Conflict of Interest Policy
Under the EU Markets in Financial Instruments Directive 2014/65 EU (‘MiFID II’), Global Shares Execution Services Limited (“Global Shares” or the “Firm”) is required to have a Conflicts of Interest Policy. The purpose of this document is to provide retail and professional clients with information on this Policy. Under the MiFID Regulations, the Firm is obliged to avoid Conflicts of Interest arising.
It is Global Shares’ Policy to ensure that the best interests of the clients are served and we avoid Conflicts of Interest arising at all – this is our primary responsibility. We must take all appropriate steps to identify, prevent and manage conflicts of interest, while noting that the Firm may need to make sufficient disclosure to comply with potential fiduciary conflicts arising as a matter of common law. Disclosure to clients is a measure of last resort to be used only where the organisational and administrative arrangements established by the Firm are not sufficient to ensure, with reasonable confidence, that risks of damage to client interests will be prevented. We also ensure that policies, procedures and controls help to:
- Identify circumstances, relationships and arrangements, which give rise to or could potentially give rise to a Conflict of Interest;
- Where Conflicts of Interest arise, eliminate or reduce to the greatest extent feasible, the Conflict of Interest and actively manage the Conflict of Interest;
- Where a Conflict of Interest cannot be eliminated, to disclose the nature and source of the Conflict of Interest to clients, along with an explanation of the efforts which have been made to eliminate the Conflict of Interest and the nature and implications of the remaining Conflict of Interest;
- Assess and resolve (where feasible) actual or potential Conflicts of Interest; and
- Disclose and maintain records of Conflicts of Interest as appropriate.
This document will also be used as a key reference tool in raising awareness of Conflicts of Interest and the conflict management process.
What is a Conflict of Interest?
Conflicts of Interest are any situations that may arise in the provision of investment or ancillary services, or a combination of them, and whose existence may damage the interests of a customer, in all cases taking into account the specific situations that may arise. In simple terms, it is where the interests of the Firm (or employees or agents or group companies) conflict with those of the retail client.
Some examples of Conflicts of Interest are where:
- The Firm may obtain a financial benefit, or prevent a financial loss, at the expense of the client.
- The Firm has an interest in the outcome of a service provided to the client or a transaction carried out on his or her behalf, which is distinct from the client’s best interests.
- The Firm has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client in question.
- The Firm carries out the same activity or business as the client.
- The Firm receives or is going to receive from a person other than the client an incentive related to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for this service.
Policy Review and Testing
This Policy shall be reviewed annually or after any changes to the business processes or regulation that would require additional policies and controls. The review shall be completed by the Risk & Compliance Officer or by its designee(s). A copy of the Conflict of Interest Register (defined below) shall be provided to the Firm’s Board of Directors for review on an annual basis.
The Policy will be tested by, among other things, selecting a sample from the Conflict of Interest Register which shall be reviewed, with consideration of the Conflict, Effect, and Consequence of the conflict, and shall also form part of the scope of the annual audit. These procedures ensure that any Conflicts of Interest which may arise are dealt with effectively and efficiently.
All new employees will be required to read and understand the Conflict of Interest Policy and in addition this Policy will be included in the annual Policy updates and training which all employees must attend.
The Head of Risk & Compliance.
The Firm conducts business in a way which is fair and professional in accordance with the best interests of its clients. The Firm tries to maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to identify, monitor and manage Conflicts of Interest that may arise through its business activities and keep the clients’ interests at their core.
The following potential conflict red flags, among other things, must be noted:
Client vs. Client Conflicts
- The Firm could be in initial discussions with clients on both sides of a deal.
Employee vs. Client Conflicts
- An employee engages in outside business activities by holding client financial instruments.
Employee vs. Firm Conflicts
- An employee engages in personal trading or outside business activities (including board memberships/directorships) that could conflict with a client or with the Firm.
Vendor vs. Client Conflicts
- A vendor may misuse or inadequately protect confidential client information.
- A vendor may fail to protect confidential client information adequately after its relationship with the Firm is terminated.
The Firm will monitor these red flags when addressing Conflicts of Interest.
For the purposes of identifying Conflicts of Interest, the following criteria shall be considered when determining whether a conflict exists or may exist. When providing a service to a client, is Global Shares and/or its employees:
- Likely to make a financial gain, or avoid a financial loss at the expense of the client?
- What is the cumulative value of the gifts / entertainment received by any one employee?
