Conflicts of interest management policy
This is an English translation of the Slovenian original provided as a reference to aid the understanding of the relevant documents. Equito Brokerage Company, Ltd. shall not be held responsible for any erroneous translations and is presented as is. In case of a discrepancy, the Slovenian original will prevail as an official document and applicable for interpretation.
1. GENERAL PROVISIONS
1.1. Purpose of the Policy
The Conflicts of Interest Management Policy (hereinafter: the Policy) is aimed at preventing the occurrence of conflicts of interest with a material risk of causing damage to clients in the provision of investment services and ancillary services as referred to in the Market in Financial Instruments Act (Official Gazette of the Republic of Slovenia, No. 77/2018, as amended; hereinafter: ZTFI-1). At the same time, the Policy identifies the circumstances, relationships, products and activities of the Company in which conflicts of interest may arise, including the elements for identifying actual and potential conflicts of interest, as well as the measures and procedures for managing such conflicts of interest.
In addition to the above, the policy also defines:
– a description of the measures and controls in place to ensure that conflicts of interest are managed;
– a description of the manner in which the Firm will ensure that the Firm’s assets and those of its clients are treated equally in the provision of investment services and that the provisions of the best order execution and client order handling rules are complied with;
– an indication of the potential conflicts of interest that may arise in the provision of investment services to clients and the measures that the Company will take to avoid them.
1.2. Defining persons with interests
This Policy establishes a system for the effective management of conflicts of interest that may arise between the various interests of the following persons or entities:
(1) The Company,
(2) clients in the provision of investment services and ancillary services (hereinafter referred to as “clients”),
(3) the Company’s significant suppliers and business partners; and
(4) the persons referred to in Section 1.3 of this Policy (hereinafter referred to as “Related Persons”).
In establishing a system for the effective management of conflicts of interest, the Company shall take into account the nature, scope and complexity of the services it provides under the ZTFI-1 and proportionality to the size and organisation of the Company.
In accordance with the first paragraph of this Article, the following types of conflicts of interest may arise in the conduct of the Company’s business and may be of adverse effect to the interests of the parties:
(1) between the interests of the Company and the interests of the clients,
(2) between the interests of Related Persons and the interests of the clients,
(3) between the interests of Related Persons and the interests of the Company;
(4) between the interests of individual clients or groups of clients.
1.3. Related Persons
The Company defines Related Persons as:
1. members of the supervisory board and the Company’s management;
2. employees who carry out transactions in the Company relating to investment services and the custody and administration of client financial instruments;
3. close family members of the persons referred to in points 1 and 2 above;
4. companies which are subsidiaries of the persons referred to in points 1, 2 and 3 above;
5. shareholders of the Company who hold at least 5% of the Company’s capital or voting rights;
6. members of the management and supervisory bodies of the legal persons referred to in points 4 and 5 above.
2. CRITERIA AND CIRCUMSTANCES IN WHICH CONFLICTS OF INTEREST ARISE
2.2. Criteria for determining conflicts of interest
The Company has a set of identification criteria/criteria in place for the purpose of identifying, managing and controlling conflicts of interest:
1. The Company, a Related Person or any person would be likely to make a financial gain or avoid a financial loss at the expense of a client of the Company;
2. The Company or a Related Person has an interest in the outcome of a service provided to a client of the Company or a transaction carried out on behalf of a client of the Company that is different from the interest of the client;
3. The Company or a Related Person has a financial or other incentive to put the interest of another party before the interest of a particular client of the Company;
4. The Company or a Related Person receives or will receive from a person who is not a client of the Company an economic benefit in relation to a service provided to the client in the form of cash, goods or services that deviate from the standard fee for such service;
5. The Company or a Related Person 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 a monetary or non-monetary benefit or service;
6. The Company has a close relationship with the issuer of the financial instrument that is the subject of the transaction;
7. The Company buys or sells a financial instrument for its own account or for the account of a client and immediately thereafter sells or buys it for the account of another client or for its own account;
8. The Company or Related Person is engaged in the same business as the client;
3. PROCEDURES AND MEASURES TO PREVENT AND MANAGE CONFLICTS OF INTEREST
The Company takes care to protect the interests of the Company’s investment clients and to prevent potential conflicts of interest through the rules in the Order execution policy, the ICAAP and ILAAP Rules, the Rules on Working Procedures and Internal Organisation, the Rules on Record Keeping, the Rules on the Safekeeping of Client Assets, the Policy on the Implementation of Internal Controls referred to in the ZPPDFT-1 and the Policy on the Familiarisation of the Employees with the Company’s Internal Acts.
