Conflicts of Interest Policy
The purpose of this Policy is to specify the procedures put in place by Gstaad Brokers Ltd, hereafter 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.
2. Legal Framework
In addition, according to the Securities Act 2007 and Securities (Conduct of Business) regulations 2008 ( collectively referred as the “Act”) as amended from time to time, Securities Dealers (“SDs”) must take all reasonable steps to identify conflicts of interest between itself, including its managers and employees 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.
In this respect, SDs must establish adequate policies and procedures sufficient to ensure compliance, including its directors, employees and other relevant person(s), with its obligations pursuant to the Act, as well as appropriate rules governing personal transactions by such persons.
The Company has established adequate policies and measures in order to prevent, control and manage the exchange of information between relevant persons engages in activities involving a risk of conflict of interest. Any employee that suspects any conflict of interest must immediately inform the Directors who will determine if any conflict does exist or has the potential to arise.
In particular, 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:
- 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.
- 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.
- 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.
- 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.
- 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 member of the board of directors, partner or equivalent, manager of the Company;
- a member of the board of directors, partner or equivalent of the Company;
- an employee of the Company as well as any other natural person whose services are placed at the disposal and under the control of the Company; and
- a natural person who is directly involved in the provision of services to the Company.
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:
- Between the client and the Company.
- Between two clients of the Company.
- Between the Company and its employees.
- Between a client of the Company and an employee/manager of the Company.
- Between Company’s Departments.
Conflicts of interest can occur in a number of situations, for example:
- The Company is likely to sustain an overall financial loss or avoid a financial loss, by executing a client’s specific order.
- The Company is likely to sustain an overall financial gain by not executing a client’s specific order.
- The market moves to a direction of a point/timing when by executing client’s order will result in a financial loss for the Company.
4. Management of Conflicts of Interest a. Independence
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 interest (i.e. by establishing of Chinese walls).
- 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.
- 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.
- Dealing room employees do not relate their remuneration with clients’ performance.
- Measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out investment services or activities. Additionally, the person who decides or influences an individual’s bonus may exert undue influence over that individual’s integrity of judgment.
- Measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate investment or ancillary services or activities such as reception and transmission of clients’ orders and tasks such as portfolio decision making and calculating performance.
b. Chinese Walls
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.
c. Disclosure of conflict of interest
When the measures taken by the Company to manage conflicts of interest are not sufficient to ensure, with reasonable confidence that risks of damage to clients’ interest will be prevented, the Company proceeds with the disclosure of conflicts of interest to the client. Prior to carry out a transaction or provide an investment services to a client, the Company must disclose any actual or potential conflict of interest to the client. The disclosure will be made in sufficient time and in a
durable mean and shall include sufficient detail, taking into account the nature of the client, to enable him to take an informed decision with respect to the investment or ancillary service in the context of which the conflict of interest arises.
Clients will be given the opportunity to decide on whether or not to continue their relationship with us with no unreasonable obstacles.
- Marketing Communication: The Company shall ensure that any such recommendation contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it has been prepared in accordance with legal requirements designed to promote the independence of investment research and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Record Keeping: In accordance with the requirements of FSA, the Company maintains records, which are regularly monitored and updated, of the kinds of investments and ancillary services or investment activities carried out by the Company or on its behalf in which there is a risk for conflict of interest that may damage the interests of one or more clients has arisen. Any conflict of interest shall be reported to the Company’s Directors and Compliance Officer, who shall be responsible for keeping records of conflicts of interest.
- Responsibilities: The Company’s Director 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 Conflict Officer has a sufficient level of authority and independence in order to carry out their responsibilities effectively.
The Company’s Directors 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 with respect to materiality; and
- 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.
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.
The Company’s responsible person for conflict of interest matters is the Head of Compliance who is responsible for the day to day management of the implementation of this Policy. In particular, he, or his delegate, 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; and
- providing appropriate internal reporting to the Directors.