Peterhouse Capital Conflicts of Interest Policy
Introduction
The purpose of this Conflicts of Interest Policy under Article 23 and Article 34 (2) of MiFID II Delegated Regulation is:
a. To identify, by reference to the specific services and activities carried out by (or on behalf of) the Firm, the circumstances which constitute or may give rise to a conflict of interest entailing a risk of damage to the interests of one or more clients; and
b. To specify procedures to be followed and measures to be adopted to manage such conflicts; and
c. To communicate this information to all those who are in the Firm.
It is the responsibility of all staff members to familiarise themselves with the contents of the Policy and report conflicts of interest to the Head of Compliance using the appropriate channels.
Regulatory Background
The Financial Conduct Authority (FCA) Principle 8 (Conflicts of Interest) and SYSC 10.1 states that:
A firm must manage conflicts of interest fairly, both between itself and its clients and between one client and another.
SYSC 10.1.10R requires a firm to establish, implement and maintain an effective conflicts of interest policy that is set out in writing and is appropriate to the size and organisation of the firm and the nature, scale and complexity of its business.
Scope
This Policy relates to all activities of the Firm and its employees (including temporary staff and contractors), regardless of their roles, department, and location.
This Policy is intended to be comprehensive but is not exhaustive
Definition of a Conflict
For the purpose of this policy, conflicts of interest arise, or may arise, in the course of providing a service and whose existence may entail a material risk of damage to the interest of a client and, as a minimum:
(1) From which Peterhouse Capital is likely to make a financial gain, or avoid a financial loss, at the expense of a client;
(2) In which Peterhouse Capital has an interest in the outcome of a service provided to a client or of a transaction carried out on behalf of a client, which is distinct from the client’s interest in that outcome;
(3) Where Peterhouse has a financial or other incentive to favour the interest of a client (or group of clients) over the interest of another client;
(4) Where Peterhouse Capital carries on the same business as a client; or
(5) Where Peterhouse Capital 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 money, goods or services other than the standard fee or commission for that service.
Identification of conflicts of interest
When identifying the types of conflict that arise, or may arise, we will assess whether our firm, anyone connected with our firm or (if relevant) another client has an interest in the outcome of a service provided to the client which is distinct from the client's interest in that outcome and has the potential to influence the outcome to the detriment of the client.
General Conflicts of Interest situations
In overview, conflicts fall into several broad categories. Some of the more common types of potential conflicts of interest scenarios within the firm include:
the interests of the Firm conflict with those of a client(s);
the interests of one client conflict with those of other clients;
one part of the firm has obtained confidential information from, or relating to, an existing or former client which would be of value to another department in the firm (such as securities business) or other clients of the firm; and
the interests of an employee of the firm conflict with the interests of a client of the firm itself e.g where an employee of the firm executes a personal account trade ahead of a client order.
Examples of General Conflicts of Interest at Peterhouse include:
Corporate advisory client having conflict of interest with corporate broking client;
Corporate broking client having conflict of interest with firm trading;
Personal account dealing in shares of firm client;
Non Public Information regarding corporate broking client benefitting employees and corporate advisory clients
Examples of Specific Conflicts of Interest Situations:
Examples of key specific conflicts of interest related to the Firms regulated markets activities in the UK.
A client’s orders and transactions may perform differently from similar transactions we handle for other clients
We may have several roles in a single transaction and those roles may conflict. For instance, we may act for an issuer in an offer of securities and we may act for investors participating in such offerings.
We may own, finance, control, advise or take legal action against securities issuers or other market participants.
We present below a table providing examples of potential conflicts for each type and the available options to manage them.
Management of conflicts of interest
The firm will take all appropriate steps to manage conflicts of interests properly. The firm has in place conflict of interest operating procedures to ensure that potential conflicts, once identified, are managed appropriately and that the firm and its employees conduct themselves and their investment business activities to ensure the interests of clients are protected.
Certain conflicts of interest (such as staff personal dealings) are managed on a regular basis. Other conflicts of interest are identified and managed on a case-by-case basis in accordance with the firm’s procedures.
Actual and potential conflicts of Interest will be managed promptly, fairly and in compliance with regulatory rules and principles and in accordance with the firm’s procedures. This will be done with assistance from the firm’s compliance department.
The firm’s arrangements which are designed to prevent any conflict giving rise to a material risk of damage to clients include:
Control of access to, and movements of, information to relevant employees to protect each person’s interests and prevent improper access to and use of such information. This is primarily achieved using Information barriers. These are organisational arrangements, physical and electronic, which are established to act as information barriers controlling the disclosure of information and preventing its unauthorised release to other areas of the company, including detailed wall crossing procedures.
Conflict clearance procedures when conflicts are identified.
Detailed personal account dealing restrictions that apply to all employees.
New Business Forums for new clients and new transactions for existing clients or clients which assess potential conflicts.
Gifts and Entertainment policy that ensures such items are justifiable and do not influence the professional judgements of the persons concerned. Similarly, the code of conduct prohibits acceptance of inducements in relation to provision of services.
Disclosure of potential conflicts where relevant - see “Disclosure of conflicts” below.
Transaction specific conflict management measures
In certain cases, special conflict of interest controls, specific to an individual transaction, can be put in place to allow the firm to engage with one client without prejudicing another prospective client or business already under way. This will normally involve establishing a temporary information barrier around the individual or team involved in both of the potentially conflicting transactions and/or obtaining the explicit consent of those parties or clients potentially impacted. Where doubts exist as to whether transaction-specific arrangements will be effective in managing conflict risk with the appropriate degree of confidence, the firm will consider declining to act.
Disclosure of Conflicts
Disclosure of a conflict of interest to a client must be a measure of last resort and should only be used by Peterhouse where our effective organisation and administrative arrangements established to prevent or manage our conflicts are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the client will be prevented. Disclosure helps clients to assess the service that they are being offered in light of Peterhouse Capital’s own interests and to decide on the extent (if at all) to which they will rely on or proceed with the service. Where Peterhouse Capital discloses a conflict or potential conflict, such disclosure must:
Be made in a durable medium;
Explain the risks to the client that arise as a result of the conflicts of interest;
Include specific description of the conflict(s) that arise in the provision of the service
Clearly state that the organisation and administrative arrangements established by us to prevent or manage the conflict are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented; 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 arises
Where such a disclosure has been made, we must await the clients consent to proceed.
Some conflicts may have such a serious potential impact on Peterhouse Capital or our clients that the only option (where they cannot be adequately prevented or managed) will be to terminate or decline the provision of the activity to which the conflict relates.
Recording Conflicts
Compliance will document any reported actual, apparent or potential conflicts of interest.
All staff are provided with training on identifying conflicts of interest. Any new conflict of interest must be reported to the Compliance officer immediately using the Conflicts Clearance Form, who will then be responsible for recording the details of the conflict on to the Register and the ongoing maintenance of the entry to an appropriate conclusion.
For conflicts that cannot be managed, the firm will decide either to decline or disclose these conflicts to the client concerned. Conflicts Clearance Form will have to be filled out when i) new client is being on boarded, ii) a new transaction is being proposed for a new client, and iii) a new transaction is being undertaken for an existing client.
The Conflicts of Interest Register will be reviewed at Board meetings, with a focused discussion on any new conflicts which have been identified, and an assessment of the effectiveness with which previously identified but ongoing conflicts are being mitigated.