EXHIBIT 19.1
FIRST US BANCSHARES, INC.
Policy on Insider Trading
This Policy on Insider Trading (this “Policy”) describes the standards of First US Bancshares, Inc. (the “Company”) on trading and causing the trading of the Company’s securities or securities of certain other publicly-traded companies while in possession of confidential information. This Policy is divided into two parts: the first part prohibits trading in certain circumstances and applies to all directors, officers and employees of the Company and its subsidiaries, and the second part imposes special additional trading restrictions and applies to (i) all directors of the Company and its subsidiaries, (ii) all executive officers of the Company as defined by Rule 3b-7 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iii) the employees listed on Appendix A ((i), (ii) and (iii) collectively, “Covered Persons”).
This Policy continues to apply to transactions in the Company’s securities for six months after termination of service with the Company in any of the above-listed roles. However, if an individual is in possession of material nonpublic information when his or her service terminates, that individual may not trade in the Company’s securities or the securities of any other company until that information has become public or is no longer material.
This Policy applies to all transactions in the Company’s securities, including common stock, options and any other securities that the Company may issue, such as preferred stock, notes, bonds and convertible securities, as well as to derivative securities relating to any of the Company’s securities, whether or not issued by the Company.
One of the principal purposes of the federal securities laws is to prohibit so-called “insider trading.” Simply stated, insider trading occurs when a person uses material non-public information obtained through involvement with the Company to make decisions to purchase, sell, give away or otherwise trade the Company’s securities or the securities of any other company or to provide that information to others outside the Company. The prohibitions against insider trading apply to trades, tips and recommendations by virtually any person, including all persons associated with the Company, if the information involved is “material” and “non-public.” These terms are defined in this Policy under Part I, Section 2 below. The prohibitions would apply to any director, officer or employee who buys or sells securities on the basis of material non-public information that he or she obtained about the Company, its customers, vendors or other companies with which the Company has contractual relationships or may be negotiating transactions.
PART I
(applicable to all directors, officers and employees)
Information dealing with the following subjects is reasonably likely to be found to be “material” in particular situations:
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Material information is not limited to historical facts but may also include projections and forecasts. With respect to a future event, such as a merger, acquisition or introduction of a new product, the point at which negotiations or new product development details are determined to be material is determined by balancing the probability that the event will occur against the magnitude of the effect that the event would have on a company’s operations or stock price should it occur. Thus, information concerning an event that would have a large effect on stock price, such as a merger or acquisition, may be material even if the possibility that the event will occur is relatively small. When in doubt about whether particular non-public information is material, you should presume that it is material. If you are unsure whether information is material, you should consult the Insider Trading Compliance Officer before making any decision to disclose such information (other than to persons who need to know it) or to trade in or recommend trading in securities to which that information relates.
Non-public information may include:
As with questions of materiality, if you are not sure whether information is considered public, you should either consult with the Insider Trading Compliance Officer or assume that the information is “non-public” and treat it as confidential.
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*Note that, under certain limited circumstances, the Chief Executive Officer of the Company may also approve in advance certain transactions that do not otherwise strictly comply with this Policy.
For purposes of this Policy, the exercise of stock options for cash under the Company’s equity incentive plans (and the payment of all withholding taxes in cash) and the exercise of stock options by net settlement are exempt from this Policy, since the other party to the transaction is the Company itself and the price does not vary with the market but is fixed by the terms of the option agreement. However, each person subject to reporting under Section 16 of the Exchange Act is required to notify the Insider Trading Compliance Officer of any such transaction prior to the transaction, in order to ensure timely filing of required Section 16 reports. Note that cashless stock option exercises that involve both a purchase of underlying shares and a sale of shares in the open market to cover the costs associated with the exercise are not exempt from this Policy and are subject to the blackout period, trading window and pre-clearance restrictions, as are any other components of equity award exercise or vesting transactions that involve open market activity (e.g., sales of shares to cover tax withholding obligations).
The trading restrictions in this Policy do not apply to purchases of Company stock in the 401(k) plan resulting from periodic contributions to the plan based on your payroll contribution election. The trading restrictions do apply, however, to elections that you make under the 401(k) plan to (i) increase or decrease the percentage of your contributions that will be allocated to a Company stock fund, (ii) move balances into or out of a Company stock fund, (iii) borrow money against your 401(k) plan account if the loan will result in liquidation of some or all of your Company stock fund balance, and (iv) pre-pay a plan loan if the pre-payment will result in the allocation of loan proceeds to a Company stock fund.
Penalties for trading on or communicating material non-public information can be severe, both for individuals involved in such unlawful conduct and for their employers and supervisors, and may include jail terms, criminal fines, civil penalties and civil enforcement injunctions.
