BERKSHIRE HATHAWAY INC.
To: The Directors, Executive Officers and Key Employees of Berkshire Hathaway
Inc. and the Executive Officers and Key Employees of its Subsidiaries
From: Warren E. Buffett
Re: "Insider" Trading Policies and Procedures
Several provisions in the Securities Exchange Act of 1934 and the rules
thereunder restrict transactions in publicly-traded securities by persons possessing
"inside" information - material nonpublic information relevant to the value of such
securities. In light of these provisions, it is imperative that all persons who possess
material nonpublic information about publicly-traded securities: 1) refrain from
purchasing or selling such securities; and 2) refrain from "tipping" (i.e. passing along)
such information to others who may purchase or sell such securities.
It is important to understand that this restriction applies not only to material
nonpublic information relevant to securities issued by Berkshire Hathaway Inc. (which,
for purposes of this policy, includes all of its subsidiaries) but also to material nonpublic
information relevant to any other publicly-traded securities. This latter category would
include securities of other public companies in which Berkshire has invested or is
actively considering making an investment. For example, while Berkshire may properly
purchase securities even though the news of such purchases might cause a price
increase, employees, officers and directors of Berkshire who learn this news in advance
of public disclosure could not purchase these securities until the news had been
disclosed publicly. The restriction does not apply to (1) Berkshire investment managers
with whom Berkshire has entered into a written trading arrangement permitting such
manager to trade alongside Berkshire in the securities of other public companies, to the
extent and on the terms provided in such arrangement, and (2) any trading in Berkshire
securities pursuant to a valid Rule 10b5-1 plan entered into with the prior consent of
Marc Hamburg (any trading permitted under such an arrangement or taking place under
such a plan, “Permitted Trading”).
The penalties for trading or "tipping" inside information can be severe. Among
other things, a person who trades on material nonpublic information, or who provides
such information to others, is potentially subject to a civil penalty of up to three times the
profits earned or losses avoided, a criminal fine of up to $5,000,000, no matter how
small the profit obtained, and a jail term of up to 20 years. In 2012 alone, the SEC and
Department of Justice brought 86 insider trading cases alone.
Securities laws also subject controlling persons to civil penalties for illegal insider
trading by employees, including employees located outside the United States.
Controlling persons include employers (e.g., Berkshire), and the term is being
interpreted by the SEC to include directors, officers and supervisors. These persons
may be subject to fines up to the greater of $1,000,000 or three times the profit of (or
loss avoided by) the insider trader.