CONFLICTS OF INTEREST POLICY
The purpose of this Policy is to specify the procedures put in place by the Company, for identifying and responsibly managing and controlling and, where necessary, disclosing the conflicts of interests arising in relation to its business and to reduce the risk of client disadvantage and reduce the risk of legal liability, regulatory censure or damage to Company’s commercial interests and reputation and to ensure that it complies with legislative requirements and the departmental and general procedures which are set by its Internal Procedures Manual.
II. Legal Framework
In accordance with Articles 34 of Commission Delegated Regulation (EU) 2017/565 supplementing Directive 2014/65/EU CIFs are required to establish, implement and maintain an effective conflict of interest policy set out in writing and appropriate to the size and organisation of the CIF and the nature, scale and complexity of its business. In addition, according to the Articles 17(3), 24, 25(10) and 28(2) of Law 87(I)/2017, CIFs must take all appropriate steps to identify conflicts of interest between itself, including its managers and employees, tied agents or other relevant persons, as well as any person directly or indirectly linked to them by control, and their clients or between one client and another, that arise in the course of providing any investment and ancillary services.
Article 34(4) of Commission Delegated Regulation (EU) 2017/565 requires that disclosure to clients of conflicts of interest that cannot be sufficiently managed to prevent risk of damage to clients is a measure of last resort.
Article 35 of Commission Delegated Regulation (EU) 2017/565 specifies in more detail the MIFID II record keeping requirements with respect to conflicts of interest.
In this respect, CIFs must establish adequate policies and procedures sufficient to ensure compliance, including its managers, employees, tied agents and other relevant person(s), with its obligations pursuant to the Law and the directives issued pursuant to this Law, as well as appropriate rules governing personal transactions by such persons.
In this Policy, we collectively refer to all of the above-mentioned legislations, regulations and guidelines as ‘Regulations’.
III. Conflict of Interest
The Company defines a conflict of interest as any situation where either the Company or an individual is in a position to exploit a professional or official capacity in some way for either corporate or personal benefit. Situations where conflicts of interest can occur include the following:
a) The Company or a relevant person, or a person directly or indirectly linked by control to the Company, is likely to make a financial gain or avoid a financial loss, at the expense of the client;
b) The Company or a relevant person, or a person directly or indirectly linked by control to the Company, has an interest in the outcome of a service provided to the client, or of the transaction carried out on behalf of the client, which is distinct from the client’s interest in that outcome;
c) The Company or a relevant person, or a person directly or indirectly linked by control to the Company, has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;
d) The Company or a relevant person, or a person directly or indirectly linked by control to the Company, carries on the same business as the client;
e) The Company or a relevant person, or a person directly or indirectly linked by control to the Company, 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 money, goods or services, other than the standard commission or fee for that service.
Relevant person in relation to the Company means any of the following persons:
a) a member of the board of directors, partner or equivalent, manager or tied agent of the Company;
b) a member of the board of directors, partner or equivalent, or manager of any tied agent of the Company;
c) an employee of the Company or of a tied agent of the Company, as well as any other natural person whose services are placed at the disposal and under the control of the Company or a tied agent of the Company who is involved in the provision by the Company of investment services or/and the performance of investment activities;
d) a natural person who is directly involved in the provision of services to the Company or to its tied agent under an outsourcing arrangement for the purpose of the provision by the Company of investment services or/and the performance of investment activities.
The affected parties if conflict of interest arises can be the Company, its employees or its clients. More specifically, a conflict of interest may arise, between the following parties:
a) Between the client and the Company;
b) Between two clients of the Company;
c) Between the Company and its employees;
d) Between a client of the Company and an employee/manager of the Company;
e) Between Company’s Departments.
IV. Examples of Conflict of Interest
The company identified that the Conflicts of interest can occur in a number of situations, for example:
- One person might hold two positions;
- The Company may have an interest in maximizing trading volumes in order to increase its revenue, which is inconsistent with the Client’s personal objective;
- The Company may receive or pay inducements to or from third parties due to the referral of new Clients or Clients’ trading in the form of monies, goods or services, other than the standard commission or fee for that service;
- The Company or a Related person 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;
- One of the employees of the Company may engage in personal account dealing in respect of financial instruments and the Company has a client with an interest that potentially conflicts with such dealing;
- Two customers may give similar orders and one customer may agree/offer to pay more commission, the priority or better execution terms may be granted to that customer’s order when it conflicts with obligations owed to the other customer;
- The company may receive the monetary or other incentives in exchange for promotion of specific products or flow of business.
V. General Measures to identify Conflicts of Interest
All employees of the Company must on commencement of their employment read and fully understand the Policy. All employees of the Company are obliged to register their acceptance of having read and understood the Policy in a register.