In particular, the Company prevents conflicts of interest by:
1. functional, organisational and physical separation of the back office from the other departments of the Company where investment services and ancillary services are provided;
2. separation and supervision of other organisational units where conflicts of interest may arise between them or because of them, and prevention of undue influence between these organisational units;
3. The Company’s business premises are functionally and physically separated from other companies;
4. measures to ensure that client assets are kept separate from Company’s assets;
5. setting up IT support for the provision of investment services and ancillary services;
6. consistent supervision over the flow of confidential and inside information, and ensuring confidentiality and secrecy in the provision of investment services, the collection of data, the acquisition of information and the storage of such information and data;
7. avoiding personal gain by Related Persons at the expense of the Company’s clients;
8. reporting of personal transactions by Related Persons;
9. keeping records of the personal transactions of Related Persons;
10. an explicit commitment that the Company’s employees and other Related Persons must act solely in the best interests of the Company’s clients and must ensure that client orders take precedence over those of Related Persons;
11. When executing orders to buy or sell identical financial instruments, the Company gives preference to client orders over orders for its own account;
12. The Company avoids investing for its own account;
13. The Company prevents or limits the risk of improper influence by clients or third parties on the Company’s management and employees in the performance of its services and business by an appropriate system of remuneration of its employees, by an organised and transparent communication with clients, and by organising and physically restricting clients’ access to the Company’s management and employees.;
14. The Company does not accept any compensation from its clients or third parties that is not standard;
15. The Company executes orders to buy or sell the same financial instruments for different clients in a time sequence;
16. The Company strictly regulates the handling of inside information and other confidential information in this and other internal rules;
17. The Company shall provide for separate internal control of Related Persons whose activities are related to the provision of investment services and ancillary services to clients whose interests may conflict with the interests of clients, including the Company;
18. The Company shall organise its business in such a way that Related Persons do not engage in other services or activities, whether concurrently or consecutively, where such engagement may be detrimental to the proper management of conflicts of interest.
3.2. Equal treatment of assets
In particular, the following conflicts of interest may arise between a client of the Company and Related Persons that are dealing in financial instruments in the course of providing services to the Company:
1. conflict of interest in the case of execution of a transaction for the account of a client and for the Company’s own account;
2. conflict of interest when executing the same transaction for the account of several different clients;
3. conflicts of interest in the case of transactions between clients.
The Company ensures equal treatment of clients’ assets. The Company shall take all necessary steps to execute orders on the terms most favourable to each client as follows:
1. The Company has procedures in place to ensure prompt, fair and expeditious execution of transactions on behalf of its clients;
2. The Company does not use joint account orders and does not aggregate them with client orders;
3. Transactions are allocated between the clients on a fair and equitable basis, with no client receiving preferential treatment;
4. the Company’s employees have a duty to ensure that no client is systematically favoured in the drafting and placing of orders and the execution of orders over other clients and that no client is systematically disadvantaged:
5. The Company has in place records of orders and transactions to ensure traceability of the placing and handling of orders.
4. NOTIFICATION OF CONFLICTS OF INTEREST
4.1 Method of notification
Related Persons must immediately report to the Company’s Compliance Officer any circumstances that might indicate a suspected conflict of interest. The Related Person shall describe and disclose the circumstance in writing. The authorised person shall investigate the reported circumstances and report them to the Board of Directors of the Company.
5. DEALING WITH CONFLICTS OF INTEREST
5.1. Procedures for dealing with conflicts of interest
The management of the Company shall conduct an impartial and objective review of any report of a suspected conflict of interest. In the event that identified conflict of interest or circumstances likely to give rise to a conflict of interest, the management shall take appropriate action to eliminate the conflict of interest or to control the circumstances likely to give rise to the conflict of interest (e.g. to require the suspension of the conflicting conduct, to suspend or revoke the powers of attorney temporarily or permanently, to require reimbursement of the damages incurred by the Company or the transfer of the benefit obtained from the transaction to the Company, etc.).
