAGEMENT OF CONFLICTS OF INTEREST TO ENSURE CLIENT INTERESTS TAKE PRIORITY (INCLUDING GIFTS AND ENTERTAINMENT)
Conflicts arise in the ordinary course of our business. Some of those conflicts are inherent in any large, global investment management business, while others are a result of our business model. We seek to avoid or minimize these conflicts where reasonably possible. However, some conflicts cannot be avoided, and although others could be, we have determined that doing so would require changes to business or investment practices that, on balance, provide a significant benefit to our firm and/or our clients. Any conflicts that we cannot or have chosen not to avoid are managed through policies and procedures that we believe are sufficient to protect the interests of our clients and fulfill our fiduciary obligations to our clients.
Our Code places restrictions on receipt of gifts, travel, and entertainment opportunities by our personnel. Our personnel occasionally participate in entertainment opportunities that are for legitimate business purposes, subject to limitations set forth in the Code.
4. RISK MANAGEMENT AND COMPLIANCE
Wellington Management identifies risks at the entity or business level as well as the activity or process level. Managers of individual business units are responsible for identifying business risks associated with their functions and monitoring changes in their functions to verify that new risks are identified. Legal & Compliance monitors laws and regulations to identify new laws that emerge or changes to existing laws or regulations.
Market risk is monitored on a daily basis to evaluate the impact on our strategies and portfolios. Portfolio gearing is monitored based on relevant client guidelines. Control and monitoring of market risk utilizes specialized reporting that has been developed to provide investment personnel with information on derivative positions.
Our Compliance Program starts with two fundamental principles. First, each Wellington Management employee serves as a fiduciary to the firm’s clients. Second, each employee is subject to certain securities laws, and to the rules and regulations that implement those laws. Our approach to compliance embraces these fundamental principles and seeks to reinforce them through the engagement of Wellington Management personnel in the process of compliance, as well as through specific policies and procedures. Our overarching policy is to achieve firmwide compliance with all applicable laws and regulations on an employee-by-employee basis, through involvement of all employees and business groups in the compliance process.
5. ERROR CORRECTION POLICY
Our risk-management and compliance processes are designed to minimize the occurrence of errors in our investment process, and we believe that we have strong policies and procedures in place. However, from time to time, errors do occur. They are usually discovered early in the process, often by the trading desk before settlement has occurred or through other internal reviews. When an individual identifies an error, he or she is required to report it to the line manager and Wellington Management’s Error Resolution Council, a committee composed of senior management personnel, for immediate review and determination of the appropriate resolution. If a compensable error impacts a client account, we endeavor to promptly notify the client involved and minimize disruption to the client and to the investment process. The Error Resolution Council is responsible for overseeing the resolution process and for working with line managers to identify issues that may warrant changing procedures.
6. BROKERAGE AND COMMISSIONS
We negotiate commission rates with broker/dealers in advance of trading based on the various types of trade execution that our client accounts may need. In many cases, we also negotiate commission rates with broker/dealers to include research services that are bundled with execution services. We attempt to negotiate rates that maximize the overall benefits received by our clients for their commission expenditures. Those benefits include, but are not limited to, trade execution, the willingness and ability to commit capital and the availability of investment research provided by the broker/dealer. While some client accounts routinely make use of a range of services provided by broker/dealers, an account may make use of a particular service only rarely, if at all. As we cannot predict when orders for a client account will require a particular service, we believe that access to the full range of services provided by broker/dealers generally benefits all client accounts.
We do not own or control a broker/dealer that executes securities trades for client accounts.
7. EQUITABLE ASSET VALUATION AND PRICING
We seek to maintain accurate market valuations of the holdings in our client accounts. We determine values of all securities and other instruments held in client accounts at least monthly. Where reliable third-party vendor prices are readily available, we update those values daily. In addition, we determine fair values for securities and other instruments for which market quotations are not readily available or when the price provided by a pricing source does not, in our view, represent fair value. This pricing is done primarily to assist our portfolio managers in managing client accounts, although certain clients have agreed to use these prices when calculating the market value of their accounts for purposes of calculating our management fees.
We do not act as the pricing agent of record in our capacity as advisor or subadvisor for client accounts, though we will provide assistance to the official pricing agents of those accounts, usually custodian banks or accounting agents, upon request. For example, we provide recommendations regarding the appropriate pricing methodology for fair-valued securities held in client accounts and often will act as the primary or sole pricing source for fair-valued securities held by our Sponsored Funds. In each instance, however, the official pricing agent retains responsibility for determining the value of the securities in question.
