Conflicts of Interest Policy

1.          Purpose

The purpose of this Conflicts of Interest Policy is:

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

2.          Regulatory Background

FCA  Principle 8[1]   (Conflicts of Interest) states that:

A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.  These requirements have been amplified in the FCA sourcebook SYSC (Senior Management Arrangements, Systems and Controls).

The FCA’s “Common Platform” of organizational requirements (SYSC 4 – SYSC 10) is designed to clarify what is expected of firms and of their senior management.  This is to be achieved by implementing management oversight and systems and controls in several areas, including conflicts of interest (SYSC 10).

3.          Summary of Requirements

a.           Preventing and Identifying Conflicts

In accordance with SYSC 10.1.3R, the Firm is required to take all appropriate steps to prevent, identify or manage conflicts of interest between:

that arise, or may arise, in the course of the Firm providing any services in the course of carrying on regulated activities, including conflicts of interest caused by:

b.           Types of Conflict

SYSC 10.1.4R sets out that, for the purposes of identifying the types of conflict that arise, or may arise[2] in the course of providing a service, and, where such conflict may damage the interests of a client, the Firm must take into account certain issues.

It must consider as a minimum, whether the Firm, an employee of the Firm or a person directly or indirectly linked by control to the Firm:

c.           Segregation of duties

In accordance with SYSC 5.1.7R to 5.1.11G, the senior management of a Firm ensures segregation of duties to avoid conflicts of interest.

d.           Disclosure of conflicts to Clients

SYSC 10.1.8R 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, the Firm must, before undertaking business for the client:

More specifically, the disclosure must:

SYSC 10.1.9A requires the Firm to treat disclosure in accordance with the process outlined above as a measure of last resort. The establishment of effective organisational and administrative arrangements to prevent conflicts is therefore of the upmost priority.[4]

e.           Responsibilities of Staff

It is the responsibility of all employees to:

Overall responsibility for conflicts of interest lies with the Board of Directors.  Compliance is responsible for the day-to-day administration of the Policy.

Compliance will work with line management to mitigate the risk of conflicts of interest, record conflicts and the mitigating action in the Conflicts Register and report the situation to the Management and Risk Committee and/or the Board of Directors.

The Board of Directors, via Head of Compliance, has responsibility for ensuring that staff members are aware of the aspects of the Policy relevant to them. All staff members have 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 arise and are managed in the course of the Firms’ day-to-day business, so that employees are better equipped to identify, report and assist in preventing or managing conflicts.

a.           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 Firms’ clients, and may also be unlawful.

Method of managing/avoiding conflict

The Firm manages these risks by maintaining and following policies and procedures to prevent the misuse of material non-public information.  These procedures have been designed to prevent and detect and insider trading, taking into account the nature of the Firm’s business and the instruments typically traded.  The Firm has also implemented procedures to manage the risks of Insider Dealing, based conflicts, the use of restricted/Insider Lists and deal monitoring. Staff should refer to the Firm’s Market Abuse Procedures for more information.

b.           Personal Account Dealing

Potential conflict

The Firm’s staff members may engage in the trading of securities or other instruments for their own account.  Such trading activities may put those employees and officers, or the Firm, in conflict with it’s clients (for example, by having a personal interest in a transaction with a client, or by front-running transactions with clients).

Method of managing/avoiding conflict

The Firm manages this potential conflict of interest by maintaining a PAD Policy which has been formulated in accordance with relevant FCA Rules.  All staff members must seek permission from the Compliance Officer to deal for their own account.

c.           Inducements

Potential conflict

The giving or receiving of gifts, entertainment, or any other form of gratuity or hospitality by or to the Firm’s staff members may create the appearance of a lack of impartiality and may lead to a potential conflict between the interests of the donor / donee and the interests of the clients.

Method of managing/avoiding conflict

Staff members must notify Head of Compliance of any gift or inducement received or given above £250.  Staff members are prohibited from giving to and accepting from clients, potential clients, or other third parties cash or other negotiable instruments.[6]

d.           Remuneration Policy

Potential conflict

The remuneration of certain members of staff of the Firm may be linked to the performance of transactions which they bring in or work on.  Whilst this ensures a significant commonality of interest between those employees and clients, it may give rise to a potential conflict between their personal interests and the interests of the clients (for example, where a client is advised to proceed with a transaction, though it is not in that client’s interests to do so or where excessive risk-taking is encouraged so that the employee may potentially claim higher performance-related compensation, should the risk prove to be successful).

Method of managing/avoiding conflict

The Firm manages this potential conflict of interest by maintaining a Remuneration Policy which has been formulated in accordance with the relevant FCA Rules.

e.           Outside Business Interests

Potential conflict

The Firm’s staff members may hold outside business interests, such as directorships or shareholdings, in service providers or other firms.  The Firm has identified that such outside business interests or investments could cause a potential conflict between the personal interest of the relevant member of staff and the interests of the Firms’ clients.

