The board of directors of Affinity Gold Corp. (the Company or we) has adopted this Policy for Trading in Company Securities. This Policy applies to our directors and officers, and certain of our employees and consultants, and it address the Companys policies regarding trading of the Companys securities as well as the securities of publicly traded companies with whom we have a business relationship.
United States federal and state securities laws prohibit the purchase or sale of a companys securities by persons who are aware of material information about such company that is not generally known or available to the public. These laws also prohibit persons who are aware of such material nonpublic information from disclosing this information to others who are likely to effect trades based upon such information. U.S. public reporting companies and their controlling persons may be liable if they fail to take reasonable steps to prevent insider trading by company personnel.
It is important that our directors, officers, employees and consultants understand the breadth of activities that constitute illegal insider trading and the consequences, which can be severe. This Policy is designed to prevent insider trading or allegations of insider trading, and to protect our collective reputation for integrity and ethical conduct. It is your obligation to understand and comply with this Policy. We encourage you to read the Policy carefully so that you understand and are able comply with it. Should you have any questions regarding this Policy, or if you wish to trade in the Companys securities, please contact the Companys Chief Executive Officer who initially will serve as the compliance officer referred to in this Policy.
Scope of Policy
As a director or officer of the Company or its subsidiaries, or a designated employee or consultant of the Company or its subsidiaries, this Policy applies to you. For an explanation of those employees or consultants of the Company or its subsidiaries that are subject to this Policy, please refer to the Pre-Clearance Procedures caption under the Statement of Policy section of this Policy (below). The same restrictions under this Policy that apply to you also apply to your family members who reside with you, anyone else who lives in your household, and any family members who do not live in your household but whose transactions in Company securities are directed by you or are subject to your influence or control (such as parents or children who consult with you before they trade in Company securities). You are responsible for making sure that the purchase or sale of any security covered by this Policy by any such person complies with this Policy.
The prohibition on insider trading in this Policy is not limited to trading in the Companys securities. It includes trading in the securities of other public reporting companies, such as customers or suppliers of the Company and those with which the Company may be negotiating major transactions, such as an acquisition, investment or sale. Information that is not material to the Company may nevertheless be material to one of those other companies.
Trading includes purchases and sales of stock, derivative securities such as put and call options, convertible debentures and preferred stock, and debt securities (e.g., debentures, bonds and notes). Nevertheless, the following trading activities are not included within the scope of this Policy: (i) the exercise of a stock option; (ii) purchases of Company stock in any employee stock purchase plan resulting from your periodic payroll contributions to the plan under an election made by you at the time of enrollment in the plan; (iii) purchases of Company stock in any 401(k) plan resulting from your periodic contribution of money to the plan pursuant to your payroll deduction election; or (iv) purchases of Company stock under any Company dividend reinvestment plan resulting from your reinvestment of dividends paid on Company securities.
Statement of Policy
No Trading on Inside Information
You may not trade in the securities of the Company, either directly or indirectly through family members or other persons or entities, if you are aware of material nonpublic information relating to the Company. Similarly, you may not trade in the securities of any other company if you are aware of material nonpublic information about that company which you obtained in the course of your employment or affiliation with the Company. The existence of a personal financial emergency does not excuse you from compliance with this Policy.
You may not pass material nonpublic information on to others or recommend to anyone the purchase or sale of any securities when you are aware of such information. This practice, known as tipping, also violates the federal and state securities laws and can result in the same civil and criminal penalties that apply to insider trading, even though you did not personally trade and did not gain any personal economic benefit from anothers trading.
