Conflicts of interest policy

CiliaFormosa Financial Advisors Ltd is a non-independent financial advisor. Financial advisors will provide financial advice based on a broad range of instruments managed by various fund managers of various fund houses.

Purpose

 

This Conflicts of Interest Policy (the “Policy”) has been drafted in line with the Investment Services Rules for Investment Services Providers, Part BI: Rules Applicable to Investment Services Licence Holders which qualify as MiFID Firms. (the “Rules”) and the Conduct of Business Rulebook (the “Rulebook”).

 

The Company shall act honestly, fairly and with integrity in the best interests of its clients (“Clients”) and of the market. To achieve this, the Company shall avoid conflicts of interests where possible. Should conflicts of interests not be possible to be avoided, measures shall be put in place to identify and manage such conflicts. As a measure of last resort, should conflicts not be able to be prevented or managed in a sufficient way to ensure with reasonable confidence that the risks of damage to the interests of clients will be prevented, the Company shall disclose such interests to its Clients.

 

This Policy sets out the Company’s procedure when identifying and managing conflicts of interest. To this effect, this Policy seeks to:

 

• Identify circumstances, or potential circumstances, which may give rise to conflicts of interest which entails a potential risk of damage to the interest of one or more Clients, and where possible seek to prevent conflicts of interest from occurring;
• Establish appropriate measures and controls to manage those conflicts of interest which cannot be mitigated; and
• Maintain procedures to ensure that all instances of conflicts of interests are being monitored.

 

This Policy is to be communicated to the Company’s Relevant Persons.

Identifying conflicts of interest

 

A conflict of interest may be described as a situation wherein the Company, its Relevant Persons, or any person directly or indirectly linked to it by control, has a material, professional, commercial or financial interest, which goes against the interest of one or more of its Clients.

 

A conflict of interest may also arise between the Company and its external service providers, hence it is important for the Company to review and be aware of its external service providers’ conflict of interests procedures when carrying out its initial and ongoing monitoring.

 

Conflicts of interest include situations whereby the Company, its Relevant Persons or any person directly or indirectly linked to it by control, is in any of the following situations:

 

• Is likely to make a financial gain, or avoid a financial loss, at the expense of a Client;
• Has an interest in the outcome of a service/activity provided to the Client, which is distinct from the Client’s interest in that outcome;
• Has a financial interest or other incentive in favouring the interest of one Client or a group of Clients over another Client;
• Is involved in the same business/activities as the Client or carries out the same business activities for more than one Client; and
• Receives from or will receive from a person, other than the Client, an inducements for entering into a transaction with a Client or for providing a service to a Client, in the form of monetary or non-monetary benefits or services.

 

The Company may face other conflicts in relation to providing investment advice, receiving and transmitting orders or execution of orders on behalf of other persons. These include, but are not limited to:

 

• Personal account dealing by its Relevant Persons or connected persons in financial instruments traded for its Clients;
• Allocation of transactions and investment opportunities amongst different Clients;
• Favouring certain counterparties over other in the execution of transactions; and
• Other forms of inducement.

 

The Company takes all reasonable steps to identify conflict of interest that arise in the course of providing services to Clients (including those caused by the receipt of inducement from third parties or by the Company’s own remuneration or other incentive structures) between:

 

• The Company, including its relevant Persons or any person directly or indirectly linked to the Company by control, and any Client of the Company; and
• One Client of the Company and another Client of the Company.

Prevention and management of conflict of interest

 

As soon as a conflict of interest or potential conflict of interest is identified, the Company shall adopt procedures and controls in order to prevent the possibility of such conflict of interest from arising. If such conflict cannot be prevented, the Company shall ensure that the said conflict of interest will not adversely affect the interest of its Clients.

 

To prevent the possibility of conflicts of interest from adversely affecting the interest of its clients, the Company shall ensure that Relevant Persons engaged in different business activities involving a conflict of interest, carry on those activities at a level of independence appropriate to: (i) the size and activities of the Company; and (ii) the materiality of the risk of damage to the interest of Clients.