Register is to be filed and managed by the Compliance Department.
Any employee that suspects any conflict of interest must immediately inform the Compliance Department who will determine if any conflict does exist or has the potential to arise and will state the reasoning for their findings in a file kept in storage for referral to the Commission should such need arise.
The Company and its employees who are involved in investment research must not:
- act as a result of an inducement;
- promise issuers favourable research coverage.
If any draft investment reports contain recommendations or target prices, the employees must not review the research material, other than for the purpose of verifying its compliance with the legal obligations.
VI. Prevention and Management of Conflicts of Interest
Conflicts of interest must be identified and taken into account during the product development to ensure the features of the product benefit the client and not the firm;
The Company must analyse potential conflicts of interests each time a financial instrument is manufactured, namely:
(a) The Company undertakes ongoing monitoring of business activities to ensure that internal controls are appropriate;
(b) The Company undertakes effective procedures to prevent or control the exchange of information between Related Persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more Clients;
(c) A policy designed to limit the conflict of interest arising from the giving and receiving of inducements.
In-house Compliance Department to monitor, rectify and report on the above to the Company’s Board of Directors.
Personal Transactions of Employees
All employees of the Company that are involved in research or other investment activities must be aware of the restrictions on personal transactions detailed below. This section also includes personal transactions which may be performed by persons who are employed by companies which perform an outsourced activity to the Company, if any. If any prohibited personal transactions are entered into, the Company must be notified promptly.
Employees of the Company that are involved in the provision of investment services and the dissemination of investment research or other activities must not enter into the personal transactions that will cause the following:
- enter into a transaction prohibited under section 9 of the Insider Dealing and Market Manipulation (Market Abuse) Law;
- misuse or cause improper disclosure of confidential information;
- enter in a transaction that is likely to conflict with any obligations of the Company, or the employee, that are stated under the law.
Where the employee has come into contact with information which is not publicly available to clients or cannot readily be inferred from information that is so available, the employees must not act or undertake personal transactions or trade, other than as market makers acting in good faith and in the ordinary course of market making, or in the execution of an unsolicited client order, on behalf of any other person, including the Company.
The employees must not disclose any opinion other than in the normal course of business, if the person who is given the opinion is likely to enter into a transaction which is contrary to the above. The employee also should not provide an advice or provide to anyone any information, other than in the proper course of his/her employment, especially if it is clear that the person who is receiving such information will advise another party who might acquire or dispose of financial instruments to which that information relates.
Any client’s orders that have been relayed to any employees of the Company must not be disclosed to another party. An employee of the Company who has knowledge of a potential client’s order must not carry out a personal transaction that is the same as the client order, if this will cause a conflict of interest.
The Company does not pay or is paid any fee or commission, or provide or is provided with any nonmonetary benefit in connection with the provision of an investment service or an ancillary service, to or by any party except the client or a person on behalf of the client, other than where the payment or benefit:
a) is designed to enhance the quality of the relevant service to the client; and
b) does not impair compliance with the investment firm’s duty to act honestly, fairly and professionally in accordance with the best interest of its clients.
Remuneration for routing client orders
A company shall not receive any remuneration, discount or non-monetary benefit for routing client orders to a particular trading or execution venue.
Remuneration of Employees
The Company removed any direct or indirect link between the remuneration of any of its Employees and Directors and the volume or/and client’s performance activity.
Conflict of interest monitoring
The Compliance Department, the Executive Director of the company, and the Risk Manager are to monitor and report on the risk to the Board of Directors.
We place orders on a first come first served basis. The volume and price of an order does not determine allocation of the aggregated order and we will by default not partially execute any order. If an error is identified in an allocation, a re-allocation may be made for an aggregated order.
The following measures have been adopted by the Company for ensuring the requisite degree of independence:
- Measures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interests by establishing a Chinese wall. Chinese walls are essentially information barriers which are used to prevent inside or highly confidential information possessed by one part of the business from being inappropriately passed to, or obtained by, another part of the business. When a Chinese wall is used as a way of managing conflicts of interests, individuals on the other side of the wall will not be regarded as being in possession of knowledge denied to them as a result of the Chinese wall. For example, where arrangements have been put in place to ensure that entities belonging to the same group operate independently of each other with effective Chinese walls, the entities shall not be deemed to have knowledge of each other for conflicts of interest purposes. In this respect, Chinese Walls will need to exist between the Brokerage Department, the Dealing on Own Account Department and the Portfolio Management Department.
- Separate supervision of relevant persons whose principal functions involve carrying out activities on behalf of, or providing services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the Company. The Company’s department whose interests may conflict with clients: RTO and Execution. In particular, physical separations will exist between the Brokerage Department, the Dealing on Own Account Department and the Portfolio Management Department, so as to prevent the flow of information from one to the other, especially in cases where big orders arise in either unit which may materially impact the prices of the Financial Instruments and so as to ensure any reports on Financial Instruments which may affect their price are not made known to members of staff before being announced to the public.
