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CalPERS Personal TradingOverviewEnterprise ComplianceEffective October 1, 20191
Personal Trading OverviewPurpose & Key TopicsPurposeTo provide an overview of CalPERS Personal Trading Regulations andSchwab Compliance Technologies (Schwab CT) personal tradingplatform.Key Topics CalPERS Personal Trading RegulationsPre-clearing TransactionsNavigating Schwab CT Personal Trading PlatformAttestations and Affirmations2
Personal Trading OverviewCalPERS Personal Trading Regulations Purpose and Intent of the RegulationsCovered PersonCovered AccountCovered SecurityExamplesPre-Clearing Transactions3
Personal Trading OverviewPurpose and IntentPurpose Federal and state laws require firms like CalPERS to have processes in place todetect and prevent the misuse of material, non-public information. CalPERS Personal Trading Regulations are consistent with investment industrybest practices.Intent To protect CalPERS staff To prevent insider trading To prevent front running To avoid potential conflicts of interest To help ensure that CalPERS meets its fiduciary duty4
Personal Trading OverviewCovered PersonThe Covered Person definition aligns with the Investment AdvisorsAct of 1940, rule 204A-1 regarding “Access Person”. An individual who has access to nonpublic informationregarding the purchase or sale of securities, is involved inmaking securities recommendations, or who has access torecommendations that are nonpublic.Specific branches and positions are called out in the regulations.Spouses or registered domestic partners are also Covered Persons.Reference: 17 CFR 275.204A-15
Personal Trading OverviewCovered AccountA Covered Account is any account that has the capability of buying orselling a Covered Security.Covered Accounts include: Any brokerage account with the capabilityof transacting in a Covered Security Self-directed brokerage accountsoffered through 401(k) or 457accountsCovered Accounts do not include: Bank accountsMutual Fund Only accountsTreasury Direct accounts403(b) accounts529 accountsAny account in which your spouse orregistered domestic partner conducts tradingby virtue of their employment (e.g., moneymanager)*Managed Accounts are not Covered Accounts, however Covered Persons must disclose the account(s) in Schwab CT, providerecertification letters annually and may be added to on an electronic feed.6
Personal Trading OverviewCovered SecurityCovered Securities include: All debt and equity securities, unlessspecifically excluded StocksCorporate BondsDerivatives of these securities (includingoptions and futures)Covered Securities do notinclude: Cash and cash-like securities Certificates of DepositMoney Market Funds Open-end mutual funds Closed-end mutual funds US Treasury Obligations Exchange-traded funds (ETFs) andnotes (ETNs) Municipal Bonds Annuities and Life Insurance Interest in Private Placement Offerings Initial Public OfferingsCollective Trust Funds Interest in a Real Estate (limited toPrivate Placement Offerings)Commercial Paper7
Personal Trading OverviewExamplesInvestmentPreclearance?Type of InvestmentNike, Inc. (NKE)YesPublicly Traded SecuritySenior Housing Communities LLCYesInterest in a Real EstateVentureT-Bill 912796TH2NoUS Treasury ObligationSPDR S&P 500 Trust ETF (SPY)YesExchange-Traded Fund (ETF)IBM Corp. Call Option(IBM190830C00132000)YesPublicly Traded SecurityDerivativeMillennium Fund LLCYesInterest in Hedge FundsVanguard 500 Index Fund (VFIAX)NoDiversified Open-end MutualFund8
Personal Trading OverviewPre-Clearing Transactions General Rule Pre-Clearance Denials Reconsideration Requests9
Personal Trading OverviewGeneral RuleCovered Persons are required to obtain pre-clearance approval before buying, selling,or transferring any Covered Securities in a Covered Account.Does the transaction occurin a Covered Account?YesNoThe transaction does notrequire pre-clearance.Does the transactioninvolve a Covered Security?YesNoThe transaction does notrequire pre-clearance.The transaction must bepre-cleared.When in doubt, pre-clear the transaction.10
Personal Trading OverviewPre-Clearance DenialsThere are three types of pre-clearance denials: Blackout PeriodThe three (3) day period of time that commences one market day beforeand ends one market day after a transaction in Covered Securities byCalPERS. Holding PeriodThe 30 calendar day period between the acquisition and sale, and the 30calendar day period between sale and re-acquisition of a CoveredSecurity, on a last-in first-out basis. Restricted ListThe list of Covered Securities that identifies companies which CalPERShas information that may be material and non-public.11
