Document

In the course of your relationship with and/or in performing your duties for American Realty Investors, Inc. and its subsidiaries and affiliates (collectively, the "Company," "we" or "us"), you may, at times, have information about us or another entity that is not generally available to the public. Because of your relationship with us, if you are aware of material nonpublic information about the Company, federal and state securities laws prohibit you from trading in the Company's (or its affiliates, Transcontinental Realty Investors, Inc. (“TCI”) and Income Opportunity Realty Investors, Inc. (“IOR”) securities or providing material nonpublic information to others who may trade on the basis of that information. This policy seeks to explain some of your obligations to us and under the law, to prevent actual (or even the appearance of) insider trading, and to protect our reputation for integrity and ethical conduct.

This policy applies to all controlling persons, directors, officers and employees of the Company, as well as their family members or other persons with whom they have a relationship who are subject to this policy and entities under their influence or control, as described below. Part Il of this policy imposes special additional trading restrictions applicable to (i) directors of the Company, (ii) executive officers of the Company, and (iii) executives reporting directly to the Chief Executive Officer of the Company and other key persons as may be designated from time to time by the Chief Executive Officer or the Chief Financial Officer in consultation with the General Counsel of the Company (each, a "Designated Person").

This policy applies to you, any family member and any other person who has a relationship with you (legal, personal or otherwise) that might reasonably result in that person's transactions being attributable to you. This includes any legal entities that are influenced or controlled by you or other persons who have a relationship with you and are subject to this policy, such as any corporations, partnerships or trusts. For purposes of this policy, your "family members" consist of people within your family who live with you, or are financially dependent on you, and also include other family members whose transactions in securities are directed by you or are subject to your influence or control. The Company may also determine that other persons should be subject to this policy, such as contractors or consultants who have access to material nonpublic information.

Transactions by your family members and other persons subject to this policy who have a relationship with you should be treated for the purposes of this policy and applicable securities laws as if they were for your own account. Accordingly, all references to you with regard to all trading restrictions and preclearance procedures in this policy also apply to your family members or other persons with whom you have a relationship who are subject to this policy. You are personally responsible for the actions of your family members or other persons with whom you have a relationship who are subject to this policy.

While in the possession of information that is "material" and "nonpublic" (as defined in Section D below), you may not buy or sell our securities or engage in any other action to take advantage of, or pass on to others, material nonpublic information. Our securities include the Company's common stock, options to purchase common stock, or any other type of securities that the Company may issue, including, but not limited to, preferred stock, convertible debentures and warrants, as well as derivative securities that are not issued by the Company. As described below, you are also prohibited from buying or selling the securities of any other publicly traded company while in possession of information that is material and nonpublic. This policy applies both to securities purchases (to make a profit based on good news) and securities sales (to avoid a loss based on bad news), regardless of how or from whom the material nonpublic information was obtained.

This policy applies to material nonpublic information relating to other publicly traded companies, including our vendors, suppliers and customers, when that information is obtained in the course of employment with the Company or the performance of services on our behalf. You should treat material nonpublic information about our business partners with the same care required with respect to information related directly to the Company.

Information is considered material if a reasonable investor would consider that information important in making a decision to buy, hold or sell securities. Any information that could be expected to affect the Company's (or, in the case of information about another company, such other company's) stock price, whether it is positive or negative, should be considered material. While it is not possible to define all categories of material information, information dealing with the following subjects is reasonably likely to be found material in particular situations:

It is difficult to provide a precise definition of material information, since there are many gray areas and varying circumstances. The determination of whether information is material is almost always made after the fact when the effect on the market can be quantified.

Information that has not been disclosed to the public is generally considered to be "nonpublic" information. In order to establish that the information has been disclosed to the public, it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be considered widely disseminated if it has been disclosed in a press release through the newswire services or disclosed in documents filed with the SEC that are available on the SEC's website. Once information is widely disseminated, it is still necessary to afford the investing public with sufficient time to absorb the information.

•other than transactions made pursuant to an approved Rule 10b5-l trading plan, pre-clearing trading in the Company's securities in accordance with the procedures set forth in Part II, Section D below.

Penalties for trading on or communicating material non-public information can be severe, both for individuals involved in such unlawful conduct and their employers and supervisors, and may include imprisonment, criminal fines, civil penalties and civil enforcement injunctions. In addition, a person may be liable for improper transactions by others (commonly referred to as "tippees") to whom they have disclosed material non-public information. Employees who violate this Policy may be subject to disciplinary action by the Company, including termination of employment.

If you are a director, an executive officer or a Designated Person, you can only trade in our securities during the period (the "trading window") commencing at the open of market on the first full trading day following the date of release of our annual and quarterly earnings for a particular fiscal quarter or year and ending at the close of market on the last day of the second calendar month of the next fiscal quarter (or if the last day is not a trading day, the end of the last trading day preceding the last day).