 

In order to ensure the requisite degree of independence the Company shall:

 

• Ensure there is control over the exchange of information between Relevant Persons engaged in activities involving risks of conflict of interest, where the exchange of that information may harm the interest of one or more Clients;
• Separate supervision of the Relevant Persons whose principal functions involve carrying out activities on behalf of, or providing services to, Clients whose interest may conflict, or who otherwise represent different interests that may conflict, including those of the Company;
• Remove any direct link between the remuneration of Relevant Persons principally engaged in one activity and the remuneration of, or revenues generated by, different Relevant Persons principally engaged in another activity, where conflict of interest may arise in relation to those activities;
• Prevent or limit any person from exercising inappropriate influence over the way in which a Relevant Person carries out the Company’s services; and
• Prevent or control the simultaneous or sequential involvement of a Relevant Person in separate services or activities where such involvement may impair the proper management of conflict of interest.

 

The following sub-sections outline the prevention and management measures the Company has put in place for effective control of interest management.

 

Corporate governance

 

The Company has robust governance arrangements, including at least one Director sitting on the Board of Directors who is completely independent from the day-to-day operations of the Company. Furthermore, all key business decisions, policies and procedures are formally approved by all Directors of the Company.

 

Furthermore, the Company has a Corporate Governance Framework in place which sets out the organisational structure of the Company and related internal control and oversight framework. The Corporate Governance Framework also sets out clear and defined reporting lines of the Company and details the roles and responsibilities of the respective functions/departments.

 

Segregation of functions

 

The Company ensures that functions, as necessary and when possible, given the size, nature and complexity of the business, are kept segregated.

 

The Company’s Control Functions are kept functionally and hierarchically separate from the Company’s operations, including the Company’s investment advisory function. This ensures that the Control Functions are not overseeing operations they are involved in and are also compensated independently of the performance of the operations of the Company and in line with the achievement of the objectives linked to their function.

 

Disclosure of personal conflict

 

Relevant Persons shall upon joining the Company and thereafter at least on an annual basis complete the Conflicts of Interest Declaration, as outlined in Appendix I of this Policy. The Board of Directors, senior management, officers, staff and external service providers may also disclose any conflicts of interest or potential conflicts of interest during the quarterly Board Meetings.

 

The following procedure is to be followed during Board Meetings, where a member considers they may have a conflict of interest:

 

• Member should declare that interest to the other members either at the Board Meeting at which the issue in relation to which they have an interest in first arises, or if the Member was not at the date of the Board Meeting interested in the issue, at the next Board Meeting held after they became interested;
• Unless otherwise agreed to by the other Members, a Member shall avoid entering into discussion in respect of any contract or arrangement in which they are interested and should withdraw from the Board Meeting while the matter in which they have an interest if being discussed;
• The interested Member should not vote at a Board Meeting of any contract or arrangement in which they are interested in, and if they do so, their vote shall not be counted in the quorum present at the Board Meeting; and
• The minutes of the Board Meeting should accurately record the sequence of such events.

 

Best execution and order handling

 

The Company has a Best Execution and Order Handling Policy which outlines the Company’s procedures to ensure that all sufficient steps are taken to obtain, when executing orders, the best possible result for clients. Furthermore, when carrying out client orders, the Best Execution and Order Handling Policy outlines the Company’s procedures to ensure that it provides prompt, fair and expeditious execution of Client orders, relative to other Client orders or the trading interests of the Company.

 

Further detail can be found in the Company’s Best Execution and Order Handling Policy.

 

Remuneration

 

The Company has a Remuneration Policy which outlines the procedures set by the Company to ensure that its remuneration practices do not give rise to conflicts of interest, which could, in the short, medium or long-term adversely affect the interest of the Company’s Clients.

 

Further information can be found in the Company’s Remuneration Policy.

 

Personal account dealing

 

The Company has a Personal Account Dealing Policy in place which outlines the Company’s procedures in respect of personal account dealing by Relevant Persons which prohibit improper conduct, such as front-running Client orders and stipulating that Client orders must take priority over principal trading.

