Each of UKBN’s directors and employees is an agent of the Firm and, as such, is obligated to act for and in the best interests of the Firm and its clients. Certain personal activities or interests of a director or employee may have some connection with UKBN’s activities or interests but involve little or no conflicts of interest (for example charitable or civic activities). Certain interests or activities of directors and employees may involve a significant actual or potential conflict with the interests or activities of the Firm and/or its clients or may give the appearance of conflict though no actual or potential conflict exists. Each director and employee must be alert to such conflicts of interest. He/she should scrupulously examine and avoid any activity or situation in which personal behaviour directly or indirectly conflict with the interests of the Firm or its clients. Such behaviour typically, but not exclusively, arises when it involves the use of knowledge acquired in conducting UKBN’s business or from relationships with UKBN’s clients or others.
One of the principal areas of potential conflict of interests is in the use of confidential information. Clients conduct business with the Firm with the expectation that all information and data provided by them or related to their business they conduct with UKBN will be maintained in absolute confidence. For this reason all information concerning the business of the Firm’s clients and their transactions must be treated as absolutely confidential and must be confined, even within UKBN, only to those who must have such information in order for the Firm to carry out its business properly and effectively. The fact that rumours may be circulating, even if they are accurate, does not mean that the Firm’s confidential information has become public information and does not relieve UKBN or its directors and employees of the ongoing obligation to treat the information as confidential.
No director or employee is permitted to benefit or allow another person to benefit (directly or indirectly, financially or otherwise) from knowledge of confidential information whether related to financial decisions, investment evaluation systems, strategies or methods, investment decisions, investment positions, in-house research or otherwise. This prohibition extends to the directors’ and employees’ relatives, friends and business contacts as well as Relevant Persons as defined in the rules of the FCA and any Appointed Representatives or Tied Agents of UKBN.
UKBN’s directors and employees must ensure that they take particular care not to discuss confidential information with, or in the presence of, unauthorised persons, whether from within or outside the Firm.
Each of the Firm’s directors and employees shall hold in a fiduciary capacity for the benefit of UKBN all information, knowledge and data relating to or concerned with its operations, business and affairs. He or she shall not, at any time, use, disclose or divulge any such information, knowledge or data to any person or corporate body other than UKBN and authorised persons within the Firm, except as may be legitimately required in connection with the business and affairs of the Firm.
Conflicts of Interest
The Guiding Principles
- This document consolidates UKBN’s procedures and controls for identifying, managing, recording and, where relevant, disclosing actual or potential conflicts of interest. The objective is to provide all personnel with clear guidelines for compliance with UKBN’s internal regulations and those of the Financial Conduct Authority (‘FCA’).
- The definition of a Conflict of Interest is any action that is likely to disadvantage a client’s interest against that of UKBN or to disadvantage one client’s interest against that of another client.
- The FCA rules require that firms, in the first instance, have in place arrangements to manage conflicts. Where such arrangements are not sufficient to ensure with reasonable confidence that the risk of damage to clients’ interests will be prevented, a firm is required to disclose a potential conflict to its client before undertaking business with that client.
- The FCA Principles that are particularly relevant to Conflicts of Interest are:
- Principle 1 – A firm must conduct its business with integrity.
- Principle 6 – A firm must pay due regard to the interests of its customers and treat them fairly;
- Principle 8 – A firm must manage conflicts of interest, both between itself and its customers and between a customer and another client.
- The FCA Handbook implements the conflicts of interest requirements and the relevant rules are located in the Senior Management Arrangements, Systems and Controls (“SYSC”) found in the High Level Standards module of the FCA Handbook. All capitalised terms refer to the FCA definitions.
- Firms are required to take all reasonable steps to identify, manage, record and, where necessary, disclose actual or potential conflicts of interests between the Firm, including its managers, employees, appointed representatives or any person directly or indirectly linked to them by control, and its clients as well as between one client and another, and have in place a written policy in respect of conflicts of interest.
- The Rules apply to all client types (i.e. Retail Client, Professional Client and Eligible Counterparty) where the Firm provides a service and where such conflicts could have a detrimental effect on clients.
- Where a firm is a member of a group, it must also consider where conflicts of interest may arise as a consequence of the group structure or business activities of other group companies.
Obligations in respect of management of Conflicts of Interest
- As described in SYSC 10.1.3R, UKBN is required to take all reasonable steps to identify conflicts of interest between:
- itself, including its managers, employees and appointed representatives or tied agents or any person directly or indirectly linked to them by control, and a client of the firm, or
- one client of the firm and another client that arise in the course of the Firm providing any service referred to in SYSC 10.1.1R.
