PERSONAL TRADING POLICY & IMPLEMENTING AN AUTOMATED PLATFORM Public Pension Financial Forum (P2F2) 6 th Annual Conf

1. PERSONAL TRADING POLICY & IMPLEMENTING AN AUTOMATED PLATFORMPublic Pension Financial Forum (P2F2) 6th Annual ConferenceSacramento, California Nancy Ross VP, Compliance October 20, 2009

2. Presentation Outline • Background – compliance function and the approach to new initiatives. • Legal requirements – insider trading, tipping and fiduciary duties • Benchmarking – best practices and recommendations • Case study of OMERS personal trading controls: • The way we were – identifying weaknesses • Where we are – improvements to date • Where we plan to be – next steps • How it went – automation hurdles October 20, 2009

3. OMERS Quick Facts – The Plan • Ontario Municipal Employees Retirement System • Defined benefit pension plan • Managed by OMERS Administration Corporation, a statutory non-share corporation • Over 920 employers (municipal governments & agencies including police, fire, ambulance, library, children’s aid, etc.) • Over 390,000 members and over 106,000 receiving pensions and benefits October 20, 2009

4. OMERS Quick Facts – Investments • AuM > $44 billion, current asset mix approximately: • < 60% public – managed internally, except some non-Canadian equities with external managers • Canadian equities < 14% • Foreign equities < 21% • Fixed income < 25% • > 40% private – managed by wholly owned investment entities • Real estate >15% • Infrastructure <17% • Private equity < 9% October 20, 2009

5. OMERS Compliance Function • Central Compliance function created in June 2006 • Now team of 6 reporting to Chief Legal Officer • Areas of responsibility: • Legislative Compliance Program – monitor and report quarterly to Board Audit Committee • Regulatory Filings – substantial shareholder reporting, AML/Anti-terrorism monitoring and reporting • Policy Co-ordination – draft and review policies, manage online library (Slide 13), communicate changes (Slide 14) • Code of Conduct – policy, training (Slide 15 & 16) • Personal & Insider Trading – policy, training, Restricted List management, personal trading monitoring (policy is available athttp://www.omers.com/Assets/investments/Personal+$!26+Insider+Trading+Policy.pdf ) October 20, 2009

6. Implementing Compliance Initiatives • Steps: • Research legal requirements and industry practices • Establish policy • Develop processes for monitoring • Communicate to and train employees • Implement and monitor • Review results • Update policy and processes as needed October 20, 2009

7. Legal Requirements • US Federal Sentencing Guidelines: Effective Compliance and Ethics Program Minimum Requirements:(http://www.ussc.gov/2007guid/8b2_1.html) • Standards and procedures to prevent and detect criminal conduct • Knowledgeable Board that exercises reasonable oversight, and specific individuals assigned responsibility • Reasonable efforts to exclude unsavoury individuals • Periodically conduct ethics training and disseminate information to employees on standards and procedures • Ensure program is followed, monitored, audited and evaluated, and has a whistle-blowing system • Promote and enforce with incentives and discipline • Remediation to prevent similar violations October 20, 2009

8. Personal Trading - Legal Principles • Fiduciary Duty – employees may not use non-public information or their position for personal benefit (i.e. front running, conflict of interest, broker preferences) • Insider Trading and Tipping – trading in securities of a public company on the basis of material non-public information about the company, or disclosing the information, except in the necessary course of business, is prohibited (US 1934 Act Rule 10b5-1: considered fraud to trade, or tip if in breach of a duty of confidence) • “material” – if known would reasonably be expected to significantly move the market (US caselaw – viewed by a reasonable investor as having significantly altered the total mix of information made available) October 20, 2009

9. Personal Trading Policy • Benchmarking of Internal Controls: • Policy and acknowledgements • Disclosure and monitoring of trades and holdings • Pre-clearance of trades • Blackout periods • IPO and private placement limits • Institutional trades where held personally by PM • Short term trading limits October 20, 2009

10. October 20, 2009

11. Personal Trading Policy • Purpose: • Protects individuals and the Fund by helping to prevent inadvertent violations • Minimizes appearance of individuals profiting from knowledge gained through their position • Demonstrates reasonable controls required to defend legal action if violation occurs October 20, 2009

12. Personal Trading Policy – Application • “ACCESS PERSON” • Director/employee/consultant with: • Ability to influence investment decisions or • Access to investment information: • Direct through systems, premises • Proximity to those with access • “COVERED ACCOUNT” • Access Person has ability to influence trades • May include accounts of family, associates, trusts • Excludes managed accounts, exempt trade accounts October 20, 2009

14. Periodic newsletter (every 2-3 months) • Summarizes policy changes and new compliance initiatives • Red titles link to Policies and Procedures Library

17. OMERS – The Way We Were • Pre-2007 program: • Investment compliance assigned to one individual within the investment group • Written policy requiring: • Reporting of trades as transacted • Annual holdings disclosure and acknowledgement • Trade pre-clearance through an online system • Monitored by external agent October 20, 2009

18. OMERS – The Way We Were (cont’d) • Problems: • Online system: • Security (not issuer) matched • Securities set up by users • Manual institutional data entry • No verification processes • Control List widely accessible • Reporting of trades irregular • Monitoring limited, not timely October 20, 2009

19. OMERS – Where We Are • Initial Improvements: • Policy rewritten – more guidance, stronger controls • Compliance responsibility for: • Maintaining Restricted List, processes • Data entry with daily verification • Account statements directly from brokers • Automated solutions for institutional pre-clearance and monitoring to limit Restricted List access • Monitoring follow up October 20, 2009

20. OMERS – Where We Are • Recent Implementation: • Online trade pre-clearance system with security master feed operating at the issuer level • Online certification of accounts held • Restricted List populated from trading system in real time plus manual capability for private deals, isolated instances • Rules for pre-clearance configurable for different employee groups (permits firewalls) October 20, 2009

21. OMERS – Where We Plan to Be • Next Steps: • Daily feed of trade confirmations from brokers • Daily reports of previous day’s trade violations • Failure to pre-clear, trade after pre-clearance expired or denied, short term trade, etc. • Periodic reports analyzing data for other trends • Front-running, high closing, unusual trading patterns, excessive pre-clearing, etc. • Other certifications • Outside activities, gift & entertainment October 20, 2009

22. OMERS – How it Went • Automation Hurdles: • Accurate issuer/security data essential • Single point of entry, up-to-date • Product choice – externally hosted • Concern is security of trading information • Product choice – integrated with trading system • Concern is security of internal systems • RFP process – limits to big players • Brokerage feeds require cooperation • 13 in US, none in Canada yet October 20, 2009

23. QUESTIONS ? October 20, 2009