 

Further information can be found in the Company’s Personal Account Dealing Policy.

 

Gifts and entertainment

 

A conflict of interest may arise where Relevant Persons receive or offer gifts, entertainment, or anything of value that constitutes an inappropriate incentive for the Relevant Person, the third-party service provider, or Client to act in a certain way. As a general standard, acceptance of gifts entertainment or anything of value is not permitted unless these are reasonable and proportionate.

 

Without prejudice to the above, Relevant Persons are not permitted to accept gifts from current or prospective Clients and/or service providers, should the gift or entertainment exceed €100. The value of recurring gifts from current or prospective Client and/or service providers, shall be taken cumulatively on an annual basis. For the sake of clarity, invitations to dinner, promotional items, food items or similar items should in general be accepted. Any gift, entertainment or anything of value provided to a Relevant Person, which is above the threshold shall be reported to the Compliance Officer and is to be approved by the Company’s Board of Directors. Small items, including trade show giveaways, such as keychains, notepads and diaries, shall not be considered as gifts contemplated in this Policy, and may be retained by Relevant Persons without obligation to report to the Compliance Officer.

 

Inducements

 

The Company shall not pay, and shall not be paid any fee or commission, or provide or be provided with any non-monetary benefits in connection with the provision of a service, to or by any party except the Client or a person on behalf of a Client, other than where the fee, commission, payment or benefit:

 

• Is designed to enhance the quality of the relevant Service to the Client; and
• Does not impair compliance with the Company’s duty to act in the best interest of the Client.

 

Relevant Persons are prohibited from offering, giving, providing, demanding, or receiving gifts, entertainment, or other things of value as an improper means of obtaining, retaining, or awarding business or securing or conferring an advantage.

Disclosure of conflict of interest to clients

 

Where the Company’s organisational and administrative arrangements made to prevent conflicts of interest from adversely affecting the interest of its Clients are not sufficient to ensure, with reasonable confidence, that risks of damage to Client interests will be prevented, the Company shall clearly disclose to the Client the general nature and sources of conflicts of interest and the steps taken to mitigate those risks before undertaking business on its behalf.

 

It is important to note that disclosure to Clients should be taken as a measure of last resort.

 

Such disclosure shall:

 

• Be made in a durable medium; and
• Include sufficient detail, taking into account the nature of the Client, to enable the Client to take an informed decision with respect to the Service in the context of which the conflict of interest arises.

 

In this respect, the disclosure shall include:

 

• Organisational and administrative arrangements established by the Company to prevent or manage that conflict are not sufficient to ensure, with reasonable confidence, that the risk of damage to the interest of the Client to be prevented; and
• Specific description of the conflict of interest that arises in the provision of the services, taking into account the nature of the Clients to whom the disclosure is being made, including a description of the general nature and sources of conflicts of interest, as well as the risks to the Client that arise as a result of the conflict and the steps undertaken to mitigate these risks, in sufficient detail to enable that Client to make an informed decision with respect to the service in the context of which the conflicts of interest arise.

Reporting of conflicts of interest

 

Relevant Persons have the responsibility of adhering to the Company’s Policy and immediately notifying the Company’s Directors and Compliance Officer upon identification of a conflict of interest. Should a Relevant Person be unsure of whether a conflict of interest or potential conflict of interest should be reported as such, the Relevant Person is encouraged to discuss such a situation with the Company’s Board of Directors and Compliance Officer.

 

Relevant Persons shall at least on an annual basis complete the Conflicts of Interest Declaration, as outlined in Appendix I of this Policy. The Board of Directors, senior management, officers and external service providers may also disclose any conflicts of interest or potential conflicts of interest during the quarterly Board Meetings.

Conflicts of interest register

 

The Company maintains a Conflicts of Interest Register, logging situations which give rise to conflicts and situations which may give rise to conflicts and how these are managed. The Conflicts of Interest Register is updated immediately upon disclosure of any new conflict of interest, such as after the Company’s Board of Directors meeting which is held quarterly and at least annually upon update of the Conflict of Interest Declaration by all Relevant Persons.