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Conflicts of Interest Policy

Purpose

The purpose of this Conflicts of Interest Policy under SYSC 10.1.11 R is:

  1. to identify by reference to the specific services and activities carried out by (or on behalf of) Arjent Limited ("Arjent" or "the Firm") 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; and
  2. to specify procedures to be followed and measures to be adopted in order to manage such conflicts,

and to communicate this information to all those who are in the Firm.

It is the responsibility of all those in Arjent to familiarise themselves with the policy and report conflicts of interest through the appropriate channels to the Compliance Officer.

Regulatory Background

FSA Principle 8 (Conflicts of Interest) states:

A firm must manage conflicts of interest fairly, both between itself and its clients and between one client and another client

These requirements have been amplified in the FSA sourcebook SYSC (Senior Management Arrangements, Systems and Controls).

The FSA's 'common platform' of organisational requirements, principally for firms affected by MiFID and CRD, has applied since 1 November 2007. The Common Platform is designed to make clear to common platform firms (such as Arjent) what is expected of them and of their senior management. It does this by having management oversight and systems and controls in several areas including conflicts of interest.

Summary of Requirements

Identifying Conflicts

SYSC 10.1.3 R requires Arjent to take all reasonable steps to identify conflicts of interest between:

  1. Arjent (including its managers, employees or any person directly or indirectly linked to them by control), and a client of Arjent; or
  2. one client of the firm and another client;

that arise or may arise in the course of Arjent providing any services in the course of carrying on regulated activities.

Types of Conflict

SYSC 10.1.4 R sets out that, for the purpose of identifying the types of conflict that arise in the course of providing a service and where there may be a material risk of damage to the interests of a client, Arjent must take into account, as a minimum, whether Arjent or a relevant person, or a person directly or indirectly linked by control to Arjent:

  1. is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
  2. 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;
  3. has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;
  4. carries on the same business as the client;
  5. 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.

Segregation of functions

SYSC 5.1.6 R to 5.1.11 G require the senior management of a firm to segregate duties so as to avoid conflicts of interest. However, it should be noted that in smaller companies, such as Arjent, it is often difficult to achieve total segregation due to the limited number of staff within the organisation. While the principles have been borne in mind in devising suitable control systems these have been modified to take account of the staff numbers performing such tasks.

Disclosure of conflicts to clients

SYSC 10.1.8 R requires that where the arrangements made by Arjent are not sufficient to ensure with reasonable confidence that the risk of damage to the client will be prevented, Arjent:

  1. must clearly disclose, in a durable medium, the general nature and source of the Conflict of Interest to the client before undertaking business for the client; and
  2. must provide sufficient detail to enable that particular client to take an informed decision in relation to the service offered.

Where a conflict in the Conflict Register scores a net rating of MH or above it will be disclosed to relevant clients. However, the Firm may decide to disclose other conflicts with net ratings below MH because the FSA's rules or best practice requires it or because the Board considers this necessary for other reasons.

Responsibilities of Staff

It is the responsibility of all employees to familiarise themselves with this Policy and to report conflicts of interest to their line manager who will in turn report them to the Compliance Officer. Failure to adhere to this policy can be taken to be a breach of an employee's contract of employment.

Overall responsibility for Conflicts of Interest lies with the Board. The Compliance Officer is responsible for the day-to-day administration of the Policy.

The Compliance Officer will work with line management to eliminate Conflicts of Interest, record conflicts and the mitigating action in the Conflicts Register and report the situation to the Board for consideration.

The Board via the Compliance Officer has responsibility for ensuring that staff are aware of the aspects of the Policy relevant to them.

All employees have a responsibility for carrying out aspects of the policy that are relevant to them.

Situations in which Conflicts of Interest could arise

The purpose of this section is to set out typical situations in which conflicts of interest arise and are managed in the course of Arjent's day-to-day business so that employees are better equipped to identify, report and assist in eliminating or managing conflicts.

