A complex body of Federal laws and regulations governs the trading of publicly held securities such as Southwestern common stock. Although the focus of this section is on trading in Southwestern common stock, you should assume (unless advised otherwise by the Office of General Counsel) that these same principles apply to bonds, debentures, preferred stock and any other securities issued by Southwestern Energy Company or any of its subsidiaries.
It is generally illegal for any person, either personally or on behalf of others, to trade in securities on the basis of material, nonpublic information. It is also generally illegal to communicate (or “tip”) material, nonpublic information to others who may trade in securities on the basis of that information. These illegal activities are commonly referred to as “insider trading”. Penalties for insider trading violations include imprisonment for up to 10 years, civil fines of up to three times the profit gained or the loss avoided by trading, and criminal fines of up to $1 million. There also may be liability to those damaged by the trading. A company whose employee violates the insider trading prohibitions may be liable for a civil fine of up to the greater of $1 million or three times the profit gained or the loss avoided as a result of the employee’s insider trading violation.
A. General Statement
It is Southwestern’s policy that no director, officer or employee shall trade or tip others who may trade in Southwestern’s securities when such director, officer or employee knows material, nonpublic information about Southwestern. You are also prohibited from trading or tipping others who may trade in the securities of another company if you learn material, nonpublic information about the other company in connection with your employment or position at Southwestern.
What information is material? All information that a reasonable investor would consider important in deciding whether to buy, sell or hold securities is considered material. Information that is likely to affect the price of a company’s securities is almost always material. Examples of some types of possible material information are:
- significant safety or environmental issues or claims
- possible strategic partnerships to explore for and/or to market production
- important exploration and/or production developments
- financial results for the quarter or the year
- financial forecasts and budgets
- possible mergers, acquisitions, joint ventures and other purchases and sales of companies, or investments in companies
- significant asset acquisitions or divestitures
- changes in supplier arrangements and relationships
- changes in relationships with significant customers or partners
- the gain or loss of important contracts
- major financing developments
- major personnel changes
- major patent developments
- major litigation developments
- changes in dividends
What is nonpublic information? Information is considered to be nonpublic unless it has been disclosed effectively to the public. Examples of public disclosure include public filings with the Securities and Exchange Commission and the Company’s press releases. For information to be considered public, it must not only be disclosed publicly, but adequate time must have passed for the market as a whole to assess the information. Arguably the most risky time to trade in Southwestern’s securities is shortly in advance of Southwestern’s public release of important financial information or other important news, while the least risky time normally is the period shortly following the release and publication of such information (unless, of course, you are aware of other material information that has not been publicized). Even after Southwestern has released such information, sufficient time must have elapsed to enable the information to be assessed by the market as a whole. Although timing may vary depending upon the circumstances, for purposes of this Policy, information is not considered public until the third trading day after Southwestern publicly discloses it. Therefore, any director, officer or employee that possesses material, nonpublic information about Southwestern, or another company, shall wait until the third business day after the information has been publicly released before trading or recommending that others trade in Southwestern’s securities, or the securities of such other company, as the case may be.
What transactions are prohibited? When you know material, nonpublic information about any company, then you, your spouse and people living in your house generally are prohibited from three activities:
- trading in that company’s securities (including trading by or through that company’s 401(k) or other employee benefit plans),
- having others trade for you in that company’s securities, and
- disclosing the information to anyone else who then might trade.
You, anyone acting on your behalf, and anyone who learns the information directly or indirectly from you (including your spouse and members of your household) are prohibited from trading. The prohibition continues whenever and for as long as you know material, nonpublic information about the company.
Although it is most likely that any material, nonpublic information you might learn would be about Southwestern (including its subsidiaries), these prohibitions apply to trading in the securities of any company about which you have material, nonpublic information that you obtained in the course of your employment or position with Southwestern.
B. Unauthorized Disclosure
As previously discussed, the disclosure of material, nonpublic information to others can lead to significant legal difficulties, fines and punishment. You should not discuss material, nonpublic information about the Company or its subsidiaries with anyone, including other employees, except as required in the performance of your regular duties on a need-to-know basis. However, if you become aware of information about Southwestern that is material or may become material, you should promptly communicate the information to your supervisor and request that the supervisor communicate the information directly to the Company’s General Counsel, Chief Executive Officer and Chief Financial Officer.
It is important that only a few representatives of the Company discuss the Company and its subsidiaries with the news media, securities analysis and investors. Inquiries about Southwestern from these people should be referred to Southwestern’s Manager of Investor Relations. In his/her absence, such inquiries should be referred to the Chief Financial Officer or Chief Executive Officer.
C. Confidential Information
As discussed previously in these Guidelines, Southwestern has strict policies to safeguard the confidentiality of its internal, proprietary information. These include identifying, marking and safeguarding confidential information and employee confidentiality agreements. You should comply with these policies at all times.
D. Prohibition on Day Trading, Short Sales, Puts, Calls and Options
It is Southwestern’s policy that neither you, your spouse nor any member of your household shall engage in day trading or make any short sales of any securities of Southwestern. In addition, no such person may buy or sell puts, calls or options in respect of Southwestern’s securities at any time.
Day trading refers to the practice of rapidly buying and selling a stock throughout a day or over a period of a few days in the hope that the stock will continue climbing or falling in value, allowing a person to lock in quick profits. Day traders do not "invest" but seek to ride the momentum of the stock and get out of the stock before it changes course. Short sales are sales of securities that the seller does not own at the time of the sale or, if owned, that will not be delivered within 20 days of the sale. One usually sells short when one thinks the market is going to decline substantially or the stock will otherwise drop in value. If the stock falls in price as expected, the person selling short can then buy the stock at a lower price for delivery at the earlier sale price (this is called “covering the short”) and pocket the difference in price as profit. In addition to the fact that it is illegal for directors and officers to sell their company’s securities short, Southwestern believes it is inappropriate for its employees, consultants, officers or directors to bet against Southwestern’s securities in either of these ways. Puts, calls and options for Southwestern’s securities (other than employee benefit plan options) also afford the opportunity to profit from a market view that is adverse to Southwestern, and they carry a high risk of inadvertent securities law violations. All such transactions are prohibited.
E. Other "Corporate Insider" Policies
Other policies apply specifically to officers, directors and “corporate insiders” of Southwestern and its subsidiaries. If you are such a person, you must inform yourself of and fully comply with the requirements under Section 16 of the Securities Act of 1934, Rule 144 under the Securities Act of 1933, and Rule 10b-5 under the Securities Act of 1934. If you are in doubt about whether you are an officer, director or “corporate insider” who is bound by these other policies, you should consult the Office of General Counsel. It is your responsibility to contact the appropriate persons within Southwestern and to make this determination.
Employees are encouraged to ask questions and seek any follow-up information that they may require about Southwestern’s policy for trading in securities. Please direct all questions to the Office of the General Counsel at 281-618-4806.
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