Conflicts and Independence Policies
Under FCA’s Principles for Businesses, Principle 8 requires a firm to “manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.” Under the Markets in Financial Instruments Directive (“MiFID”), Messels Limited (“Messels”) is required to maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to identify, monitor and manage such conflicts of interest. Messels has put in place a policy to meet this obligation and set out below is a summary of that policy and the key information that is needed by clients and counterparties (together “customers”) to understand the measures Messels is taking to safeguard the interests of its customers.
Messels seeks to:
- identify circumstances which may give rise to conflicts of interest entailing a material risk of damage to customers’ interests;
- establish appropriate mechanisms and systems to manage those conflicts; and
- maintain systems in an effort to prevent actual damage to customers’ interests through the identified conflicts.
WHAT IS A CONFLICT OF INTEREST?
A conflict of interest under MiFID is a conflict that arises in any area of Messels’s business in the course of providing its customers with a service which may benefit Messels (or another customer for whom Messels is acting) whilst potentially materially damaging another customer where Messels owes a duty to the customer. There may be a conflict where Messels (or anyone connected to Messels including another Messels affiliate):
- is likely to make a financial gain (or avoid a loss) at the expense of its customer;
- is interested in the outcome of the service provided to its customer where the interests of Messels is distinct from that of the customer;
- has a financial or other incentive to favour the interests of one customer over another;
- carries on the same business as a customer;
- receives money, goods or services from a third party in relation to services provided to a customer other than standard fees or commissions.
Messels has sought to identify conflicts of interest that exist in its business and has put in place measures it considers appropriate to the relevant conflict in an effort to monitor, manage and control the potential impact of those conflicts on its customers. The conflicts identified include:
- those between customers with competing interests;
- those between customers and Messels where their respective interests in a particular outcome may be different; and
- those between the personal interests of staff of Messels and the interests of Messels or its customers where those interests may be different.
POLICIES AND PROCEDURES
Messels has adopted internal policies and procedures in order to manage recognised conflicts of interests. These policies and procedures will be subject to our normal monitoring and review processes and include:
INTEGRITY AND STANDARDS OF CONDUCT
Messels insists that in its dealings with customers its staff must use the highest standard of integrity in their actions at all times. The induction programme, training and competency procedures and monitoring programme at Messels are designed to ensure that all relevant staff are familiar with and observe, inter alia, the FCA Principles for Businesses, the Statements of Principle and the Code of Practice for Approved Persons.
PERSONAL ACCOUNT DEALING
Messels has a policy on Personal Account Dealing and the rules are signed off as understood by all relevant employees regardless of their position within Messels.
CONFIDENTIALITY AND INFORMATION BARRIERS
Messels insists on strict customer confidentiality to ensure that information is disclosed only to those entitled to receive it or otherwise with the prior approval of the Compliance Department.
INDUCEMENTS TO EMPLOYEES FROM CUSTOMERS
Staff are not allowed to accept gifts, entertainment or any other inducement from any person which might benefit one customer at the expense of another when conducting investment business. Messels has a Gifts and Entertainment Policy which is part of the staff’s Policy Manual and is monitored by management on a regular basis.
All relevant staff who are open to a conflict of interest are paid a basic salary including those in key support areas such as Compliance, Finance and Back Office. This salary is not dependent on company performance. A bonus scheme does exist which is linked to the company’s performance and the performance of the individual. It is entirely discretionary.
SEPARATE SUPERVISION AND SEGREGATION OF FUNCTION
Where appropriate, Messels has arranged for the separate supervision of those carrying out functions for customers whose interests may conflict, or where the interests of customers and Messels may conflict and has taken steps to prevent the simultaneous or sequential involvement of a relevant person in separate services or activities where such involvement may impair the proper management of conflicts of interest.
As a last resort, where there is no other means of managing the conflict or where the measures in place do not, in the view of Messels, sufficiently protect the interests of customers, the conflict of interest will be disclosed to customers to enable an informed decision to be made by the customer as to whether they wish to continue doing business with Messels in that particular situation.
DECLINING TO ACT
Finally, where Messels considers it is not able to manage the conflict of interest in any other way it may decline to act for a customer.
POLICY OF INDEPENDENCE
All investment research issued by Messels Investment Ltd (“Messels”) is independent, impartial and objective. Messels does not conduct any investment business with or for its clients, other than the provision of investment research and advice. Messels staff have no other responsibilities which could conflict with the interests of our clients. Messels does not carry out any corporate finance business; and has no involvement in raising capital for corporate clients. Messels has no other regulated or unregulated business activities which conflict with its provision of independent research.
INTERESTS IN SECURITIES
Messels, its directors or employees may have interests in the securities on which we provide research and may add to or dispose of such securities from time to time. Messels may have provided advice, other investment or professional services to the issuer of the securities. Any such interests are reviewed by a director of Messels to ensure that they do not represent conflicts of interest with our customers.
CONDUCT OF OUR INVESTMENT ANALYSTS
All of Messels’s investment analysts are supervised by directors of the firm. The remuneration structure for Messels’s analysts may be linked in any way to dealing or other activities which our customers carry out as a result of the independent research provided by the firm. In the event of any conflict of interest, Messels requires all relevant employees to disregard any material interest or conflict of interest when advising a customer. Our analysts are not permitted to be involved in any activities which could be seen as conflicting with our provision of investment research to our clients. No inducements offered by issuers, or others with a material interest in the subject matter of investment research, may be accepted by our investment analysts or directors of the firm. No employee of Messels may carry out any personal account dealing which could create a conflict of interest which might affect the impartiality of Messels’s investment research. Any proposed personal account dealing by employees is subject to pre-approval by a director of Messels and no dealing which could create a conflict of interest between the employees of Messels and its customers is permitted. In addition, a prohibited list of securities is maintained. All outside business activities of employees are subject to prior approval by a director of the firm.
The timing and manner of publication and distribution of investment research and of the communication of its substance must be approved in advance by a director or senior analyst of Messels. Before being issued, all research documents must be approved and signed-off by a director or senior analyst. No one outside Messels may comment on draft investment research before publication, other than, where necessary, to verify factual information. Certain disclaimers may be included in our research where appropriate, for example for legal reasons. Messels’s policy and procedures require investment research to be distributed in an appropriate manner.
Our investment research is published and distributed either in hard copy or on line. No employee may communicate the substance of any investment research, except in accordance with our policy of independence.