- In order to fulfil its obligation to ‘take all reasonable steps’ the Firm will consider:
- the level of risk that such a conflict may constitute or give rise to a material risk of damage to a client/clients’ interests;
- the nature, scale and complexity of its business; and
- the nature and range of products and services offered in the course of its business.
- As required by SYSC 10.1.7R, UKBN will maintain and operate effective organisational and administrative arrangements so as to ensure it takes all reasonable steps to prevent conflicts of interest as defined in SYSC 10.1.3R from constituting or giving rise to a material risk of damage to the interests of its clients.
Senior Management Responsibilities
- The responsibility for the management of Conflicts of Interest rests with UKBN’s Senior Management. The Senior Management shall therefore ensure that they are kept fully aware of the FCA requirements in respect of Conflicts of Interest and are able to identify and manage any Conflicts of Interest or potential Conflicts of Interest. They must be able to assess objectively any conflicts or potential conflicts and be aware of the steps that need to be taken to mitigate any such conflicts in respect of both their business and personal responsibilities.
- The Senior Management is responsible for ensuring that UKBN’s systems and controls are robust and sufficient to determine that UKBN is taking all reasonable steps to identify and manage any conflicts of interest that may arise. The Senior Management will ensure that they receive sufficient Management Information to enable them to carry out an informed assessment of the Firm’s arrangements in order to assess that they are operating effectively. In practice, this requires the Firm’s Senior Management to:
- be involved in the identification and management of areas where conflicts of interest may arise;
- regularly review UKBN’s risks of conflicts of interest arising and the mitigating arrangements in place. This will involve an inclusive review of the entire business activities of the Firm and, where appropriate, will include the relevant activities of any group companies;
- put in place a Conflicts of Interest Policy and Conflicts Register as required under the rules of the FCA;
- review the Conflicts of Interest Policy and Conflicts Register on a regular basis and, at a minimum, on an annual basis;
- on an annual basis all Directors and staff must formally confirm his or her record of potential conflicts of interest by signing an Annual Interest Declaration;
- assess and review on an ongoing basis situations that could potentially give rise to Conflicts of Interest. For example, whether the firm’s organisational structure is likely to incentivise behaviour that may lead to conflicts (bonuses, appraisal, management/control arrangements that reward or potentially reward behaviour that disadvantages the interests of one client in favour of the Firm or another client); and
- put in place processes so that the Senior Management is able to identify any new conflicts of interest that may arise, for example as a result of new business or new product initiatives.
- The provision of relevant, timely and accurate management information in order to assist senior management in controlling conflict of interest issues follows a well-defined process which has been established for all compliance matters in the Firm.
- Management information is derived in the first instance from the Firm’s compliance department’s monitoring processes. The Compliance Department conducts a series of tests within the compliance monitoring programme, weighted as to frequency based on the perceived conflict of interest. The results of the compliance monitoring programme are documented as part of UKBN’s Risk Assessment process, which is regularly reviewed by Senior Management. All staff are required to report actual or potential conflicts of interest to compliance when they arise and to manage conflicts fairly.
- In addition, the heads of each department of the Firm are required to respond to the findings of the compliance monitoring programme.
- Remedial action is undertaken by the senior management of the Compliance Department so as to ensure that systemic or repeated failures in established procedures are addressed. Senior Management is responsible for ensuring that the heads of each department or section as appropriate are aware of their duty to manage and control potential conflicts of interest and to ensure that departmental procedures are followed.
- When reviewing new business, product initiatives or proposals, the Senior Management must ensure that any evaluation includes consideration and identification of any areas of conflicts with the Firm’s existing business activity. Where conflicts of interest are identified, before proceeding with the new business or product the Senior Management will ensure that mitigating arrangements have been put in place to manage such conflicts. If the Firm is not able to put in place adequate mitigating arrangements the Firm will either decide not to proceed with the new business or product or alternatively make the necessary disclosures to its clients in accordance with the process described under the heading Disclosure below.
Criteria for the identification of actual or potential areas of Conflict
- As required by SYSC 10.1.4R, in our process for the identification of conflicts, UKBN considers whether the Firm or a Relevant Person or a person directly or indirectly linked by control to the firm:
- is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
- 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;
- has a financial or other incentive to favour the interest of one Client or group of Clients over the interests of another Client;
- carries on the same business as the Client; or
- 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 monies, goods or services, other than the standard commission or fee for that service.