If a conflict of interest is found to exist with respect to any Related Person, it may constitute a material breach of the obligations under the employment contract or a material breach of another contract entered into between the Related Person and the Company. The violation shall constitute grounds for possible termination of the employment contract or other contract of the Related Person by the Company, and the Company shall take action against members of the Company’s management and supervisory bodies in accordance with the provisions of this Policy, the Rules of Procedure of the Supervisory Board (if adopted) and applicable law.
6. DISCLOSURES RELATING TO CONFLICTS OF INTEREST
6.1. Disclosure of conflicts of interest to the clients
If the measures set out in this Policy and other internal acts of the Company are not sufficient to prevent the risk of damage to the interests of a client for whom the Company provides investment services and/or ancillary services, the Company shall, before it commences to provide those services to the client, explain to the client in a reasonable and clear manner, in writing on paper or by electronic mail, if this is the usual method of exchange of information between the Company and the client, the nature and sources of those conflicts of interest and the procedures for mitigating those risks.
The disclosure referred to in the preceding paragraph must: 1. be in a durable medium; and 2. contain sufficient detail to enable the client to make a reasonable decision about the service in relation to which the conflict of interest has arisen, taking into account the nature of the individual client.
7. RECORDS AND LISTS ON CONFLICTS OF INTEREST
7.1. Record of conflicts of interest
The Company keeps a register of conflicts of interest. The Conflicts of Interest Register shall be maintained by the authorised person, on the basis of notifications from the persons referred to in Article 1.3 of this Policy, of all those services or activities carried out by the Company or by another person on its behalf in which a conflict of interest has arisen or, in the case of continuing services or activities, may arise which has a material risk of causing damage to the interests of the Company’s clients. The persons referred to in Article 1.3 of this Policy are obliged to inform the Authorised Person without delay of the occurrence of a circumstance to be entered in the Conflicts of Interest Register in accordance with the preceding paragraph.
The Authorised Person shall prepare a report on the conflicts of interest register at least once a year and submit it to the Company’s management no later than 30 June of each calendar year for the previous calendar year.
7.2. List of persons having access to inside information
The Company maintains a list of persons who have access to inside information in accordance with the provisions of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation).
7.3. List of securities
The Company shall maintain a list of securities in respect of which it has obtained inside information in accordance with the provisions of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation). The contents of the list shall be made known to all broker-dealers and other persons who deal for the Company in relation to investment services and transactions.
7.4. Record of transactions in listed securities for which the Company has inside information
The Company shall keep a record of all transactions in the securities listed in point 7.3 concluded by:
1. a person who holds a position as a member of its management or supervisory body,
2. a person employed by the Company or any other person to whom inside information is made available in any way in connection with his or her work for the Company or the provision of services to the Company,
3. an immediate family member of a person referred to in points 1 or 2,
4. a company which is a subsidiary of a person referred to in points 1, 2 or 3 of this paragraph.
Records of securities transactions are maintained and reviewed by the Compliance Officer, who also performs other control activities related to inside information.
7.5. List of persons to whom confidential information may be disclosed
The Company maintains the following list of persons who have access to confidential information:
1. members of the Company’s bodies,
2. the shareholders or members of the Company,
3. of the Company’s employees,
4. other persons who have any access to confidential information in connection with their work for the Company or the provision of services to the Company.
Confidential information shall be deemed to be all Company’s information, facts and circumstances about a particular client, irrespective of how the Company obtained the information.
Persons who have access to confidential information must not communicate it to unauthorised persons.
7.6. Related party transactions
Any transfer of financial instruments of Related Persons (held in trading accounts with the Company) must be approved by at least two persons who are engaged in the business of the Company in relation to investment services and transactions or the custody and administration of financial instruments.
Notwithstanding any other provision of this Policy, Related Persons are obliged to promptly (and no later than within 3 Business Days of the execution of a particular transaction) report to the Authorised Person (on the form set out in Annex 1 to this Policy) any executed transaction in financial instruments and cash balances in the trading accounts of Related Persons that are not held with the Company.
The Company is obliged to submit to the Securities Market Agency, no later than the 25th day of the month, a report for the preceding month on transactions and dealings in financial instruments and cash balances of Related Persons, containing the opening and closing balances and transactions and dealings of Related Persons, irrespective of whether the transactions and dealings were executed on or off regulated platforms. In addition to the above, the report shall also include all Related Person’s transactions and trades that were executed without 100% margin on the settlement date of the trade.
