United States federal law prohibits trading in a company’s stock while knowingly of material, nonpublic information about that company. All HII employees are responsible for understanding the laws and company policies that govern insider trading. This article is intended to supplement, not replace, the policies outlined in CP A11 – Insider Trading. All employees are encouraged to familiarize themselves with the full policy located in Corporate Command Media.

Examples of recent insider trading cases brought by the Securities and Exchange Commission (SEC) have implicated a wide variety of individuals. Those involved include officers, directors and employees who traded in securities after learning about significant, confidential developments within their companies; friends, family members and colleagues of company employees who traded in securities after learning about such information; and even employees of law firms, banks, brokerage houses and printing companies who had access to the inside information in the course of providing services to the companies in whose stock they traded.

Why Does It Matter?

Inside information is information that is not yet known to the public and that a reasonable investor might consider important in making an investment decision. It can include financial forecasts, product plans, inventions or discoveries, marketing strategies, executive personnel changes, and mergers and acquisitions. Buying or selling stock while aware of this kind of information gives you an unfair advantage over other HII shareholders or trading market participants.

Insider trading is dishonest and damages your reputation and that of HII. In the long run, it undermines investor confidence in the integrity and fairness of the stock market. Beyond that, violators of federal insider trading laws face severe penalties, including company disciplinary action and possible termination; fines up to $1 million or three times the profit gained, or losses avoided as a result of the trading; and up to ten years in prison.

Types of Illegal Actions

There are three types of behavior that is prohibited under U.S. securities laws: trading the stock of one’s own company (HII), trading in other companies’ stock (such as the stock of vendors, suppliers, and competitors), and “tipping,” or passing inside information to another person so that he or she may purchase or sell stock.

• Trading in Company Stock: If you possess inside information about our company, you are prohibited from trading HII’s stock until the information is public (generally until the end of the business day following public disclosure). It does not matter how you obtained the information. Someone in another department may have told you, you may have overheard a conversation or heard a rumor, or you may have glimpsed at a confidential document mistakenly left on the company copier. Director level employees and above and certain other designated employees are subject to additional restrictions with respect to trading in HII securities and must request pre-approval to trade during certain designated open trading window periods. Please refer to corporate policy, CP A11, Insider Trading for details.
• Trading in Other Companies’ Stock: Inside information about other companies is treated the same way as HII’s inside information. It is illegal for you to trade that company’s stock until the information on which you are basing your decision to trade has been disclosed to the public.
• Tipping: Any inside information given to another is considered tipping under the law. Tipping doesn’t have to be overt or direct; it may include implications, vague suggestions, and coded expressions. Special attention is paid to family members and close confidants.

In the course of your daily work as a HII employee, you have access to a variety of information that is not known to the public. Remember that you are a trustee of that information, and have a responsibility to keep it “inside,” or private, unless and until HII deems it appropriate to disclose it via a public announcement, such as a press release.

If you find yourself in a situation that potentially involves insider trading, or if you believe someone else is violating insider trading laws or company policies, contact your supervisor, the Law Department, or the OpenLine. Remember, it is far better to report a situation as soon as it is discovered than to pretend it does not exist or hope that it will go undetected. For more information or answers to questions please review corporate policy CP A11 – Insider Trading or contact the Law Department.