Examples of conflicts that may exist within Arjent;

Potential misuse of information

Junior staff under pressure to perform may disregard a client's KYC information (background) and recommend unsuitable investments.

Remuneration Policy/Performance Related Fees

Personal gains by brokers may sway them from acting in the best interest of Arjent.

Personal Account Dealing

Staff dealing in the same investments as clients can potentially be accused of dealing ahead of clients (front-running) or of providing advice to improve their own position.

Staff on notice to leave

Staff who are serving their notice period may not perform their role with enthusiasm leading to matters being overlooked or missed.

Inducements

Company staff may have received inducements to recommend a particular investment.

The company may have an arrangement with an investment house to provide commission for attracting investors to invest in certain of its funds/products.

Initial Public Offering allocations

Company staff and directors may wish to participate in IPOs where they can be accused of obtaining an unfair advantage in obtaining allocations to the detriment of clients.

Arrangements for managing conflicts

Governance

Arjent has robust governance arrangements. Key business decisions are taken by the Board and are recorded. The Compliance Officer reports directly to the Board.

Arjent has rules laid out in the standard employment terms and conditions, governing employee conduct, including Personal Account Dealing ("PAD") rules (see 5.13.6. of the Compliance Manual) which control and mitigate conflicts of interest. It also maintains a Conflicts of Interest Register (see Appendix H of the Compliance Manual)

Reporting Lines

Arjent has defined and clear reporting lines. An organisational chart is maintained by the Compliance Department.

Segregation of functions

The rules in SYSC 5.1 requiring segregation of functions are met by segregating duties as appropriate to avoid conflicts of interest wherever possible. These duties are set out via job descriptions, procedure manuals and organisation charts. Ensuring these duties remain segregated is the responsibility of line managers as advised by the Compliance Officer.

Remuneration/Compensation Arrangements

Potential conflicts arising and arrangements for controlling/mitigating them are identified in the Conflicts of Interest Register. (Appendix H of the Compliance Manual)

Disclosure of Personal Conflicts

Employees and owners are required to disclose conflicts of interest. Employees will disclose any conflicts of interest to their line manager who in turn will inform the Compliance Officer. Owners will disclose any conflicts directly to the Compliance Officer. The Compliance Officer will record in the appropriate register and inform the Board of any action taken.

Disclosure to Clients

If Arjent's arrangements to manage a Conflict of Interest are not sufficient to ensure with reasonable confidence that the risk of damage to that client's interests is prevented, Arjent will inform the client, in a durable medium, of the general nature and/or source of the conflict in such a way that an informed decision can be made by that client before business is undertaken.

Other systems and controls

Recruitment

In recruiting individuals their fitness and propriety is considered by the Compliance Department as well as technical and managerial ability. Suitable background checks are made and references are taken up.

Training

Compliance training relevant to conflicts of interest forms part of the annual training needs analysis. The Compliance Department ensures that appropriate training is devised and delivered.

Compliance and Procedures Manuals

Systems and controls are documented in the compliance and procedures manuals which are reviewed at least once a year to ensure they are fit for purpose. The reviewer is appointed by the Board.

Management Information

Management information relevant to identifying conflicts is reviewed by the Compliance Department. Compliance keeps a Conflicts Register and updates this Register immediateley it becomes aware of new conflicts. Compliance is also responsible for initiating reviews or investigations with a view to making appropriate recommendations to the Board as to how to manage these conflicts and to determine if they remain material and thus must be disclosed to clients impacted by such.

Verifying Compliance

The principal means of verifying that these policies have been complied with will be a risk based compliance review undertaken by the Compliance Department. The Compliance Officer will have the responsibility of considering compliance with the policy on a monthly basis and will report formally to the Board.

Confidentiality

Unless authorised by the Board no portion of this Policy may be copied reproduced or shown to any individual who is not an employee of Arjent, a representative of a relevant legal or regulatory authority or a relevant professional advisor.

Approval

This Policy was last amended on ….May 2008 and, following review, was approved by the Board on ….May 2008.