Conflicts of Interest Policy

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CONFLICTS of INTEREST POLICY

1. Purpose

The purpose of this Conflicts of Interest Policy under and Article 34 (2) of MiFID II is:

To identify, by reference to the specific services and activities carried out by (or on behalf of) the Firm, the circumstances which constitute or may give rise to a conflict of interest entailing a risk of damage to the interests of one or more clients; and
To specify procedures to be followed and measures to be adopted in order to manage such conflicts; and
To communicate this information to all those who are in the Firm

It is the responsibility of all staff members to familiarise themselves with the contents of the Policy and report conflicts of interest to the Compliance Officer using the appropriate channels.

2. Regulatory Background

FCA Principle 8 (Conflicts of Interest) states that:

A firm must manage conflicts of interest fairly, both between itself and its clients and between one client and another.

3. Summary of Requirements

Identifying and Preventing Conflicts

Article 23 requires a firm to take all appropriate steps to identify and prevent conflicts of interest between:

The Firm (including its managers, employees, or any person directly or indirectly linked to them by control) and a client of the Firm; or
One client of the Firm and another client;
That arise or may arise in the course of the Firm providing any services in the course of carrying on regulated activities, including those caused by the receipt of inducements from third parties
Types of Conflict

SYSC 10.1.4 of the FCA handbook sets out that, for the purpose of identifying the types of conflict that arise in the course of providing a service, and, where there may be a risk of damage to the interests of a client, the Firm must take into account certain issues. It must consider as a minimum, whether the Firm or a relevant person or a person directly or indirectly linked by control to the Firm:

(1) is likely to make a financial gain, or avoid a financial loss, at the expense of the client;

(2) has an interest in the outcome of a service provided to the client or of a transaction carried out on behalf of the client, which is distinct from the client’s interest in that outcome;

(2A) in the case of a management company providing collective portfolio management services for a UCITS scheme, (2) also applies where the service is provided to, or the transaction is carried out on behalf of, a client other than the UCITS scheme;

(3) has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;

(4) carries on the same business as the client; or in the case of a management company, carries on the same activities for the UCITS scheme and for another client or clients which are not UCITS schemes; or

(5) receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services.

Segregation of functions

The senior management of the Firm should, where appropriate segregate duties so as to avoid conflicts of interest.

Disclosure of conflicts to clients

SYSC 10.1.8 of the FCA Handbook requires that, where the arrangements made by the firm are not sufficient to ensure, with reasonable confidence, that the risk of damage to the client will be prevented a clear disclosure to the client must be made.

This disclosure must explain the general nature or sources of conflicts of interest and the steps taken to mitigate those risks

The disclosure must:

be made in a durable medium;
- clearly state that the organisational and administrative arrangements established by the firm to prevent or manage that conflict are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented;
- include specific description of the conflicts of interest that arise in the provision of insurance distribution activities, investment services or ancillary services;
- explain the risks to the client that arise as a result of the conflicts of interest; and
- include sufficient detail, taking into account the nature of the client, to enable that client to take an informed decision with respect to the service in the context of which the conflict of interest arises.

It is important to note that a disclosure may be made only as a matter of last resort after all other options to successfully mitigate the conflict of interest have been exhausted.

Responsibilities of Staff Members

It is the responsibility of all employees to familiarise themselves with this Policy and to report conflicts of interest to their line manager who will in turn report them to the Compliance Officer. Failure to adhere to this policy may be held to be a breach of an employee’s contract.

Overall responsibility for Conflicts of Interest lies with the Board. The Compliance Officer is responsible for the day-to-day administration of the Policy.

The Compliance Officer will work with line management to identify and prevent Conflicts of Interest, record conflicts and the mitigating action in the Conflicts Register and report the situation to the Board for consideration. Additionally, the Compliance officer will ensure that this conflict of interest policy is reviewed at least annually.

The Board, via the Compliance Officer, has responsibility for ensuring that staff are aware of the aspects of the Policy relevant to them.

All staff have a responsibility for carrying out aspects of the policy that are relevant to them.

4. Situations in which Conflicts of Interest could arise

The purpose of this section is to set out typical situations in which conflicts of interest may arise and are managed in the course of the Firm’s day-to-day business, so that employees are better equipped to identify, report and assist in eliminating or managing conflicts.

Potential misuse of information

Potential conflict

Members of staff of the Firm may come into possession of material non-public information. The improper use of such information by staff members could cause a conflict with the interests of the Firm’s clients, or between the interests of the Firm’s clients, and may also be unlawful.