Method of managing/avoiding conflict

Staff members must inform the Compliance Officer about their outside business interests.  The Compliance Officer must approve any such interests and will maintain a record of them.

f.             Introduction commission

Potential conflict

From time to time, the Firm may pay introduction commission to third parties in relation to executed transactions.

Method of managing/avoiding conflict

In such cases, full disclosure of the existence of the introduction commission must be provided to the client.

5.          Arrangements for managing conflicts

a.           Governance

b.           Reporting Lines

The Firm has defined and clear reporting lines.  An organisational chart is maintained by Compliance.

c.           Segregation of Functions

The rules in SYSC 5.1 requiring segregation of functions are met by segregating duties as appropriate to avoid conflicts of interest wherever possible.  These duties are set out in job descriptions, procedure manuals and organisational charts.  Ensuring these duties remain segregated is the responsibility of line managers, as advised by the Compliance Officer.

d.           Disclosure of Personal Conflicts

Employees and owners are required to disclose conflicts of interest.  Employees will disclose any conflicts of interest to their line manager who in turn will inform Head of Compliance.  Owners will disclose any conflicts directly to Head of Compliance.  Head of Compliance will record in the appropriate register and inform the Board of Directors of any action taken in accordance with SYSC 10.1.6.

e.           Disclosure to Clients

If the Firm’s arrangements to manage a conflict of interest are not sufficient to ensure, with reasonable confidence, that the risk of damage to that client’s interests is prevented, the Firm will inform the client, in a durable medium, of the general nature and/or source of the conflict in such a way that an informed decision can be made by that client before business is undertaken (as more specifically outlined in section 3(d), above).

f.             Inducements

Staff members are prohibited from giving to and accepting from clients, potential clients or other third parties gifts and entertainment of above the specified threshold unless approved by the Head of Legal & Compliance or a Director of the Company.

g.           Recruitment

When new employees are taken on, their fitness and propriety is considered by Head of Compliance as part of the recruitment process, as well as their technical and, where relevant, managerial ability.  Suitable background checks are made and references are taken up.

h.           Training

Compliance training to address conflicts of interest forms part of the annual training needs analysis.  Head of Compliance ensures that appropriate training is devised and delivered.

i.             Compliance and Procedures Manuals

Systems and controls are documented in the compliance and procedures manuals.  These are reviewed at least annually to ensure they are fit for purpose.  Compliance has been appointed by the Board of Directors to review its systems and controls.  Compliance receives the assistance of Kinetic Partners (a division of Duff & Phelps), an independent compliance consulting firm.

j.             Periodic Monitoring

Head of Compliance oversees and executes a suitable audit programme at least annually to verify that the systems and controls are being applied.

k.            Management Information

Management information relevant to identifying conflicts is reviewed by Head of Compliance.  Conflicts checks are undertaken when the Firm is taking on new clients or accepting new business from existing clients.

l.             Verifying Compliance

Verification of compliance with these policies will be undertaken by Compliance as part of an annual compliance review.  Head of Compliance will have responsibility for reviewing compliance with the policy on an annual basis and will report formally to the Board of Directors

m.         Remuneration

The Firm’s remuneration policy is designed to avoid rewarding behaviour that may lead to the disadvantage of its clients.

n.           Conflicts Monitoring

As part of the Firm’s compliance with this Conflicts Policy, periodic reports are made on at least an annual basis to the Management and Risk Committee and the Board of the Firm.

o.           Confidentiality

No portion of this Policy may be copied reproduced or shown to any individual who is not an employee of the Firm, a representative of a relevant legal or regulatory authority or a relevant professional advisor.

p.           Approval

This Policy will be reviewed at least annually and was last amended in {X] 2017 and, following review, was approved by the Management and Risk Committee on [X] 2018.

[1] RS Note: Suggest inserting direct link to PRIN

[2] RS Note: Although this may seem overly prescriptive, we suggest inserting this wording to acknowledge MiFID II’s focus on active prevention of conflicts (as opposed to identification under MiFID I).

[3] Such detail to take into account the nature of the client.

[4] RS Note: In accordance with the new requirements under MiFID II the Firm must take all appropriate measures to address any deficiencies in its conflicts of interest policy, including any potential over reliance on disclosure of conflicts of interest. We have therefore added this sentence to clearly evidence that Amius has taken this shift of focus into account.

[5] RS Note: such reasonable steps include taking appropriate steps to prevent conflict arising in the first. In light of the above footnote, Amius might consider highlighting this point explicitly.

[6] RS Note: Consider referring to Amius’ Gifts and Entertainment policy.

[7] RS Note: Such reports must be provided on at least an annual basis.