However, even during this trading window, if you are in possession of any material non-public information, you should not trade in our securities until the information has been made publicly available or is no longer material. Because directors, executive officers and Designated Persons are especially likely to receive regular nonpublic information regarding our operations, limiting trading to the trading window helps ensure that trading is not based on material information that is not available to the public. This restriction on trading does not apply to transactions made under an approved Rule 10b5-l trading plan, as discussed in Section C below.

The Compliance Officer may issue instructions from time to time advising some or all personnel that they may not buy or sell our securities for certain periods, or that our securities may not be traded without prior approval. Due to the confidential nature of the events that may trigger these sorts of blackout periods, the Compliance Officer may find it necessary to inform affected individuals of a blackout period without disclosing the reason. If you are made aware of such a blackout period, do not disclose its existence to anyone.

Rule 10b5-l under the Securities Exchange Act of 1934 ("Exchange Act") provides a defense from insider trading liability under Rule 10b-5. Executive officers of the Company may not buy, sell or trade in our securities (even during an open trading window), except pursuant to a pre-existing written plan, contract, instruction or arrangement under Rule 10b5-1 meeting the following criteria (an "approved 10b5-l plan"):

•The trading plan must be reviewed and approved by the Compliance Officer at least 30 calendar days in advance of any trades under the plan (or, if modified, such modifications must have been reviewed and approved by the Compliance Officer at least 30 days in advance of any subsequent trades);

•The trading plan must specify the number of and price at which securities are to be purchased or sold as well as the date on which the securities are to be purchased or sold or, alternatively, specify a method or formula by which such parameters are to be determined; and

In addition, the securities covered by the trading plan should not exceed 25% of the executive officer's total holdings of the Company's securities and the trading plan must not cause the executive officer to fall below applicable Company minimum stock ownership guidelines as in effect from time to time.

Directors, Designated Persons or other persons subject to this policy who wish to rely on the defense from insider trading liability under Rule 10b-5, must also enter into an approved 10b5-l plan meeting the above criteria.

If you are a director of the Company, you may not buy, sell, or engage in any other transaction in our securities (even during an open trading window), without first obtaining pre-clearance from the Compliance Officer. Pre-clearance is not required for purchases and sales of securities under an approved 10b5-l plan.

Any proposed transaction (unless otherwise specified) should be submitted to the Compliance Officer at least two full trading days in advance of the proposed transaction. Any confirmation must not have been revoked by oral or email notice from the Compliance Officer. Pre-cleared trades must be completed within five full trading days of receipt of pre-clearance unless an exception is granted by the Compliance Officer. Transactions not completed within the time limit are subject to pre-clearance again.

The Compliance Officer is under no obligation to approve a transaction submitted for pre-clearance and may determine not to permit the transaction. If you seek pre-clearance and permission to engage in the transaction is denied, you should refrain from initiating any transaction in the Company's securities, and should not inform any other person of the restriction. You are responsible for ensuring that you do not have material nonpublic information about the Company before engaging in a transaction and that you comply with any and all other legal obligations. Therefore, when a request for pre-clearance is made, you should carefully consider whether you are aware of any material nonpublic information about the Company and should describe fully those circumstances to the Compliance Officer.

If you are subject to the requirements of Section 16 of the Exchange Act, you should also consider whether you have effected any non-exempt transactions within the past six months or otherwise that must

The Compliance Officer's approval of a transaction submitted for pre-clearance does not constitute legal advice, does not constitute confirmation that you do not possess material nonpublic information and does not relieve you of any of your legal obligations.

Certain types of transactions increase the Company's exposure to legal risks and may create the appearance of improper or inappropriate conduct. Therefore, if you are a director or executive officer of the Company or a Designated Person, you may not:

Further, if you are a director or executive officer of the Company, the aggregate amount of securities pledged by you may not exceed 50% of the amount of the Company's common stock you beneficially own in excess of 75,000 shares. We recognize that the pledging of securities can be a beneficial and appropriate financing technique when done prudently, but can also be risky to the pledgor (e.g., foreclosure on pledged shares could result in a violation of Section 16 or this policy) or potentially damaging to the Company and its stockholders if done imprudently. Accordingly, you should not pledge securities unless you reasonably believe you are, and in the future will be, able to perform under the financing transaction without increased pledging of securities or foreclosure upon pledged securities.

In addition, the Company strongly discourages you from engaging in hedging and monetization transactions. These transactions can be accomplished through the use of various financial instruments, including prepaid variable forwards, equity swaps, collars and exchange funds.

If you have supervisory authority over any of our personnel, you must immediately report to the Compliance Officer either any trading in our securities by our personnel or any disclosure of material nonpublic information by our personnel, in either case which you have reason to believe may violate this policy, the Company's Regulation FD Policy or applicable securities laws. Because the SEC can seek civil penalties against us, directors, and supervisory personnel for failing to take appropriate steps to prevent illegal trading, we should be made aware of any suspected violations as early as possible. Any exceptions to this policy must be reviewed and approved by the Compliance Officer.