In addition, a person who tips others may also be liable for transactions by the tippees to whom he or she has disclosed material non-public information. Tippers can be subject to the same penalties and sanctions as the tippees, and the U.S. Securities and Exchange Commission (the “SEC”) has imposed large penalties even when the tipper did not profit from the transaction.
The SEC can also seek substantial civil penalties from any person who, at the time of an insider trading violation, “directly or indirectly controlled the person who committed such violation,” which would apply to the Company and/or management and supervisory personnel. These control persons may be held liable for up to the greater of $1 million or three times the amount of the profits gained or losses avoided.
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Even for violations that result in a small or no profit, the SEC can seek penalties from a company and/or its management and supervisory personnel as control persons.
Given the severity of the potential penalties, compliance with this Policy is absolutely mandatory. Any individual who believes at any time that he or she has violated this Policy or any securities laws governing insider trading, or believes that any other individual has done so, must report such violation or suspected violation immediately to the Insider Trading Compliance Officer. Upon learning of any such violation, the Insider Trading Compliance Officer, in consultation with outside legal counsel, will determine whether the Company should release any material non-public information and/or whether the Company should report the violation to the SEC or other appropriate governmental authority.
Nothing in this Policy prohibits or limits any person’s ability to communicate with any government agencies (including the SEC, and any other federal, state or local government regulatory or law enforcement agencies). Individuals have the right to participate in and fully cooperate with any investigation or proceeding that may be conducted by any government agency, including providing documents or other information, without notice to or approval from the Insider Trading Compliance Officer or the Company. Individuals are also permitted under all circumstances to file a charge or complaint with or recover an award from any government agency, and to provide confidential information to any government agency without risk of being held liable by the Company for any penalty.
PART II
(applicable to Covered Persons)
All Covered Persons are prohibited from trading in the Company’s securities during blackout periods, as defined below.
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A Covered Person may not enter into overlapping Rule 10b5-1 trading plans (subject to certain exceptions) and may only enter into one single trade Rule 10b5-1 trading plan during any 12-month period (subject to certain exceptions). No Rule 10b5-1 trading plan may be adopted during a blackout period.
Covered Persons are permitted to trade in the Company’s securities when no blackout period is in effect. Generally, this means that Covered Persons can trade during the period beginning on the third trading day following the date the Company’s financial results for such period are publicly disclosed and ending at the close of business on the fifteenth calendar day of the third month of each fiscal quarter. However, even during this trading window, a Covered Person who is in possession of any material non-public information should not trade in the Company’s securities until the information has been made publicly available or is no longer material. In addition, the Company may close the trading window if a
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special blackout period under Part II, Section 1(b) above is imposed and will re-open the trading window once the special blackout period has ended.
(a) Directors and officers of the Company are prohibited from trading in the Company’s equity securities during a blackout period imposed under an “individual account” retirement or pension plan of the Company during which at least 50% of the plan participants are unable to purchase, sell or otherwise acquire or transfer an interest in equity securities of the Company, due to a temporary suspension of trading by the Company or the plan fiduciary.
(b) Covered Persons, including any person’s spouse, other persons living in such person’s household and minor children, and entities over which such person exercises control, are prohibited from engaging in the following transactions in the Company’s securities:
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To facilitate timely reporting of transactions pursuant to Section 16 requirements, each person subject to Section 16 reporting requirements must provide, or must ensure that his or her broker provides, the Insider Trading Compliance Officer with detailed information (e.g., trade date, number of shares, exact price(s), etc.) regarding his or her transactions involving the Company’s securities, including gifts, transfers, pledges and transactions pursuant to a Rule 10b5-1 trading plan, both prior to (to confirm compliance with pre-clearance procedures, if applicable) and promptly following execution. Remember: Section 16 and the rules promulgated thereunder are very complicated, and it is often not intuitive what is a “purchase” and what is a “sale” within the same six (6)-month time period for purposes of potentially running afoul of the short-swing profits prohibitions.
Directors and officers of the Company are required to file a Form 144 with the SEC before making an open market sale of the Company’s securities. The Form 144 notifies the SEC of the person’s intent to sell Company securities. This Form 144 is generally prepared and filed by the individual’s broker and is in addition to the Section 16 reports that are required to be filed with the SEC.
The obligation to file Section 16 reports and Forms 144, and to otherwise comply with Section 16 and Rule 144, is personal. The Company is not responsible for the failure to comply with these requirements.
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ACKNOWLEDGMENT AND CERTIFICATION
The undersigned does hereby acknowledge receipt of the Company’s Policy on Insider Trading. The undersigned has read and understands (or has had explained) such Policy and agrees to be governed by such Policy at all times in connection with the purchase and sale of securities and the confidentiality of material non-public information.
(Signature)
(Please print name)
Date:
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APPENDIX A
[Maintained internally]
A-1