This policy applies to ALL Compound staff, both full time and parttime, and individuals acting on behalf of Compound.

This Policy sets out Compound’s standards for the identification, management, mitigation and reporting of Conflicts of Interest. The purpose of this document is to provide details as to what is expected when handling Conflicts of Interest, to ensure adherence to relevant rules and legislation, maintain the reputation of Compound and its venders and ensure that clients are not disadvantaged by conflicts not being properly managed. The Policy forms the basis for compliance, monitoring and record keeping in relation to Conflicts of Interest.

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Principles of the Policy

FCA regulations require regulated firms to establish policies and procedures to ensure that conflicts do not adversely affect a client’s interests or, when this is not possible, inform a client of the conflict so they may decide whether to continue to use that Firm. In addition:

FCA Principle 1 requires a Firm to conduct its business with integrity;
FCA Principle 6 requires that a Firm must pay due regard to the interests of its clients and treat them fairly; and
FCA Principle 8 requires a Firm to manage conflicts of interest fairly.

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This policy sets out arrangements in connection with the identification, management and prevention of conflicts of interest that may arise during the course of business in accordance with SYSC 10.1 of the FCA Handbook. This document will not only address any conflicts that arise between the business i.e. Compound and a client, but it will also address conflicts that arise between clients; and personal conflicts that may compromise an individual’s performance at work.

Compound is committed to treating clients fairly and following the principles of the regulations as indicated above.Compound has developed and implemented policies and procedures to avoid putting the entity in a position whereby its own interests, or our duty to any persons for whom we are acting, conflicts with our duty to a client. However, Compound recognises that there may be instances whereby conflicts of interest are unavoidable. A conflict may exist even if no unethical or improper act or outcome results from it.

Compound adopts the following principles in relation to the management of Conflicts of Interest:

Client’s interests will be protected and preferred to the interests of Compound;
Client’s interests will be protected and preferred to third-party’s interests;
Where conflicts between clients arise, all reasonable efforts will be made to treat both clients fairly;
Conflicts of Interest are disclosed and mitigation measures imposed without delay;
Compound operates a policy of transparency through disclosure where required;
To prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out investment or ancillary services or investment activities; and
To prevent or control the exchange of information between relevant persons where the exchange of that information may harm the interests of one or more Clients.

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Identifying Conflicts of Interest

A conflict of interest is a situation where Compound; and/or any of the staff members; and/or its clients are exposed to a number of interests, and the competition between such interests might negatively affect the decision-making or outcomes in the course of business. A conflict can be the competition of legitimate interests (such as acting for multiple clients), or the presence of harmful ones (such as personal gain for staff members or the organisation).

A Conflict of Interest under this policy includes both an actual conflict of interest and a potential conflict of interest. It also includes a perceived conflict of interest (i.e., a situation which may give rise to the perception of a conflict of interest), even where a conflict of interest may not in fact exist.

In order to identify the types of conflict of interest that may arise in the course of business, Compound considers, by way of minimum criteria, the question of whether Compound, or any person directly or indirectly linked by control to Compound:

Are likely to make a financial gain, or avoid a financial loss, at the expense of the client;
Have 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;
Have a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;
Carry on the same business as the client; and/or
Receive 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.

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A conflict of interest may arise in one of the following cases:

Between Compound and the Customers;
Between staff and Customers;
Between management and the organisation;
Between Compound and its Vendors; and
Between the Compound and its staff.

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Taking into account the above, Compound has identified the following example situations which could lead to a conflict of interest entailing a material risk of damage to the interests of one or more clients. This is not an exhaustive list, but an example of key areas where conflicts can occur:

Conflict

Parties

Details

Between the Compound and Customers

Compound acts to provide services to Customers. Compound may have priorities which do not place the interests of Customers first. As Compound receives its income from the Customer, this could create a potential conflict whereby Compound is incentivised to place the interests ahead of Customers.

Between staff and Customers

Staff could trade ahead of Customer orders to the detriment of Customers.

Between management and the organisation

It is possible for management to have separate financial interest in Compound. This would create conflicts between the interests of the organisation and the personal interests of management.