8. BEST EXECUTION AND TRADE ALLOCATION
We seek best available price and most favorable execution of the orders directed by our portfolio managers. We define best execution as a process, not a result: it is the process of executing portfolio transactions at prices and, if applicable, commissions that provide the most favorable total cost or proceeds reasonably obtainable under the circumstances (taking into account all relevant factors). Trading practices, regulatory requirements, liquidity, public availability of transaction information and commission structures vary considerably from one market to another. Best execution incorporates many such factors, as well as the portfolio manager’s investment intentions, and involves an evaluation of the trading process and execution results over extended periods. We regularly monitor our trade executions to assess our effectiveness in seeking best execution and use third-party analysis where applicable. We can never know with certainty that we have achieved best execution on any given trade, but we believe that over time we do achieve it. Wellington Management’s allocation policy is designed to allocate trades in a manner that is fair and reasonable to client accounts over time. When orders are substantially similar, Equity and Fixed Income Trading typically aggregates them and places a block order with one or more broker/dealers. After execution, the allocation to a given account may be rounded to the nearest round trading lot or adjusted due to specific market conventions. Wellington Management typically imposes a minimum allocation amount for transactions in equity securities in secondary markets. When a strict pro rata allocation places some client accounts below the minimum allocation amount, an algorithm is used to reallocate the residual shares among the affected accounts. The new allocations are approximately equal in size to the minimum allocation amount. The algorithm weights the participating accounts according to the allocations they would have received under a strict pro rata process.
All executed trade orders are allocated to client accounts on the same business unless market convention dictates otherwise. For equity IPOs, if the resulting allocation received from the underwriting syndicate is sufficient to fill each order, then each order is filled. If, however, the orders exceed the number of shares allocated to the firm, then the shares are automatically distributed pro rata among the participating accounts, based on each account’s equity assets under management. For these purposes, equity assets may include cash, fixed income securities and derivative instruments held in that portfolio. The designated trader reviews the Underwriter report upon allocation to verify that the system allocated the shares correctly.
9. REMUNERATION POLICY
Our compensation plans are designed to be fair and motivational over time in order to attract and retain the best professionals in the investment industry. We provide them with incentives to excel, and reward superior performance. Compensation arrangements for investment professionals typically include a base salary component and one or more variable components. For senior professionals, variable compensation is a substantial portion of total compensation.
The significant number of our professionals who are senior managing directors or managing directors of the firm receive additional merit-based compensation based on the overall performance of the firm and their individual and team contributions to firmwide results.
10. WHISTLE-BLOWER PROTECTION POLICY
Wellington Management staff have the right to report violations of law or regulation to Wellington Management, the Code of Ethics team, the Chief Compliance Officer, the General Counsel or the Chair of the Ethics Committee. They also have the right to report violations of law or regulation directly to relevant governmental agencies. They do not need Wellington Management’s prior authorization to make any such report or disclosures and are not required to notify the firm if any such disclosures are made.
11. TRAINING AND DEVELOPMENT
Wellington Management endeavors to hire, develop and retain personnel with the appropriate knowledge and skills to successfully fulfill their roles. Most portfolio management and trading positions require a minimum of five years of relevant industry experience and an undergraduate degree, coupled with an advanced degree and/or Chartered Financial Analyst designation or efforts towards one. All candidates participate in a vigorous interview process, meeting with many professionals at the firm. Once hired, new employees participate in new employee orientation. In addition to standard human resources-related issues, new employees learn about Wellington Management’s culture, the Code of Ethics and general operating procedures such as client confidentiality, proprietary research and material nonpublic information.
In addition, Wellington Management firmly believes in the value of continuing education. The firm offers many diverse opportunities, both internally and externally, for personal and professional development. On-the-job training is an important responsibility of each line manager.
12. COMPLAINTS AND DISPUTE RESOLUTION
Wellington Management Australia has established formal procedures for dealing with enquiries and complaints by its clients to ensure that all complaints are responded to promptly and in a positive manner, and to provide an efficient, fair and accessible mechanism for complaint resolution.
All material instances of client dissatisfaction (i.e., a complaint), whether verbal, written or electronic, must be communicated to appropriate members of the Wellington Management Australia Team and Compliance. Wellington Management Australia will investigate the client’s allegation(s) and the circumstances that resulted in the complaint and, as appropriate, a response will be prepared and issued to the client.