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Important information

Conflicts of interest

Conflicts of interest

Introduction

The nature of the financial services market is such that conflicts of interest can sometimes arise.  When we provide advice, make recommendations, arrange transactions or deal on your behalf, we or some other entity associated or connected with us may have an interest, relationship or arrangement that is material in relation to the investment, transaction or service concerned.  We endeavour to ensure that no conflict arises but where it does we will seek to manage the conflict fairly and always act in the best interests of the client.

If conflicts are not properly identified and managed it could lead to a loss of revenue, damage to our reputation, legal action, public censure or a fine from FCA against both the firm and relevant employees.

Application

This policy applies to SG Hambros Bank Limited and SG Hambros Trust Company Limited and all subsidiary companies.  Unless otherwise indicated within the Policy, references to the bank or the firm refer to all entities within the SGPB Hambros group. 

Senior Management Responsibility

Senior Management is required to set the standards governing the handling of conflicts of interest within a firm.  Within the bank, the responsibility for ownership of conflict risk ultimately rests with the Boards, and therefore the members of the Boards  must take reasonable steps to prevent conflicts of interests from constituting or giving rise to a material risk of damage to the interests of clients within the areas for which they have responsibility.

In practice, the performance of these responsibilities will be delegated to all staff to identify and manage appropriately any conflicts of interest that arise in his or her business area or department.  This means that all staff should be aware of the extent of the risk in his or her area in terms of conflicts of interest and is aware of the processes that should be followed in the event of a potential conflict arising.

The CAFC  Department has  responsibility for recording the details of conflicts arising, as well as for monitoring the effectiveness of the conflicts procedures, and will do so as part of the Compliance Monitoring programme.

Where conflicts may arise

Whilst detailed, the policy is not intended to be a comprehensive list of all conflicts and/or situations which may give rise to such conflicts.  Inevitably, circumstances will arise that are not specifically covered. 

Broadly a conflict may arise wherever two or more parties have different interests in an undertaking.  Conflicts may arise between the interests of a firm and client, between two or more clients or even between a firm’s employees and clients.  The following list sets out some of the circumstances where conflicts may arise.  This list is not exhaustive and we monitor all areas to identify potential conflicts arising.  Corporate level conflicts may arise where we or a connected company;

      i.        are the financial adviser or banker to the issuer of the investment concerned or to a company which is in the same group as the issuer, or are acting for any such company in a take-over bid by it or for it;

     ii.        have another client who has a holding or a dealing position in the investment concerned, a related investment or asset underlying the investment, whether as market maker or otherwise;

    iii.         are the operator or trustee of, or investment adviser to, a broker fund or collective investment scheme in whose units you are dealing;

     iv.        in connection with a service provided to you, receive payments or other benefits for giving business to the firm or company with which your order is placed;

      v.        are sponsoring or are involved as an underwriter or in some other capacity in the issue of the investment concerned or a take-over, a new issue or another transaction involving the investment, a related investment or the issuer of the investment;

     vi.        are advising and providing other services to associates or other customers who may have interests in investments or underlying assets which conflict with your own;

    vii.        are dealing as principal for our own account by selling the investment concerned to you or buying it from you;

   viii.        are matching your transaction with that of another of our clients by acting on such client’s behalf as well as on your behalf; or

     ix.        recommend you to buy or sell an investment which another of our clients has given instructions to buy or sell or in which we or a connected company have a long or short position.

Managing conflicts

This policy is communicated to all employees to enable the successful management of conflicts of interest.  All staff should regularly review their area of business to identify potential conflicts and to assess whether we are taking appropriate steps to manage those conflicts.  All instances of potential conflict will be recorded and, where appropriate, reports will be made to senior management and the Board.

Segregation

Where activities carried on in two different parts of the bank could involve conflict, we endeavour to manage the risk by strictly segregating activities.  As such, information or activities that would otherwise create potential conflict if shared amongst parts of the business are restricted.  Methods used to segregate business areas include physical separation as well as operational separation.  Compliance will also monitor the segregation controls to ensure that they are being properly applied.

Separation of function is achieved by the imposition of management structures which ensure that decisions in a particular operational area are made independently of other operational areas and without knowledge of, and without regard to the wishes, intentions, interests or the confidential information in the possession of any competing or conflicting operational area.  

Policy of Independence

SGH also relies on a policy of independence which requires staff to disregard any material interest or conflict of interest when making recommendations or arranging transactions for clients. 

Personal Account Dealing

Standards and procedures are set for when and how employees are permitted to deal in investment either for themselves or connected persons.  Connected persons of employees, are deemed to include all parties where the individual might be considered to have an influence over the investment dealings of that party.  The following parties are assumed to be connected persons:

      i.        Spouse (or unmarried equivalent)

     ii.        Children and stepchildren under the age of 18 unless still living at home in which case all children and stepchildren regardless of age.

    iii.        An Estate, for which the employee is a personal representative.

     iv.        A trust, for which the employee is a trustee.

      v.        Any legal entity which the employee owns (or has the option to own) more than 10% of the voting equity capital.

     vi.        Any company outside of the SG Hambros Group of which the employee is a director.