8. AUTHORISED PERSON
8.1. Definition of authorised person
The person responsible for compliance with the obligations arising from this Policy and from the regulations relating to the content and manner of preparation of records in the area of conflicts of interest shall be an authorised person appointed by a resolution of the Company’s management (hereinafter referred to as the “authorised person”). The authorised person shall also keep all documentation obtained in the course of performing his/her obligations under this Policy.
The authorised person referred to in the preceding paragraph shall immediately inform the Company’s management if he/she considers that changes to the Policy are necessary to ensure the provision of the required documentation and the enforcement of the provisions of this Policy in accordance with applicable laws and regulations, and propose the content of the necessary changes and the reasons for them.
The Authorised Person shall report in writing to the Company’s management on the implementation of the provisions of this Policy by the 15th day of each month.
9. EMPLOYEE OBLIGATIONS
9.1. Types of obligations and procedures for compliance
All employees and members of the Company’s management and supervisory boards have a duty to protect confidential information and inside information.
The obligation referred to in the preceding paragraph shall not cease if the person ceases to be an employee or a member of the management or supervisory board of the Company.
The obligation to protect inside information ceases at the moment the inside information becomes publicly available and is no longer included in the list of securities in respect of which the Company has obtained inside information. Employees shall be informed of the termination of the insider protection obligation by the authorised person.
The Company’s employees and members of the management and supervisory boards may not communicate confidential data and inside information to other persons, except where required by law, nor use it themselves or allow it to be used by other persons. They may use confidential data and inside information only for the purpose for which it was obtained.
Each employee and member of the management or supervisory board of the Company shall notify the Commissioner in writing of the acquisition of inside information referred to in Article 15, who shall immediately place the security on the list of securities in respect of which the Company has acquired inside information.
The person referred to in the previous paragraph shall send the notification to the authorised person by e-mail. The authorised person shall acknowledge receipt of the notification in the same manner. Notwithstanding any delay in acknowledging receipt of the notification, the time and date of the listing of the security shall be deemed to be the time at which the notification was transmitted by electronic mail.
The notice referred to in the preceding paragraph shall include:
– the name and surname of the persons who have knowledge of the inside information,
– the date and time when the inside information was made available,
– the designation of the security and/or the name of the issuer to which the inside information relates,
– a description of the content of the inside information,
– other relevant information about the security, if any.
Each person referred to in the first paragraph of this Clause 9.1 of this Policy shall have a duty to notify the Authorised Person immediately in relation to any services or activities carried out by or on behalf of the Company or any other person in respect of which a conflict of interest has arisen or, in the case of ongoing services or activities, may arise which has a material risk of causing damage to the interests of the Company’s clients.
Each person referred to in the first paragraph of this Clause 9.1 of this Policy shall sign a Declaration of Awareness of the contents of this Policy, which shall form part of a common declaration of awareness of the Company’s internal acts.
9.2. Independence of the Management Board and the Supervisory Board
Members of the Management Board and the Supervisory Board must endeavour in all circumstances to take decisions independently and to asses on that basis any opinions or instructions of those who elected, nominated or appointed them as members.
In his/her actions and decisions, a member of the Management Board shall have the Company’s interests as his/her primary consideration, to which he/she shall subordinate any other personal interests, and shall not take advantage of business opportunities of the Company for his/her own account. A member of the Management Board shall immediately inform the other member of the Management Board and the Supervisory Board of any conflict of interest which arises or may arise in the performance or in connection with the performance of his/her duties.
In acting and making decisions, a member of the Supervisory Board shall have regard primarily to the objectives of the Company and shall subordinate to them any other personal or individual interests of the shareholders, the Management Board, the public or other persons. A member of the Supervisory Board shall immediately inform the other members of the Supervisory Board of any conflict of interest which arises or may arise in the exercise or performance of his/her functions.
A member of the Supervisory Board must not be dependent on the Company. This means that his/her economic, personal or other links with the Company or its management shall not affect his/her impartial, professional, objective, fair and comprehensive personal judgement in the performance of his/her duties as a member of the Supervisory Board. A member of the Supervisory Board shall immediately inform the Supervisory Board of any such relationship.
10. FINAL PROVISIONS
This Policy shall come into force on the date of the Company’s authorisation to provide investment services.