12.5Insider Trading

This section defines insider trading, explain the duties of ISO Employees and describes behavior that is prohibited under securities laws.

12.5.1Insider Information:

Federal laws prohibit the purchase or sale of any publicly traded security by a person in possession of important information about the security or its issuer that is not publicly known.  These laws have special significance to the ISO because ISO Employees routinely learn of Confidential Information about Market Participants and others.  This circumstance creates two duties for all ISO Employees:  (1) a duty not to trade while in possession of “material, nonpublic information,” also known as “inside information” or “insider information,” as defined below, and (2) a duty not to communicate such information to anyone outside of the ISO, also known as “tipping.”  It has been and remains the policy of the ISO that there be scrupulous compliance with each of these duties.

Material:  Much of the information obtained about Market Participants and any of their Affiliates may be material information under the law.  Information is material if a reasonable investor would consider it important in determining whether to buy or sell the securities of the company involved.  The information may be either positive or negative.  If the information would affect the price of the stock, it is material.  If the information makes you or anyone else think about wanting to buy or sell the stock, that is probably the best indication that it is material.  Some examples of information that could be considered material are key personnel changes, earnings information, fines or assessments that the ISO imposes on the company, and Confidential Information (as described in Section 12.4) including information relating to future generation capacity.  If in doubt, one should assume that any information which could have any significance to an investor is material and not purchase or sell or allow anyone else to purchase or sell the securities in question until such information has been made public.

Nonpublic:  Information that has not been disclosed to the public generally is nonpublic.  To show that information is public, one should be able to point to some evidence that it is widely disseminated.  Information would generally be deemed widely disseminated if it has been disclosed, for example, in the Dow Jones broad tape; news wire services such as AP or Reuters; radio or television; newspapers or magazines; the OASIS; or widely circulated public disclosure documents filed with the federal Securities and Exchange Commission (“SEC”), such as prospectuses or proxies.

Although it is natural to “talk shop,” no Confidential Information should be given to outsiders; for this purpose “outsiders” include one’s immediate family (as defined in Section 12.8), relatives, friends and anyone else other than those working on the matter at the ISO.  In general, ISO matters should not be discussed with any outside individuals.  Particular care is necessary in discussing ISO matters in elevators, restaurants, taxicabs, trains, commercial aircraft and other public places where names and other scraps of information might be overheard.  Care should also be taken not to expose nonpublic papers in such places or leave them lying around in conference rooms or other places even within the ISO.

12.5.2Penalties for Trading on Insider Information

It is against ISO policy and a violation of law to make use of insider information for personal advantage in securities trading or to disclose such information to an outsider.  ISO Employees who have any knowledge or insider trading activities or improper disclosure committed by other ISO Employees must immediately notify the ISO compliance officer (as described in Section 12.11) or his designee.  ISO Employees who have engaged in insider trading or have provided insider information to outsiders will be terminated immediately.  In addition, both the ISO and the ISO Employee may be subject to severe civil and criminal penalties as a result of insider trading by the ISO Employee or by an outsider who has received insider information from the ISO Employee.