Conflicts of Interest
This document sets out Fundamental Asset Management Limited’s (hereinafter referred to as “FAML”) policy to manage any conflicts of interest that may arise in carrying out its business. The aim of this conflict of interest policy is to ensure that FAML’s clients are treated fairly. Key areas are conflicts that arise (i) between FAML or a worker of FAML and its clients; and (ii) when the duties FAML owes one client conflict with the duties it owes to another client.
FAML’s Directors are responsible for maintaining systems, controls and procedures to identify and manage conflicts of interest which might arise in relation to the business of FAML. If a situation arises where FAML identifies a conflict of interest or potential conflict of interest which relates to a particular client and cannot manage it to its satisfaction, FAML shall disclose the nature of the conflict of interest to that client before providing any further services to that client in relation to any matter that might be affected by that conflict.
This policy takes into consideration the small size of FAML’s organisation and the investment management services it provides to its clients. As part of monitoring and identifying conflicts of interest, FAML shall pay careful attention to identifying situations where FAML, a worker or another client:
is likely to benefit financially (whether by making a financial gain or not making a loss), at the expense of a client
has a different interest in the outcome of a service which FAML is providing to the client from the client’s interest in that outcome
has an incentive (whether financial or otherwise) to favour the interests of one client over the interests of another client
2. Overview of circumstances which may give rise to conflicts in FAML’s business
FAML’s business is predominantly that of a discretionary investment manager.
FAML has identified the following areas as being areas in which potential conflicts of interest could arise:
An FAML worker is dealing on his or her personal account in a way that might give rise to a conflict of interest with the investment management services being provided to a client of FAML (‘Personal Account Dealing’);
FAML is engaged in proprietary trading in a way that might give rise to a conflict of interest with the investment management services being provided to FAML (‘Proprietary Trading’);
Other business interests outside FAML;
If FAML were to receive inducements from execution brokers or other third parties to execute transactions through them or other wise receive inducements to conduct business with a third party where the services being received affect or impact on the investment management services being provided to the a client of FAML (‘Inducements’);
Where two clients have competing interests in relation to the investment management services being provided by FAML (‘Competing Interests’);
Inappropriate exchanging or disclosure of information (‘Inappropriate Exchange of Information’);
Use and distribution of investment research (‘Investment Research’)
FAML does not undertake the following business activities, and conflicts of interest are therefore not able to arise in relation to them:
Advising on mergers and acquisitions
2.1 Proprietary Trading
FAML maintains procedures for avoiding and managing conflicts of interest when undertaking proprietary trading activities. When placing orders FAML does not prioritise FAML orders over orders it is considering placing for a client. Where there is any conflict between orders it is placing for itself and orders it is placing for a client, FAML will prioritise the order for the client.
2.2 Personal account dealing
FAML maintains a personal dealing policy which all people working in investment management at FAML are required to comply with. This policy requires such workers to ensure that all personal dealing activity is appropriate and does not create an actual or potential disadvantage or loss to a client.
All personal dealing requires pre-approval. The pre-approval process requires FAML to make an assessment as to whether FAML is or may be trading, on behalf of a client or clients, in the instrument for which a worker at FAML is seeking permission to deal. If FAML is trading or may trade in the same instrument on behalf of a client or clients, a worker at FAML shall not be permitted to trade in that financial instrument until all orders placed for clients have been satisfied in full.
2.3 Other business interests outside FAML
FAML workers shall not whether directly or indirectly, undertake any other business activities without the prior written approval of FAML.
The Compliance Officer shall maintain a register of all business interests disclosed and requested by FAML’s workers. The register shall be reviewed regularly by the Compliance Officer in order to ensure that there is no evidence of any undue influence or conflict due to workers’ 3rd party business interests.
2.4 Use and distribution of investment research
FAML does not produce investment research. It does disseminate research of Investor’s Champion though no recommendations are made in such material and it is more a general commentary than detailed.
FAML maintains a register of all investment research it distributes. The register will contain the subject and the issuer of the investment research, the person or organisation to whom it was distributed, the name of FAML’s workers who were responsible for the distribution, and the dates when the investment research was received by FAML and was distributed.
Workers, their families and any personally connected individuals are not allowed under any circumstances to offer or give, solicit or accept any inducement which causes, is likely to cause, or is perceived as likely to cause conflict with any duties owed by themselves or FAML to clients.
FAML shall not offer entertainment to a client where the client is not accompanied by a FAML worker. FAML shall not receive entertainment whereby the worker is not accompanied by the donor.
FAML’s entertainment policy requires workers to notify Compliance in advance of any entertainment which might give the impression of influencing a worker’s judgement or behaviour in the performance of their duties to FAML and its clients. Any invitation or entertainment that could be construed to be unusual, or appear to create a sense of obligation to the host or bias in their favour must be refused. This should be assessed in the context of the nature of the invitation, including cost or rarity value and any other relevant factor.