- In the event that we are not able to put in place procedures to ensure with reasonable confidence there is no material risk to the interests of our clients, we will disclose any such conflict to clients or potential clients prior to commencing any designated investment business. We will ensure that such disclosures are fair, clear and not misleading and that the disclosures contain sufficient detail to enable the client to make an informed decision.
- In some circumstances, such disclosures may relate to transaction specific conflicts or to the general business of the firm or to a particular service or activity. We will ensure that disclosures are provided in a Durable Medium and are made prior to undertaking business with or on the client’s behalf.
- In accordance with the rules of the FCA, the Firm will not place over-reliance on disclosure as a means of managing conflicts of interest. In this regard we will consider whether other reasonable measures would be effective in reducing the potential damage to clients’ interests before relying on disclosure.
- UKBN maintains a record of any circumstances in which a conflict of interest may arise or has arisen as a result of its activities of which this Policy forms the basis. Any conflicts that may arise during the course of business will be logged on the Conflicts Register. These records will be maintained and updated on a regular basis and will be retained for a minimum period of 5 years.
Management of Conflicts of Interest
- The Senior Management of UKBN has undertaken a review to identify the circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of one or more clients in respect of the specific services and activities carried out by or on behalf of UKBN.
- In order to protect the interests of its clients, UKBN has put in place the procedures and policies that are to be followed and the measures to be taken by the Firm, its employees, agents, etc. to manage such conflicts. The details of these policies and procedures are set out in this document.
- The policies and procedures have been designed so that Relevant Persons conduct their activities at a level of independence appropriate to the size and activities of the Firm and if applicable to the Group and to ensure that the Firm has taken all reasonable steps to protect the interests of its Clients.
- If any of the Firm’s procedures do not provide the necessary level of independence, the Firm will put in place alternative or additional measures and procedures as are necessary and appropriate for the purposes of paragraph (10) (b).
- The Firm may, in certain circumstances decide it is not able to act for a client because it is not able to prevent a material risk of damage to the interests of one or more clients.
- The Firm will ensure that all employees receive training in respect of the Firm’s procedures for identifying, managing and escalating conflicts. All Staff are made fully aware of the Firm’s Conflicts of Interest Policy and of their responsibilities to ensure that customers are treated fairly.
Areas of potential Conflicts of Interest
- UKBN has taken reasonable steps to identify, prevent, disclose or otherwise manage conflicts of interest and these are summarised below. It should be noted that UKBN may also need to take additional steps on a case by case basis. Although UKBN will endeavour to inform clients of any conflict of interest before acting for the client, it has no obligation to obtain client consent to any such conflict.
The choice of what measures/combination of measures to be put in place for the purposes of managing conflicts of interest is left to the discretion of UKBN senior management provided, of course, that UKBN takes all reasonable steps to manage its conflict of interest.
The measures taken to manage conflicts of interest include:
- Integrity and Standards of Conduct
UKBN insists that in its dealings with clients its officers and employees must apply the highest standards of integrity in their actions at all times and always act in the customers best interests. The induction, training and competence program of the Firm are designed to ensure that all relevant officers and employees are familiar with and observe the FCA Principles for Business, the Statements of Principle and Code of Practice for Approved Persons.
- Management Oversight
UKBN senior management and Compliance will be alert to any potential conflicts and particularly those in respect of any new business activity. Any proposed new business activities go through the Firm’s defined Investment Committee process.
- Confidential Information
All information obtained from a client or other source which has been provided in the expectation that it will be kept confidential shall be treated as such. UKBN employees may not disclose any confidential information to any person who is not an officer or employee unless permitted by the terms of the transaction, law or regulation. In respect of all confidential information the need to know principle will be applied and treated as confidential.
- Independence policy
All officers and employees must disregard any of the following interests and must not allow the existence of such interests to influence them when dealing with clients or potential clients:
- Any personal interests which they or members of their family may have. Where appropriate, a client should be advised of such an interests, notwithstanding this policy;
- Any existing, proposed or prospective business relationship between any member of the UK Bond Network Group of companies and any third party;
- Any agreement or transaction which has been, will or may be, entered into by any member of the UK Bond Network Group of Companies;
- The holding by, interest or position of any member of the UK Bond Network Group in any investments issued by the client or any third party.