Company directors and officers, and certain employees and consultants, together with their family members and other members of their household, may not engage in any transaction involving the Companys securities without first obtaining pre-clearance of the transaction from the Companys compliance officer. If you are an employee or consultant, you will not be subject to the pre-clearance procedures unless you are notified differently in writing. A request for pre-clearance should be submitted to the compliance officer at least two business days in advance of the proposed transaction. The compliance officer is under no obligation to approve a trade submitted for pre-clearance, and may determine not to permit the proposed trade. The compliance officer himself or herself may not trade in Company securities unless such transaction is pre-cleared by another executive officer (such as the Chief Financial Officer, in the case where the compliance officer is the Chief Executive Officer), the board of directors of the Company, or the Companys legal counsel. The compliance officer (or other executive officer of the Company, the board of directors or the Companys legal counsel, as applicable) shall make and retain a written record of every pre-clearance request received and the disposition of (i.e., answer to) such request.
Exception for Approved 10b5-1 Plans
Trades by covered persons in the Companys securities that are executed pursuant to a 10b5-1 plan approved by the compliance officer are not subject to the prohibition on trading on the basis of material nonpublic information contained in this Policy or to the restrictions set forth above relating to pre-clearance procedures.
The Company considers it improper and inappropriate for those employed by or associated with the Company to engage in short-term or speculative transactions in the Companys securities or in other transactions in the Companys securities that may lead to inadvertent violations, or apparent violations, of insider trading laws.
Definition of Material Nonpublic Information
You should understand that inside information has two important elementsmateriality and public availability.
Material Information. Information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. Any information that could reasonably be expected to affect the price of the security is material. Some examples of information that will often likely be material include
projections of future earnings or losses or other earnings guidance
earnings that are inconsistent with the consensus expectations of the investment community
a pending or proposed merger, acquisition or tender offer or an acquisition or disposition of significant assets
a change or pending change in management
major events regarding the Companys securities, including the declaration of a stock split, stock combination, or the offering of additional securities
severe financial liquidity problems
actual or threatened major litigation, or the resolution of such litigation, and
new major contracts, orders, suppliers, customers or finance sources, or the loss thereof.
Nonpublic Information. Nonpublic information is information that is not generally known or available to the public. One common misconception is that material information loses its nonpublic status immediately upon the issuance of a press release disclosing such information. In fact, information is considered to be available to the public only when it has been released broadly to the marketplace (such as by a press release or an SEC filing) and the investing public has had time to absorb the information fully. As a general rule, information is considered nonpublic until the second full trading day after it is released.
This Policy continues to apply to your transactions in Company securities even after you have terminated employment or other services to, or affiliation with, the Company or a subsidiary. Specifically, if you are aware of material nonpublic information when your employment, service relationship, or other affiliation with the Company terminates, you may not trade in Company securities until that information has become public or is no longer material. In all other respects, the procedures set forth in this Policy will cease to apply to your transactions in Company securities upon your termination of employment, services or other affiliation.
Maintaining the confidentiality of Company information is essential for competitive, security and other business reasons, as well as to comply with securities laws. You should treat all information you learn about the Company or its business plans in connection with your employment or other relationship with the Company as confidential and proprietary to the Company. Inadvertent disclosure of confidential or inside information may expose the Company and you to significant risk of investigation and litigation.
You should remember that the ultimate responsibility for adhering to this Policy and avoiding improper trading rests with you. If you violate this Policy, the Company may take disciplinary action, including but not limited to dismissal for cause.
Penalties for Noncompliance
Potential civil and criminal penalties for insider trading violations include (1) imprisonment for up to 20 years, (2) criminal fines of up to $5 million, and (3) civil fines of up to three times the profit gained or loss avoided.
If the Company fails to take appropriate steps to prevent illegal insider trading, the Company may have controlling person liability for a trading violation, with civil penalties of up to the greater of $1 million and three times the profit gained or loss avoided, as well as a criminal penalty of up to $25 million. These civil penalties can extend personal liability to the Companys directors, officers and other supervisory personnel if they fail to take appropriate steps to prevent insider trading.
Finally, failure to comply with this Policy may also subject you to Company-imposed sanctions, including dismissal for cause, whether or not your failure to comply with this Policy results in a violation of law.