The following non-exhaustive list sets out situations which have been identified by Global Shares, as potential situations in which Global Shares may have conflicting interests in the provision of the Services or otherwise. Does Global Shares and/or its employees:
- Have 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;
- Have a financial or other incentive to favour the interest of one client or group of clients over another client or group of clients;
- Carry on the same business as the client;
- 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;
- Profit personally from an arrangement outside the compensation arrangements provided by Global Shares;
- Is involved in an arrangement or activity that creates the appearance of a conflict with a client;
- When providing the Service or carrying out a transaction, Global Shares receives or will receive an inducement in relation to that service provided to the client (in the form of monies, goods or services other than the standard commission or fee for that service) from a person other than the client;
- Has it been identified that Global Shares carries on the same business as the client; or
- Does Global Shares have a financial or other incentive to favour one service provider over other service providers (a relative or personal relationship);
It is important to note that Conflicts of Interest can occur at any level of the business. Whether it is at senior management or trainee level, employees must be aware of personal connections that give rise to Conflicts of Interest and are obliged to disclose such connections so that conflicts can be identified and managed appropriately.
Any failure to identify or properly address a conflict can have severe negative repercussions for Global Shares, its associated persons, and/or clients. In some cases, the improper handling of a conflict could result in litigation and/or a disciplinary action. Impropriety or even the appearance of impropriety could negatively affect all associated persons, including those who have no direct involvement in the problematic activities
Avoidance and Management of Conflicts
Global Shares has put in place all the necessary internal policies and has assigned the identification and management of Conflicts of Interests to its Compliance Department. The internal procedures will be updated regularly by the Compliance Department to ensure that the procedures put in place deal with conflicting interests effectively and efficiently.
It is Global Shares’ Policy to avoid Conflicts of Interest arising at all, unless that is not feasible. If it is not feasible, it is Global Shares’ Policy to disclose the nature and source of the Conflict of Interest to clients, along with an explanation of the efforts which have been made to eliminate the Conflict of Interest and the nature and implications of the remaining Conflict of Interest
Global Shares has put in place several procedures and controls that are used to manage the identified conflicts of interest, which are set out, non-exhaustively, below:
(a) Global Shares shall put in place a scheme whereby the flow of information between relevant persons whose conflicting interests may harm the interests of one or more clients, is controlled and prevented.
(b) Global Shares shall ensure that relevant persons whose functions involve the carrying out of activities on behalf of, or providing services to, clients who may have conflicting interests, are supervised and separated. The scheme of supervision includes functions of relevant persons who represent clients whose different interests that may conflict, including the interests of Global Shares;
(c) Global Shares shall ensure that there is no direct link between the remuneration or revenue of different employees, where one is primarily performing in one function and the other is a person primarily performing another function, where there may be a Conflict of Interest between these functions;
(d) Global Shares shall take such measures that would limit the influence of any person, relevant or otherwise, over the inappropriately interfering with the way in which a relevant person carries out the Service;
(e) Global Shares shall put in place a scheme whereby a relevant person will be prevented from being sequentially or simultaneously involved in functions that may inhibit any Conflicts of Interest that may arise from being properly managed.
(f) Global Shares shall ensure the ongoing monitoring of business activities to ensure that Global Shares also undertakes ongoing monitoring of business activities to ensure that internal controls put in place remain appropriate.
The following schemes for the prevention of any Conflicts of Interest will be put in place:
(a) The prevention and/or management of the distribution of confidential or inside information within Global Shares, by the implementation of “Chinese walls”, if necessary, which would control and limit the flow of confidential and/or inside information within Global Shares. The scheme will also ensure the separation of different departments/functions, to prevent or restrict the flow of such information.
(b) The prevention and/or management and the safeguard of access to electronic data held by Global Shares.
(c) The separation of functions carried out by the same person that may bring about the Conflict of Interests within Global Shares or otherwise.
(d) The logging of all gifts and inducements which will monitor the offer of receipt of any benefits.
(e) Monitoring and prevention of the external business interests of the Company’s Officers and employees to ensure no conflict with the interests of Global Shares, save for the instances where the board issues the relevant approval.
(f) A scheme whereby the risk of conflicting interests arising from the exchange of documents is eliminated.
(g) The implementation of a “four-eyes” scheme which will be adopted at all stages and for all relevant functions performed by Global Shares.
(h) An Internal Head of Client Asset Oversight is appointed, whose duties will include the monitoring and reporting on all client assets matters to the Board of Directors of the Firm.
