Company policy on conflict of interest prevention, identification and management
The concept of ‘conflicts of interest’
There is a conflict of interests when in the process of managing Mutual Funds or providing investment services, competing interests arise for the Company which entail a material risk of harm to the interests of the Mutual Funds being managed, the unitholders or the Company’s clients (hereinafter all referred to as Clients).
Such conflict arises when competing interests emerge:
a) between the Company and the client
b) between persons directly or indirectly affiliated with the Company via a relationship of control (as defined below) and the client
c) between relevant persons (as defined below) and the client
d) a client, and the interests of another client.
2. Content and scope of the conflict of interest prevention, identification and management policy
To ensure that the interests of clients are given priority in accordance with the new legislative framework, the Company has adopted the internal procedures referred to below, which include organisational and administrative measures, in order to prevent conflicts of interest arising and to resolve any such situations that do arise. “Relevant persons” (as defined below) are obliged to respect the Company’s rules to prevent and manage conflicts of interest. Sanctions apply in the case where these rules are breached.
3. Relevant persons
For the purposes of this Annex “relevant persons” mean:
a) competent persons, for the purposes of Hellenic Capital Market Commission Board of Directors Decision No. 15/633/20.12.2012, as defined in Article 3, namely:
(i) Company management executives and shareholders,
(ii) Company employees and any other natural person providing collective portfolio management services on the Company’s behalf and under its control and
(iii) Natural persons directly providing services to the Company in the context of any form of cooperation under Article 22 of Law 4099/2012, for the purpose of provision by the Company of one or more functions relevant to the management of collective portfolios.
b) for the purposes of Hellenic Capital Market Commission Board of Directors Decision No. 2/452/01.11.2007, relevant persons (as defined in Article 2 of that Decision), and in this case (a) directors or equivalent persons or managers of the Company, (b) Company employees and any other natural person whose services are placed at the disposal and under the control of the Company, and who is involved in the provision of investment services and activities by the Company, and (c) natural persons directly involved in providing services to the Company under an outsourcing arrangement, for the purpose of the provision of investment services and activities by the Company.
c) In all events the relevant persons this Annex refers to include:
The Company’s Chairman and the Chief Executive Officer, and the members of the Company’s Board of Directors with executive duties.
Company administrators, managers and management executives. This category includes the heads of all Company divisions and departments, including the Internal Audit, Regulatory Compliance and Risk Management Departments.
4. Measures and procedures to identify, prevent and manage conflicts of interest
Having identified the cases which could lead to conflicts of interest, in light of the points made above, the Company’s goal is to take the necessary measures in line with the requirements of Law 3606/2007, Hellenic Capital Market Commission Board of Directors Decision No. 2/452/1.11.2007, Law 4099/2012 and Hellenic Capital Market Commission Board of Directors Decision No. 15/633/20.12.2012, to prevent or otherwise manage situations of this kind.
The Company’s conflicts of interest policy consists of four stages:
a) Identifying a conflict of interest situation.
b) Taking suitable measures to prevent it, or if it cannot be prevented to effectively manage the conflict.
c) Disclosing the conflict of interest to the client in certain cases.
d) Constantly supervising and checking the suitability and effectiveness of the web of measures used, and adjusting it if necessary.
5. Identifying conflicts of interest
Conflicts of interest may arise when managing Mutual Funds and managing client investment portfolios, providing investment advice and safekeeping and managing and administering the units of collective investment schemes in accordance with Article 12(2) of Law 4099/2012.
The following are considered to be specific circumstances which constitute or could cause a conflict of interest:
The Company or relevant persons or persons with close direct or indirect ties to the Company via a relationship of control:
a) can obtain a benefit or prevent loss, while causing loss to the client at the same time
b) have an interest in executing a transaction in a manner different than the one dictated by the client’s interests
c) have a financial or other incentive to favour the interests of a specific client or group of clients to the detriment of other clients
d) carry on the same activity as the client
e) will receive consideration for a service related to the client, from a person who is not the client, in return for more than the normal commission or fee for that service
f) have an interest in the outcome of a service or activity provided to the client, or the outcome of a transaction entered into on the client’s behalf, which differs from the client’s interests in the same case.
g) in the case of the Mutual Funds being managed, provide the same service as those the Mutual Funds provide to another client, who is not a Mutual Fund.
In light of this, the list below contains some illustrative examples of what are considered to be conflicts of interest:
Transactions entered into by relevant persons on own account or on behalf of the Company under terms more favourable than those entered into on behalf of the client.
Using insider information that relevant persons have about the investment strategy or future transactions the Mutual Fund or client will enter into, in order to enter into transactions for themselves or for third parties associated with them, involving financial instruments or derivatives in which they enter into transactions on the client’s or Mutual Fund’s behalf. Company employees entering into transactions on their own behalf or on the Company’s behalf in financial instruments that are also involved in transactions on the client’s behalf, or in derivatives of those instruments, for their own benefit, by exploiting insider information that they have about the client’s investment strategy.
Entering into transactions on the behalf of Mutual Funds and clients whose interests are directly opposed to those of the Company employee.