Regardless of value, workers should ensure that no gift or series of gifts be accepted which might appear to create a conflict of interest.
The gifts policy also applies to all suppliers and service providers as well as potential suppliers and service providers.
In considering whether a gift or form of entertainment is excessive or inappropriate, the Compliance Officer will consider the nature of the business relationship and whether it could be regarded as an improper inducement by the employer of the recipient or donor or by any other relevant party.
When in doubt whether a gift or entertainment is appropriate, all workers are required to consult the Compliance Officer.
2.6 Competing client interests
FAML places orders with execution brokers on behalf of clients portfolios in such a way as to ensure that one client will not be treated in such a way so as to create a disadvantage or loss to another client. This includes policies and procedures which include (but are not limited to) the following business activities:
Placing of orders with execution brokers on behalf of clients portfolios fairly
Maintaining confidential information
Fair placing of orders when placing orders on behalf of multiple clients portfolios
Equal disclosure of relevant information to clients
FAML has procedures and security measures in place to ensure that confidential information regarding one client orders is not inadvertently disclosed to another third party.
2.7 Inappropriate exchange of information
Our insider dealing policy requires workers to notify Compliance of all situations whereby a worker becomes aware of inside information. Workers are also required to notify Compliance of any situation where information received might constitute inside information. Compliance will record the circumstances of the situation and take such action as is necessary and appropriate. This may include (but is not limited to):
Requiring the worker not to disclose the inside information to any other party
Requiring the worker to desist from any activities whereby the knowledge of the inside information will or might create a conflict of interest
3. Operational process for managing conflicts of interest
FAML will manage conflicts of interest situations in accordance with the steps set out below:
Notification of conflicts
Report/keep record in respect of conflicts
3.1 Identify conflicts
Identification of conflicts is the responsibility of all workers at FAML. All workers are aware of their responsibilities to identify situations which give rise to a conflict or which might give rise to a conflict under FAML’s conflict of interest policy.
In the event that a worker is unsure as to whether a situation represents a potential conflict of interest or not, the worker is required to raise the issue immediately with the Compliance Officer.
3.2 Notification of conflicts
The worker is required to immediately raise any conflict or potential conflict of interest that comes to his or her attention to the Compliance Officer, shall assess and monitor all conflict of interest situations.
The Compliance Officer shall assess all conflict of interest situations. Such assessment shall include (but is not limited to) assessing:
Whether the situation represents an actual or potential conflict of interest;
How the conflict of interest can be appropriately managed;
The materiality of the conflict of interest;
Whether the conflict of interest requires immediate notification to senior management for further assessment;
Whether it is necessary to disclose the conflict of interest to the client(s) whose assets are at risk to agree on a course of action with the client or resolve the matter via another route.
FAML will take the necessary actions to resolve and/or manage conflicts of interest/potential conflicts of interest. This may include (but is not limited to):
Managing the situation so as to prevent the conflict of interest arising;
Managing the situation so as to ensure the interests of FAML or its workers are not permitted to disadvantage or lead to a loss for the client(s);
Notifying the conflict of interest to the client(s) so that either a satisfactory course of action may be decided on or the client may elect not to use the service insofar as there is a conflict.
3.5 Reporting/record keeping
The Compliance Officer shall maintain a register of all circumstances in which a conflict of interest or potential conflict of interest has been identified as having arisen. The register shall also contain the measures that FAML takes to mitigate conflicts of interest that do arise or to manage them. The register shall be updated each time a conflict of interest or potential conflict of interest is identified as having arisen and shall be kept for a minimum of five years.
The register shall contain a description of the circumstances which constituted or may have constituted a conflict of interest, names of the persons involved, the name of the person responsible for the mitigation of the conflict, a description of the steps taken in order to mitigate the conflict – including client disclosures and subsequent instructions.
4. Senior management control
The Compliance Officer is responsible for the identification and management of conflicts of interest on a daily basis according to the policy as described above and given the small size of the firm he shall bring any conflict of interest to the attention of the Directors as soon as it is brought to his attention including in particular any conflict or potential conflict of interest involving him.
The Compliance Officer shall provide senior management with regular reports of any conflicts of interest/ potential conflicts of interest that may arise including details of the situation giving rise to the conflict or potential conflict, the assessment analysis and the measures taken to mitigate the conflicts.
Periodically (no less than annually) senior management shall analyse the cases of conflicts of interest that have arisen as well as potential conflicts of interests and review the systems and controls that are in place for preventing and mitigating the conflicts of interests in order to ensure that they continue to be effective and relevant for dealing with conflict of interest situations.