(i) The Compliance Department’s duties include the carrying out of checks, monitoring and reporting all of the above to the Board of Directors of the Firm.
(j) Employee systems access limited to relevant client information only, to eliminate the risk of a Conflict of Interest
(k) Staff providing services to only one entity within the group and having defined roles.
When a Conflict of Interest arises concerning a client, Global Shares will make a disclosure to the client in accordance with the MiFID Regulations. Global Shares will disclose the general nature and the source of the Conflict of Interest before undertaking business on the client’s behalf. Such disclosures, which apply irrespective of the categorisation of the client, should:
- Specifically describe the conflict
- Explain the general nature and/or source of the conflict
- Explain the risks that arise to the client as a result of the conflict
- Note the steps taken to mitigate the risks
- Be made in a durable medium
- Include detail sufficient for the client to make an informed decision on whether to proceed with the service giving rise to the conflict of interest
- Clearly state that the organisational and administrative arrangements established by the Firm to prevent or manage that conflict are not sufficient to ensure that the client’s interests will be protected.
- The description of the conflict should also take into account the nature of the clients to whom the disclosure is made.
Recording and Disclosure of Conflicts
The Compliance Officer maintains a Register of Conflicts of Interests. The Register will inter alia contain any actions taken to address the conflict, the value of the conflict and if applicable the client or supplier it relates to.
Where Global Shares becomes aware of a Conflict of Interest, it will disclose this conflict to a Client, before the Client performs any further actions for investment. Global Shares may also choose not to disclose the conflict to the client, if reasonably that disclosure is not the appropriate action to take to manage the conflict and that not to do so would be within the legal obligations on the Firm. In this case, Global Shares may choose to not proceed with the transaction or any other issue which gives rise to the conflict.
Should a client that does business with one group entity be offered services from another group entity, full disclosure of the group relationship should be made so that the client may be aware of any benefit to the firm as a group and any impact it may have on the client.
Gifts and Entertainment
Global Shares employees must disclose any gifts received from clients and gifts given to clients. Gifts must be recorded in the gift register. A valid business reason must be given for giving or receiving gifts. Approval must be sought from the CEO for receiving gifts with a value over €100. If such a gift is declined, it still must be recorded in the register.
Political contributions by Global Shares to politically connected individuals or entities with the intention of influencing such individuals or entities for business purposes are strictly prohibited.
Roles and Responsibilities
All Global Shares employees must advise their manager and the Head of Compliance of potential Conflict of Interest situations promptly, and in any event no later than 30 days from the date of becoming aware of the conflict, or in the case of a previous notification, any new information must be disclosed as soon as is practically possible.
The Head of Compliance must ensure that all reasonable steps and efforts are made to identify conflicts and that conflicts are managed appropriately.
The identification of Conflicts of Interest is the responsibility of ALL employees
In advance of joining Global Shares, employees must disclose all external business interests and other potential conflicts including:
- Directorships or partnerships and details of companies in which they have an interest or holding;
- Any personal relationships with employees of Global Shares; and
- Positions, business interests or relationships that would or could conflict with their principal employment with Global Shares.
In addition, employees have an on-going obligation to seek approval from the Risk & Compliance Officer, if they propose to become involved in or to accept an appointment in any of the activities described above.
Intra Group Relationships
As the Global Shares Group grows Global Shares’ individual companies will remain mindful to limit system access and sharing of information in the various entities to their relevant clients only to eliminate the risk of Conflicts of Interest.
Should a client that does business with one group entity be offered services from another group entity, full disclosure of the group relationship should be made, so that the client may be aware of any benefit to the firm as a group and any impact it may have on the clients
Any officer appointments to a Global Shares Group Company must be approved by the board of directors of Global Shares Plc.
Global Shares provides execution only and administration services rather than advisory services for Share Plans, it significantly reduces the opportunity for Conflicts of Interest. Nevertheless, all staff must remain alert to any conflicts that may arise during their work.
Reporting & Review
Material Conflicts of Interest will be escalated by the Risk & Compliance Officer to Senior Management, the Risk & Audit Committee and/or the Board of Directors. The Conflicts of Interest Policy is to be reviewed at least annually and all appropriate measures must be taken by the Firm to address any deficiencies. The Firm must keep and regularly update a record of investment services and activities likely to give rise to Conflicts of Interest and senior management must receive a written report, at least annually, where Conflicts of Interest have arisen.