URMC Compliance Program Policy Manual:
Securities Laws

When an organization's tax-exempt bonds (the "Bonds") are publicly traded securities, certain activities of the organization are subject to certain provisions of the federal securities laws. These laws govern the dissemination or use of information about the affairs of the organization or its affiliates. Federal securities laws also address the dissemination or use of information which might be of interest to persons considering the purchase or sale of the Bonds.

Continuing Disclosure

The Securities and Exchange Commission ("SEC") requires continuing disclosure on municipal securities transactions by relevant parties. The Strong Health entities are committed to carrying out any continuing contractual disclosure obligations involving health care revenue bond transactions, and shall make appropriate annual disclosures and all necessary periodic or material disclosures in a timely manner. Employees and staff should be reminded each year of their obligation to refrain from insider trading and disclosure.

Insider Trading

It is generally illegal for any person, either personally or on behalf of others, (i) to buy or sell securities such as the Bonds while in possession of material non-public information, or (ii) to communicate (to "tip") material nonpublic information to another person who trades in the Bonds on the basis of the information or who is person who trades in the Bonds on the basis of the information or who in turn passes the information on to someone who trades. All employees, trustees, and professional staff members must comply with these "insider trading" restrictions.

Penalties for violating the insider trading rules include civil fines of up to three times the profit gained or loss avoided by the trading, criminal fines of up to $1 million, and imprisonment for up to 10 years. There can also be civil liability to those damaged by the trading. An employer whose employee violates the insider trading prohibitions may be liable for a civil fine of up to greater of $1 million or three times the profit gained or loss avoided as a result of the employee's insider trading violation.

All information that an investor might consider important in deciding whether to buy, sell, or hold securities is considered "material." Examples of some types of material information are:

  • financial and operating results for the month, quarter or year
  • financial forecasts, including proposed or approved budgets
  • utilization statistics such as occupancy rates, payer mix, number of discharges and ambulatory visits, etc.
  • awarding or loss of major research funding
  • possible mergers, acquisitions, joint ventures and other purchases and sales of companies and investments in companies
  • obtaining or losing important contracts
  • major personnel or medical staff changes
  • major litigation developments

Information that is likely to affect the price of securities is almost always material.

Information is considered to be nonpublic unless it has been effectively disclosed to the public, for example by a press release. The information must not only be publicly disclosed, but there must also be adequate time for the market as a whole to digest the information. All information about an organization or its business plans is potentially "insider" information until publicly disclosed or made available by the organization. Thus, employees may not disclose it to others, such as relatives, friends, or business or social acquaintances, who do not need to know it for legitimate business reasons.

When an employee (or a member of the professional staff or trustee) knows material nonpublic information about the organization, he or she is prohibited from three activities:

  • trading in the Bonds for his or her own account or for the account of another (including any trust of which the employee, member of the professional staff, or trustee is a trustee, or any other entity that buys or sells securities, such as a mutual fund);
  • having anyone else trade for the employee;
  • disclosing the information to anyone else who then trades or in turn "tips" another person who trades.

Neither the employee nor anyone acting on the employee's behalf, nor anyone who learns the information from the employee, may trade for as long as the information continues to be material and nonpublic.

If an employee, member of the professional staff, or trustee is considering buying or selling the Bonds and has a question as to whether the transaction might involve the improper use of material nonpublic information, that individual should obtain specific prior approval from the Compliance Officer. Consultation with the individual's own attorney is also strongly encouraged.

All of us should remember that outsiders may be listening to us or watching us and may be able to pick up information they should not have. We should not, for example, discuss the System's affairs in places where we can be overheard by others - such as corridors, elevators, the cafeteria, other restaurants, and on cellular phones and we should be careful about how we handle and dispose of sensitive papers.