Personal Trading OverviewSubmitting a Reconsideration RequestIf a request for pre-clearance is denied, a Covered Personcan submit a Reconsideration Request.Each Reconsideration Request isunique and has a specific set ofquestions you must answer.In some cases, you may be requiredto submit additional information and/ordocumentation.All requests are evaluated on acase by case basis.12
Personal Trading OverviewNavigating Schwab Compliance Technologies Logging in to Schwab CTHow to Request Pre-ClearanceSubmitting a Reconsideration RequestPersonal Trading Affirmation and AttestationsOther Navigations Items13
Personal Trading OverviewLogging in to Schwab CTLog in to the Personal Trading Platform at www.schwabct.com Your username is your CalPERS emailaddress, all lowercase (firstname.lastname@calpers.ca.gov). First time users and those who forgot theirpassword, click the “Forgot your password?”link. The system will generate a password resetlink and send it to your CalPERS email. Usewww.office.com to access your emailanywhere. Follow the steps in the link to reset yourpassword.14
Personal Trading OverviewHow to Request Pre-ClearanceLog in to the Personal Trading Platform at www.schwabct.comPublicly Traded SecuritiesRequest for pre-clearance by clicking “Create a preclearance” under the Quick Links section on the homepage. Enter the pertinent information and hit Submit.Non-Publicly Traded SecuritiesRequest for pre-clearance by clicking “Pre-clearance forNon-Public Securities” under the Forms section on thehome page. Enter the pertinent information and attachdocumentation (fact sheet, offer letter, etc.) and hit Submit.You will receive an email from the system indicating if yourpre-clearance has been approved or denied. Not receivingand immediate response means the request is pendingadministrator review.15
Personal Trading OverviewPersonal Trading Affirmations and AttestationsInitial Personal Trading AffirmationFor new Covered Persons, you arerequired to complete your InitialPersonal Trading within 30 days of yourstart date.Annual Personal Trading AttestationThe three affirmations are:Once a year, Covered Persons are1.required to attest to the threeaffirmations. This is a requirement for all 2.Covered Persons, regardless of if you3.have Covered Accounts.Personal Trading RegulationAttestationCovered Account ValidationAccount Statement andConfirmation Authorization16
Personal Trading OverviewPersonal Trading Affirmations and AttestationsPersonal Trading Regulation AttestationA “Yes” response affirms that you have read and understand theCalPERS Personal Trading Regulations.Note: You must click the hyperlink to open the regulations before you can respond.17
Personal Trading OverviewPersonal Trading Affirmations and AttestationsCovered Account ValidationThis section is for you to disclose the Covered Accounts for you andspouse/registered domestic partner. Select “No” if you do not have anyCovered Accounts to Disclose. Select “Yes” to begin disclosingyour Covered Accounts. You will betaken to the Brokerage Accountdisclosure page. See page 22-23for more information. Annually you will be asked toreview your disclosed accounts toensure they are current.18
Personal Trading OverviewPersonal Trading Affirmations and AttestationsAccount Statement & Confirmation AuthorizationA “ Yes” response affirms that you authorize your broker to sendduplicate account statements and trade confirmations to CalPERS foryour Covered Accounts.Note: If you do not have any Covered Accounts, a “Yes” response affirms you willallow the above of any future disclosed Covered Accounts.19
Personal Trading OverviewPersonal Trading Affirmations and AttestationsQuarterly Transaction AffirmationsCovered Persons who have accounts that are not with one of CalPERS’Designated Brokerages are required to complete a QuarterlyTransaction Affirmation. Click on “Disclose” to open the affirmation.Covered Persons are required to manually enter transactions that occurred during thereporting quarter.Authorize their non-designated brokerage to provide duplicate trade confirmations andstatements to Enterprise Compliance either by mail or email to the Personal Trading Mailbox.20
Personal Trading OverviewOther Navigation ItemsPersonal Trading View your submitted Pre-clearances Disclosed brokerage accounts Past transactions Submitted paper statements (if applicable)Affirmations View past affirmations Disclosures (reconsideration requests, Pre-clearance for NonPublic Securities) Various other policies and resources21
Personal Trading OverviewManaging My Accounts Designated BrokeragesAdding Brokerage AccountsNon-Designated BrokeragesManaged Accounts22
Personal Trading OverviewDesignated BrokeragesCalPERS Designated BrokersElectronic Feed is established for 17 brokerages: Charles SchwabFidelityE*TRADETD AmeritradeAll Covered Accounts must be maintained at a Designated Brokerage.Covered Persons have 60 days from employment to move accounts to aDesignated Broker.Note: If you cannot move your account(s) to a Designated Broker, you mustrequest for an exception. Exemptions will be considered on a case by casebasis.23