- Removal of any direct link between the remuneration of relevant persons principally engaged with one activity and the remuneration of, or revenues generated by, different relevant persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities: RTO and Execution Department employees do not relate their remuneration with clients’ performance.
The Company shall ensure that any such information contains a clear and prominent statement that has been prepared in accordance with legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Our Marketing communication is developed on the basis of being fair, clear and not misleading to clients and is issued following approval by the Compliance Department.
The Company’s Chief Executive Officer is responsible for clearly allocating responsibility and delegating authority to accountable individuals to ensure that those involved are aware of their involvement and that the Company’s Senior Management has a sufficient level of authority and independence in order to carry out their responsibilities effectively.
The Company’s Senior Management is required to:
- fully engage in the implementation of policies, procedures and arrangements for the identification, management and ongoing monitoring of conflicts of interest; adopt a holistic view to ensure the identification of potential and emerging conflicts within and across business lines and to ensure that informed judgments are made;
- raise awareness and ensure compliance of relevant individuals by ensuring: regular training (including to contractors and third-party service providers’ staff) both at induction and in the form of refresher training; the clear communication of policies, procedures and expectations; that awareness of conflicts procedures forms part of the performance review/appraisal process, and that the best practice is shared throughout the Company;
- sponsor robust systems and controls and effective regular reviews to ensure that strategies and controls used to manage and mitigate risks remain appropriate and effective and that appropriate warnings and disclosures are issued to clients where necessary;
- utilise management information to remain sufficiently up-to-date and informed; and
- support an independent review of the processes and procedures in place.
To that effect Senior Management shall receive on a frequent basis, and at least annually, written reports on situations regarding conflicts of interest.
Individuals are required to identify new conflicts of interest arising out of the activities/services that they perform and engage in the process to notify line management upon identifying any potential conflict.
Reporting conflicts of interest
In the event of a possible conflict of interest, the employee must first communicate the matter to his immediate supervisor, help with assessing the risk of damage and send the completed conflict of interest notification form together with all the related information available so that regulatory control can take place in the form of:
- corrective and preventive measures;
- how these actions were considered appropriate;
- any proposed conditions;
- whether there are ongoing conflicts of interest, how they are dealt with and what can be addressed to the affected client; and to be handed over to the compliance officer for inclusion in the reports reviewed by the Board of Directors.
The Company’s Compliance Department is responsible for the day to day management of the implementation of this policy. In particular, the Compliance Department is responsible for:
- establishing the policy in relation to conflicts of interest;
- providing training oversight and aid;
- monitoring compliance with arrangements;
- the oversight of conflicts management;
- maintaining records in relation to conflicts of interest;
- reviewing and challenging the Conflicts Identification and Management Map; and
- providing appropriate internal reporting to the Board of Directors.
Where line management cannot resolve a conflict to the satisfaction of all parties, the Compliance Head will, as the Approved Person with responsibility for Compliance and Risk, have the final say.
VIII. Record keeping
The Company keeps and regularly updates a record of the kinds of investment and ancillary service or investment activity carried out by or on behalf of the Company in which a conflict of interest entailing a risk of damage to the interests of one or more clients has arisen or, in the case of an ongoing service or activity, may arise. The following documentation shall be maintained for a minimum period of five years:
- this policy, any functional variations if applicable;
- the Conflicts Monitoring Log and the Conflicts Identification and Management Map;
- rules, procedures and processes;
- training material and training records;
- Conflicts of Interest Notification Forms;
- details of any review work carried out (including any decisions made on conflicts management); and
- any other documentation used to demonstrate the management of conflicts of interest.
The company shall include all conflicts of interest entailing a risk of damage (regardless of the materiality of the conflict of interest) to the interests of one or more clients and senior management shall receive on a frequent basis, and at least annually, written reports on situations regarding conflicts of interest.
IX. Disclosure of conflict of interest
Disclosure to clients of conflicts of interest that cannot be sufficiently managed to prevent risk of damage to clients is only a measure of the last resort.
When the measures taken by the Company to manage conflicts of interest are not sufficient to ensure, that risks of damage to clients’ interest will be prevented, the Company proceeds with the disclosure of conflicts of interest to the client. The disclosure shall clearly state that the organisational and administrative arrangements established by the investment 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. The disclosure shall also include a specific description of the conflicts of interest that arise as well as the risks to the client that arise as a result of the conflicts of interest and the steps undertaken to mitigate these risks.
This Conflict of Interest Policy is part of the company’s Internal Operational Manual and will be subject to annual assessment and review by the BOD.