Material interests and potential conflicts of interest
- Where any firm acts for more than one client, there is the possibility of a conflict of interest. Conflicts may also exist between the interests of a firm, including Persons connected with it, and the interests of clients. Investment firms are required by the Rules of the FCA to establish, implement and maintain an effective conflicts of interest policy appropriate to the size and organisation of the firm and the nature, scale and complexity of its business, in line with the FCA Principles for Business and in particular Principle 8: “A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client”.
- Our firm maintains a Conflicts Management Policy (the Policy) that identifies, with reference to our services, the circumstances that constitute or may give rise to a conflict of interest entailing a risk of damage to the interests of one or more clients. We take all appropriate steps to identify conflicts of interest between our firm, including managers and staff, and our clients, and between one client and another client, which arise or may arise in the course of providing our services.
- Our staff are required to act in the best interests of each individual client and not to have regard to the interests of one client over the interests of any other. They are required to comply with a policy of independence and disregard any interest other than your own when making recommendations to you or carrying out transactions on your behalf. We maintain and operate effective organisational and administrative arrangements in order to take all appropriate steps to prevent or manage such conflicts from adversely affecting the interest of clients. In respect of the business that we conduct with you, the procedures we follow and measures we adopt include at least those items in the following list that are necessary for us to ensure the requisite degree of independence:
- effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients;
- the separate supervision of persons whose principal functions involve carrying out activities, or providing services to, clients whose interests may conflict, or whose interests may conflict with the interests of our firm;
- measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out services and activities, and to prevent or control the simultaneous or sequential involvement of relevant persons in separate services or activities where such involvement may impair the proper management of conflicts of interest; and
- a policy of the removal of any direct link between the remuneration of persons principally engaged in one activity and the remuneration of, or revenues generated by, different persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities.
- Where conflicts of interest are so great that they cannot appropriately be prevented or managed by a combination of these and/or other steps in such a way as to ensure fair treatment for a client and to ensure that client interests will not be damaged, we would be required to disclose the general nature and/or source of the conflict. However, disclosure to clients is a measure of last resort and is not a form of managing that conflict of interest. We are required to take appropriate steps to prevent or manage conflicts of interest beforehand and rely on disclosure of a conflict only when our administrative and organisational arrangements have failed in this regard.
- As a result of our organisational and administrative arrangements, we have no general conflicts of interest that are not appropriately prevented or managed, and that we would be obliged to disclose in accordance with the FCA Rules. However, for your information, we set out below the details of certain specific areas of conflict and controls.
Group Structure/Close Links
A potential conflict would exist if a third party product provider or supplier had a material shareholding or financial interest in the Charles Stanley group (or vice versa), of a size significant enough to be able to influence the operating decisions of the firm to the detriment of the client interests. At the date of these Terms, the group has no close links to product providers or insurers, other than with respect to the Charles Stanley OEIC range. If circumstances were to change and such close links arose, we would review the situation carefully to identify and appropriately manage any potential conflict.
Holistic Wealth Management
Our firm provides full-service wealth management, including discretionary and advisory managed portfolios, advisory and execution-only services and fund management, with
investment management services also being provided through the discretionary managed model portfolios hosted on third-party investor and Independent Financial Adviser platforms. We (or a Person connected with us) may be the trustee or operator (or an adviser to the trustee or operator) of a collective investment scheme or other Retail Investment Product in which you are advised to invest, or in which discretionary transactions are arranged for you if you are a Discretionary Client. We are cognisant of the potential for conflict between providing investment management services and offering in-house funds, the primary mitigating factor of which is the absence of incentives for investment management staff to recommend in-house funds.
Our group Remuneration Policy sets out how we seek to comply with our regulatory obligations regarding executive and staff remuneration and group remuneration schemes, including the consideration of potential conflicts within our incentive schemes. Where staff are remunerated by reference to business volumes, there is potential for conflict with client interests as such remuneration schemes may provide an incentive to maximise revenues at the expense of clients’ interests. It is our policy to assess incentives-based conduct risks and factor these into internal control and monitoring routines. Additional policies are designed to counter any incentives to engage in poor behaviours. Staff are not permitted to receive any payments from clients directly.
Staff Personal Dealing
Staff personal interests in holdings of securities, or in dealing in securities, may conflict with their obligations to clients. For example, when we give you investment advice or (if you are a Discretionary Client) arrange a discretionary transaction on your behalf, staff or connected persons may have an interest, relationship or arrangement that is material in relation to the Investment, transaction or service concerned. We have policies, procedures and monitoring arrangements in place to review staff personal dealing and to restrict it in certain circumstances.
External Business Interests
Staff may not accept any employment or business interest outside the group without prior approval from management.
Inducements/Gifts And Hospitality
As a matter of policy, our firm and staff do not solicit or accept inducements that could conflict with our obligations to its clients, nor offer nor give inducements that could conflict with the recipient’s obligations to its own clients. Gifts, corporate hospitality and similar benefits may fall within this category and we maintain a Gifts & Hospitality Policy and Procedure detailing the requirements around the giving and receiving of gifts and hospitality.
A potential conflict exists in that it may be to our benefit to categorise clients as Professional rather than Retail Clients, thereby reducing the level of investor protection enjoyed by
clients. Policies and procedures are in place to ensure that clients are only categorised as Professional when this is fully justified in all the circumstances and permitted by the FCA Rules
on client categorisation. Otherwise, clients are categorised as Retail Clients.
When we recommend a transaction to you or enter into a transaction for you, conflicts may exist where:
- we carry out your Order by matching it with that of another client;
- we carry out comparable Orders given simultaneously by different clients;
- we allocate Investments, where you are a discretionary managed client or your Orders are aggregated with those of other clients but full allocations are not possible; or
- a Person connected with us is dealing as principal for their own account by selling the Investment concerned to you or buying it from you. In making any recommendation or in carrying out any transaction for you, we are not required to disclose that the other party to the transaction may be ourselves, a company connected with us, or another client of ours or of another company. Our firm maintains Client Order Handling procedures that are designed to ensure the fair treatment of clients in such instances.
Our main sources of income are fees and trading commissions from our investment management, and advisory and trade execution activities and the commercial requirements of these businesses can create conflicts of interest for research analysts, as the desire to maximise trading commissions can conflict with the requirement for analysts to provide high quality, timely and unbiased recommendations to investing clients. Charles Stanley and its connected companies, their directors, members, staff and members of their families may have positions in the securities of Financial Instruments referred to in our research. Under our Research Analysts Policy, analysts giving advice on or making a recommendation about security are required to disregard any relationship, arrangement or interest of their own or of our firm, which might influence the advice or recommendation. Our Research Analysts Policy sets out detailed standards for analysts, both as regards their own conduct and the disclosure of potential or actual conflicts within research publications. Our policy on managing actual or potential conflicts of interest in respect of research
- Although as a result of our organisational and administrative arrangements, we have no general conflicts of interest that are not appropriately prevented or managed, it is possible that we may face specific conflicts in respect of services and/or products provided to particular clients that cannot be appropriately prevented or managed, and that in accordance with the FCA Rules we would be obliged to disclose. Where this occurs, the disclosure shall clearly state that the organisational and administrative arrangements established by us to prevent or manage that conflict are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented. The disclosure shall include a specific description of the conflicts of interest and shall explain the general nature and sources of conflicts of interest, as well as the risks to the client that arise as a result of the conflicts of interest and the steps undertaken to mitigate these risks, in sufficient detail to enable that client to make an informed decision regarding our investment services. Ultimately, it is likely that we would decline to act for such a client.