Personal Trading OverviewAdding Brokerage AccountsHow to Disclose a Covered Account A “Yes” response to the Covered Account Validation Covered Account Validation link under “Forms” Under the Personal Trading section, in the “My Brokerage Accounts”subsection, click the green “New” buttonRequired Items You will need to title your disclosed account, provide the account number,and enter the brokerage name. Once the form is complete, hit “Submit”.Note: If you do not see your brokerage auto populate, please select “Other”and enter the name in the space provided. For non-designated brokerages,you need to provide an “Exception Reason”.24
Personal Trading OverviewNon-Designated BrokeragesQuarterly Transactions Affirmations Authorize your broker to provide duplicate trade confirmations and statements to EnterpriseCompliance either by mail or email Manually enter the related transactions in Covered Securities with their respective preclearance approval IDs You have 30 calendar days from the end of the quarter to complete the affirmationNon-Designated Brokerage Accounts must adhere to the Regulations Requesting for pre-clearance for all transactions in a Covered Security Adhering to the Holding Period, Blackout Period, and Restricted List requirementsNote: Enterprise Compliance reserves the right to revoke the undesignated broker exception atany time if it is determined that your account no longer fits the criteria for having an exception.25
Personal Trading OverviewManaged AccountsDefinition of a Managed Account It is managed by a third party who is not a Covered Person; No Covered Person has the power to affect or ability to control or influence investmentdecisions in the account, and; No Covered Person communicates (directly or indirectly) with the person(s) with investmentdiscretion regarding specific trade activity in the account.Managed Accounts and the Regulations Managed Accounts are not considered Covered Accounts under the Personal TradingRegulations. They are not subject to the Regulation requirements, such as requesting for pre-clearance andholding period. While they are not Covered Accounts, they must be disclosed and a Managed AccountCertification Letter is required upon disclosure. Additionally, Managed Account holders must certify annually that the disclosed information iscurrent and provide an updated copy of the Managed Account Certification Letter from the thirdparty money manager.26
Personal Trading OverviewManaged AccountsHow to Disclose a Managed Account From the “New Brokerage Account” form, check the “ManagedAccount” box certifying that this account is a Managed Account.Once the Managed Account has been submitted, go to the “MyPolicies” subsection under Affirmations.Download the “Managed Account Certification Form” and have yourinvestment advisor complete and sign the letter. Note: CalPERS will accept an investment advisor’s proprietary letter,providing it contains the same required information and language.Email the letter to the Personal Trading Mailbox for review andapproval.27
Personal Trading OverviewBrokerage Account MatrixType of AccountType of BrokerageRequirementsDesignated Brokerage Setup on Electronic FeedRequires Managed Account Certification LetterAnnual Managed Account Certification/AttestationAnnual Personal Trading AttestationPre-Clearance is not RequiredNon-Designated Brokerage Not on Electronic Feed, Statements are not RequiredRequires Managed Account Certification LetterAnnual Managed Account Certification/AttestationAnnual Personal Trading AttestationPre-Clearance is not RequiredNon-Managed Account Designated Brokerage Setup on Electronic FeedAnnual Personal Trading AttestationPre-Clearance is Required (Stocks, ETFs, etc.)Non-Managed Account Non-Designated Brokerage Not on Electronic FeedDuplicate trade confirmation and statements from brokerageQuarterly Transaction AffirmationAnnual Personal Trading AttestationPre-Clearance is Required (Stocks, ETFs, etc.)Managed AccountManaged Account28
Personal Trading OverviewContact Enterprise ComplianceReach out with any questions or to setup a one-on-one training: ECOM Personal Trading Requests@CalPERS.ca.gov ECOM Main Line: (916) 795-2148Additional Resources CalPERS Personal Trading Information Center29
Any brokerage account with the capability of transacting in a Covered Security Self-directed brokerage accounts offered through 401(k) or 457 accounts. Covered Accounts do not include: Bank accounts Mutual Fund Only accounts Treasury Direct accounts 403(b) accounts 529 accounts Any account in which your spouse or