All permanent, temporary & contract employees are subject to the following rules.

  1. No dealing in Restricted List Stocks
  2. Compliance Pre-approval of transactions
  3. Reporting of transactions to Compliance
  4. Restrictions on short term trading
  5. Restrictions on Spread Betting

The additional prohibitions also apply:

(i) Dealing ahead of Customers

If an employee knows or should reasonably know that the bank has accepted an order or instructions from a customer or has decided on behalf of a customer to effect any transaction, the employee may not deal the same way for his own account until the order or instruction or decision in question has been executed or cancelled.

(ii) Dealing ahead of Research

If an employee knows or should reasonably know that SG has in its possession the results of research and analysis and will or may publish to its customers those results or recommendations to effect transactions in investments based on those results, the employee may not deal in those investments for his own account until the recommendations have been published generally to all customers interested or expected to be interested in the investments concerned and such customers have had a reasonable opportunity to react to the recommendations.

Directorships and Outside Interests

Employees must keep the CAFC team informed of any directorships or outside interests. This covers:

  1. directorships or shareholdings of 10% or more of the issued Share capital of any public or private limited company; and
  2. any interest in a partnership, trust, will or settlement
  3. directorships held in  any Corporate arrangement
  4. any role or position of responsibility held which may conflict with the interests of the bank or its clients

Personal Gifts & Entertainment

The Gifts, business entertainment and corporate events policy sets out the acceptable practices that should be adhered to when dealing with Gifts, Business Entertainment and Corporate Events to ensure that the business of SGPBHG is compliant with the relevant regulatory requirements.   This policy should be read in conjunction with this manual.  The general principles of that policy are:

Employees (or someone on their behalf) must not:

•           give or receive Gifts; or,

•           provide or accept Business Entertainment or Corporate Events

which would cause any of the following to occur:

•           create a conflict of interest between the interests of an Employee, those of the recipient or SGPBHG;

•           constitute an improper inducement or influence, including, but not limited to, any  expectation or hope that a business advantage will be received, or to reward a business advantage already given;

•           result in family members or friends of Employees receiving Gifts, Business Entertainment or Corporate Events; and,

•           breach relevant laws and regulations; or SGPBHG policies, including but not limited to those governing professional conduct.  All the requirements and/or approvals contained in all relevant SGPBHG policies must have been followed.

The following principles must also be considered when giving and receiving Gifts or providing and accepting Business Entertainment and Corporate Events:

•           the intention behind the Gift, Business Entertainment and Corporate Event and if there is a legitimate business purpose (eg: the development of business relationships or the promotion of SGPBHG products or services); 

•           they are modest and reasonable in value, appropriate in all the circumstances and do not compromise the integrity and reputation of SGPBHG;

•           they are proportionate and acceptable in the context of the business occasion and they are in accordance with usual business practice.  In other words, it must not be so lavish as to create the appearance that SGPBHG are intending to cause anyone to make a decision in return for receiving them;

•           they are transparent and can be discussed openly.  In other words, if it were reported to the media it would neither cause embarrassment to the recipient nor SGPBHG;

•           they are timed appropriately.  In other words, they do not coincide with the engagement in a bid process or pitch for prospective work, or any decision in relation to new business/transactions, or the removal of any other business arrangement; and

•           they comply with all requirements of this Policy and all approvals have been obtained.

For the avoidance of doubt, if the giving or receiving of a Gift, Business Entertainment and Corporate Event is prohibited under this Policy if made directly, it is also prohibited if made indirectly (e.g. via a third party).

Where a question arises over whether or not a particular Gift, Business Entertainment and Corporate Event is permissible under this Policy, those involved are advised to seek advice of their Business Line Manager and the Business Control Manager (BCM), who if in doubt should refer the matter to CAFC.

All gifts and entertainment is recorded and monitored by Compliance.

Remuneration

The way in which members of staff are remunerated is also considered to ensure that remuneration structures do not create a conflict between incentives given to staff and the best interests of clients.  SGPBHG has a remuneration policy which is adhered to in setting and maintaining remuneration for staff.

Inducements

A firm must not pay or accept any fee or commission, or provide or receive any non-monetary benefit, in relation to designated investment business unless that fee, commission or non-monetary benefit does not impair compliance with the firm’s duty to act in the best interests of the client and the amount or method of calculating the amount is clearly disclosed to the client before the provision of the service.

Disclosure

Neither we, nor any connected company, shall disclose to clients the nature or extent of any interest we have in any security, unless obliged to do so by any applicable law or regulation.

Record-keeping Requirements

From a regulatory perspective, records of all conflicts of interest arising must be maintained for a minimum of 6 years.

It is also required that the conflicts policy is regularly reviewed, and records maintained of all changes made thereto, for a period of 6 years.  Such a review goes part way to ensuring compliance with the record keeping requirements.

The CAFC  Department will be responsible for reviewing and updating this Conflicts Policy.