Subject: Protecting Confidential Information: New European Restricted List Procedure
From: [email-masked]
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Date: Wed, 23 Feb 2000 08:22:00 -0800 (PST)

As you know, we are now launching EnronCredit.com which will involve credit 
derivatives trading in Europe and North America, both on Enron Online and 
off-line.  This will involve quoting prices for buying and selling bankruptcy 
protection in respect of reference entities, many of whom are our 
counterparties in a variety of different commercial and financial contexts.

This exciting cocktail of credit derivatives and Enron Online raises 
significant novel legal risks for Enron.  Probably the most significant risk 
would arise in a situation where Enron has confidential information about a 
reference entity and wrongfully uses that information in pricing the credit 
derivative on that entity.  This could well result in legal proceeding 
against Enron.  In practice, an allegation of misuse of confidential 
information can be very difficult indeed to defend without adequate 
procedures in place to safeguard that information.  In fact, Enron's credit 
trading will rely strictly on publicly available financial information and 
will not involve the use of confidential information, unless the reference 
entity has specifically consented.  Nevertheless, to avoid  the appearance of 
impropriety, we are taking additional steps to consider confidentiality 
agreements we have in place with potential reference entities before deciding 
whether or not we will quote prices on such entities.

Against this background is the ever-present risk of "insider dealing".  This 
crime - which carries a maximum prison sentence of 7 years and an unlimited 
fine - is committed where a person (or member of their family etc) deals in 
the securities (shares, bonds or derivatives on them) of a listed company on 
the basis of unpublished (confidential) price-sensitive information.  We do 
not expect at this time to deal in publicly traded bonds as part of 
EnronCredit.com, but insider dealing is relevant to the conduct of Enron 
staff and could affect other parts of our business.  In addition, SFA rules 
require the safeguarding of confidential information, the misuse of which is 
a serious disciplinary matter.

In order to ensure the success of this new business and that confidential 
information is not misused either by Enron or its staff, we are now 
introducing new policies and procedures (attached) which include a simple 
Restricted List procedure.   In essence they require you - 

to take prudent steps to safeguard confidential information within Enron
to notify Michael Brown, Mark Elliott or myself if you become aware of 
confidential or sensitive information (or circumstances) about a counterparty 
which you think might make it appropriate for that counterparty to be placed 
on the Restricted List.

To make life easier, numerous examples of the types of information which 
might be relevant are set out in the attached procedures.  Please familiarise 
yourself, and anyone else in your group you think appropriate,  with these 
procedures.  As you will see, you are not expected to make difficult 
determinations about whether an entity should or should not be added to the 
Restricted List, just to let us know if you think there is a possibility that 
it should be added.  We will also provide quick briefing sessions to ensure 
that each of you is comfortable with these new procedures.

  Many thanks for your co-operation.