- Gifts and Entertainment
UKBN has put in place measures to prevent or limit any Person from exercising inappropriate influence over the way in which a Relevant Person carries out services or activities. These measures are detailed, for example, in our Gifts and Entertainment Policy (which includes non-monetary benefits) so as to verify that no benefits are received that may influence the behaviour of its personnel.
- Outside Business Activities
UKBN has arrangements to manage conflicts that may arise through service on Company Boards and other Outside Activities of its employees and directors.
- Personal Account Dealing
Conflicts may arise in connection with Personal Transactions by UKBN employees, agents or relevant persons.These issues are addressed in the Firm’s .
The above examples are not exhaustive and UKBN, its officers and employees are required at all times to consider the need to act independently in any conflict.
Monitoring Potential Conflict of Interest Situations
- UKBN adheres to the following procedures for monitoring compliance with the FCA’s rules and guidance on conflicts of interest.
- The Firm documents its policies in this regard, both in general terms in the Compliance Manual and this Policy and its appendices which contain the Firm’s supplementary policies. These documents are circulated to all the Firm’s employees.
- The Compliance Department, through its Compliance Monitoring Programme, conducts various tests which, inter alia, contain elements of conflicts monitoring. These will include:
- Review of fees, commission and non-monetary benefits received or paid by the Firm including review of Gifts & Entertainment records
- Review of personal account dealing to ensure that trades will not create a conflict with duties owed to clients. The policy requires all relevant persons to declare any accounts held with external brokers and to have every transaction approved prior to dealing.
- The Compliance Department maintains the Conflicts Register, which documents information from the Firm’s personnel and Senior Management, and provides an independent assessment as to whether a Conflict is present or likely to occur. This Register also records any instances of where a Conflict of Interest has occurred and the remedial action taken.
- Details of the findings from the Compliance Monitoring Programme are provided on a regular basis to the Firm’s Senior Management.
The Firm regularly reviews and monitors all fees and non-monetary benefits that are paid, received or provided to or by third parties in respect of designated investment business or ancillary services carried on by the Firm for its clients to ensure that they meet the FCA requirements. In particular, that where necessary customers are provided essential terms of such arrangements in sufficient detail to enable the customer to tie in the disclosure to the services provided to him and to take a decision as to whether to request further/full information regarding the Inducement. The information provided will detail the existence, nature and amount of the fee or benefit or, where the amount cannot be ascertained, the method of calculating that amount. Payment or receipt of payment will only be allowed if it meets the following criteria: that it enhances the quality of the service to the clients, does not impair the Firm’s duty to act honestly and in the interests of the clients or that it is necessary for the provision of service.
Service on Boards of Directors and Outside Activities
Service on boards of directors of outside companies, as well as other outside activities generally, could lead to potential conflicts of interest and insider trading problems, and may otherwise interfere with UKBN personnel’s duties to the Firm. Accordingly, UKBN’s personnel may not serve as a director of an outside company (or in a similar role for an unincorporated entity) without prior approval from UKBN’s Governing Body.
If you desire to serve as a director of an outside company, you must notify UKBN’s Compliance Officer before accepting the position. In addition, if service as an outside director is approved and unless otherwise agreed by Senior Management in a particular case, you must pay, assign or transfer to UKBN all compensation and other financial benefits related to or arising out of such service in recognition of the reduction of your business and professional time that would otherwise be devoted to UKBN. Any employee serving as a director of a public company (or a private company that is about to go public) may be required to resign or comply with other controls as may be appropriate.
All new hires must:
- promptly disclose any pre-existing board memberships to UKBN’s Compliance Officer;
- obtain approval from UKBN’s Governing Body if they wish to continue such membership; and
- comply with any conditions placed on them to control or eliminate potential conflicts of interest. The foregoing restrictions do not apply to service on the board of a charitable organization or the board of another group company.
With respect to other outside activities:
- You may not be employed by, or accept any form of compensation from, any other person as a result of any business activity (including consulting engagements, paid positions with governmental or charitable organizations and part-time, at-home ventures such as multi-level marketing programs or freelance software development) outside the scope of your relationship with UKBN, without the prior written approval of a Senior Manager.
- You may not raise money or participate in the raising of money for any company, individual or other business venture, except with respect to charitable or educational organizations, without the prior written approval of a Senior Manager.
- You may not form or participate in any stockholders’ or creditors’ committee, except as part of your responsibilities to the Firm, without the prior written approval of a Managing Director.
A copy of any such written approval should be forwarded to UKBN’s Compliance Officer.