Between staff and Customers

If staff accept gifts or inducements from customers there could be a risk of them prioritising certain customer orders at the expense of others.

Between the Compound and the staff

If the remuneration structure of staff is linked to the performance of Compound then there could be a conflict between staff incentives and the responsibilities of Compound.

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Reporting and Management of Conflicts of Interest

Conflicts, perceived, potential or actual, should be reported/disclosed by Compounds head of compliance. Compound will use the Symbiant system via RiskSaveto register all conflicts of interest to ensure visibility for the MLRO at RiskSave

Measures of effective management/mitigation of Conflicts of Interest may include:

Information Barriers between individuals and/or departments;
Provisions of other policies related to the case, such as PAD, Gifts and Entertainment, Order Handling and Best Execution;
Disclosure to clients prior to establishing a relationship and/or acting on behalf of the client;
Declining to act on behalf of the client;
Terminating client relationships or changing the nature of the relationship;
Enhanced Audit and Compliance Monitoring arrangements;
Remuneration arrangements carefully considered to ensure conflicts do not inadvertently arise through inappropriately set targets, and which do not reward behaviour that disadvantages the interests of clients in favour of the organisation or relevant persons, or other clients;
Disciplinary actions against staff members;
Dismissal of staff; and/or
Termination of an AR relationship.

If staff are in doubt of any parts of the identification, reporting and management process of Conflicts of Interest, they must seek advice directly from the Head of Compliance of Compound.

Disclosure to Clients

If the internal arrangements to manage a potential conflict of interest are not sufficient to ensure with reasonable confidence that the risk of damage to a client’s interests is prevented, Compound must disclose the conflict to the client in a durable medium. The disclosure will provide sufficient detail to enable the client to make an informed decision with respect to the service in the context of which the conflict of interest has arisen. Specifically the disclosure must:

Describe, in a durable medium (e.g. email or post letter), the general nature and source of the conflict of interest to the client before undertaking business for the client;
Clearly state that the organisational and administrative arrangements established by the firm 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;
Explain the risks that arise as a result of the conflict of interests and the steps taken to mitigate these risks;
Provide sufficient detail to enable that client to make an informed decision in relation to the service in the context of which the conflict arises;
In accordance with this, a disclosure may be made only as a matter of last resort where the organisational and administrative arrangements established by Compound to prevent or manage its conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the client will be prevented;
Compound may also decline to act for a client in cases where the conflict of interest cannot be managed in any other way.

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Controls

In addition to the rules and standards of this Policy, Compound must review conflicts of interest register on RiskSave’s symbiant system at least on a quarterly basis and as part of their yearly board meetings to ensure that all identified conflicts of interests are properly reported and effective and proportionate mitigation measures are in place. To support this policy and ensure compliance by staff members, Compound are expected to test on a regular basis the conflicts of interest provisions.

Training

Compound must ensure that all staff members receive guidance and training in respect of this Policy to ensure that they are aware of the importance and the need to report any potential or actual conflict of interest immediately. Refresher training also must be provided at least annually.

Record Keeping

All records relating to conflicts of interest arrangements must be recorded and maintained for at least 5 years. Such records include:

Conflicts of interest records and associated evidence (Conflicts Register).
Records of disciplinary actions related to Conflicts of Interest.
Records of internal and external communication related to reporting and/or disclosure of conflicts of interest.
Records of conflicts of interest register review with relevant outcomes.

Breaches, Waivers and Escalations

Breaches of Policy

Where a breach of any of these policy standards is identified, the breach will be recorded on the Breaches Log and reported to Head of Compliance. Where a breach is identified, this must be fully investigated, including the root cause of the breach, with remedial action taken as necessary. The breach analysis should also consider any potential customer impact/detriment that may have occurred as a result of the breach.

Escalations

Compound are required to escalate to Risksave, any issues, breaches, risks outside appetite or other matters that may threaten their ability to continue to maintain safe, sustainable systems and controls. Compound will log all breaches, issues, risks outside appetite and incidents in the relevant registers. Material matters (i.e. regulatory breaches; matters that are systemic or repetitive in nature; and/or have or are likely to cause material customer detriment) must be escalated to Compound as soon as practical following identification (and within 24 hours of the identification of the matter).

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