6. Measures relevant to functional independence, communication and the flow of information between Company divisions and departments
6.1. Functional Independence
To ensure that conflicts of interest are avoided, the Company has put in place a series of arrangements and measures to ensure that its divisions and departments are functionally independent.
Management decisions are taken solely by the Company, unless there is a special written agreement outsourcing management of all or part of a Mutual Fund portfolio to another party. In such cases, that agreement is notified to the Hellenic Capital Market Commission. In all events, the Company remains fully liable for management decisions that are taken. The Company never outsources all or part of the management of Mutual Funds to its custodian.
The Company specifies the work tasks and duties of relevant persons that could give rise to conflicts of interest when managing the portfolios of Mutual Funds and client portfolios. In that context, the Company identifies any incompatible roles that could give rise to conflicts of interest when those persons are performing their duties. The Company has ensured the following:
(a) It has appointed different investment managers for the collective portfolios and client portfolios it manages and
(b) The collective portfolio and client portfolio investment managers cannot be:
Members of the Board of Directors or employees of a company whose transferable securities are in a portfolio the Company manages.
Members of the Board of Directors of a credit institution or investment firm or insurance company.
Managers of a credit institution or investment firm or insurance company or other mutual fund management company or other management company.
Investment managers cannot receive benefits or other gifts from any third parties, whether natural persons or legal entities, which could call into doubt the independence of their decisions, unless they have obtained the permission of the Company’s Board of Directors in advance. Moreover, Managers must not agree to take up duties which could prevent decisions being taken independently in relation to their duties as Managers. In any event, fund managers are covered by any additional rules on incompatible roles which are specified from time to time by the relevant legislation or by these bylaws.
6.2. Chinese Walls
The Company’s various management departments (Mutual Fund Portfolio Management Department and the Client Investment Portfolio Management Department) and its Transaction Processing and Clearing Department and its Marketing Department, are fully segregated and independent in implementation of the Chinese Walls principle. They provide their services in completely different places and have their own staff.
Issues that relate to the competences of one department that could lead to a conflict of interests are not discussed at joint meetings with the executives and staff of other departments.
Relevant persons employed in one department cannot be temporarily employed in another department, unless the head of that department or the Company’s Chief Executive Officer has first submitted a specially reasoned request to the Compliance Officer.
Office and communications equipment like phones faxes and computers are not shared by more than one department.
The electronic system is accessed using strictly personal userIDs and passwords and it is prohibited to disclose them to other persons. Records held in hard copy are kept by departmental staff in special secure areas which are locked so that third parties cannot access them.
This strict segregation which applies between departments in the manner described above also applies to the various companies or divisions and departments of other companies in the Group.
In certain cases, it is possible that information may be allowed to be exchanged between divisions and/or departments, outside the scope of these rules, but only where that is considered strictly necessary to enable the Company to operate smoothly. In those cases all information exchanged between departments of the same company or between departments of companies in the Group will also be notified to the Compliance Officer who will draw up a report on this matter.
The Company ensures that the Mutual Funds it manages are managed independently of the investment services it provides to clients. To facilitate this, the Company appoints different investment managers for its collective portfolios and the portfolios of clients that it manages.
Particular attention is paid to ensuring the autonomy of the management departments. Autonomous management and the confidentiality of investment decisions or advice from each department are ensured by segregating the portfolios managed into different departments and appointing a certified manager or advisor (in the case of investment advice) for each department. The portfolio management departments are also segregated from and independent of each other. In addition, the Company has various investment committees for the Mutual Funds it manages and for other clients. The segregation exists at organisational level. The records and information relating to management activities are confidential and are only used for management purposes and for management review. Segregation on the computer systems is achieved by granting different access rights to system users.
7. How confidential information is managed
Controls are in place concerning the flow of customer-related information, which is considered to be confidential. Thus:
i) A user can only access computer system data and functions relevant to the duties of the specific company division or department the user works in, in line with the access rights referred to in these rules. The head of that division also has access to the data held by the division or its various departments. The Internal Auditor and the Compliance Officer can access all data and all functions on the system overall.
The Internal Auditor and the Compliance Officer monitor the computer system, which has an access log function, and also allows transactions, modifications and all changes in general made by every system user to be monitored.
Discussions which take place at the meetings of Company committees or collective bodies must be recorded so that the confidentiality of the information they contain is ensured.
i) is only held for statutory purposes,
ii) is accurate and is updated with any new information that emerges,
iii) is not held for a time period longer than that necessary or specified in legislative and/or regulatory provisions from time to time, and is then destroyed so as to avoid the information coming into the possession of other persons or being used in any further way.
iv) is not disclosed or used for purposes other than those for which it was held.
Personal information can only be accessed for the Company’s internal use by persons who need to use it to carry out their duties, on a need to know basis.
Information the Company holds about a client or a Mutual Fund cannot be used to provide services to another client or Mutual Fund.
Where confidential information is sent to / from the Company by electronic means or confidential information is stored by the Company on electronic means, the Company takes the appropriate measures to safeguard that information.
If confidential information about a client needs to be disclosed to persons over whom the Company, in its reasonable opinion, does not exercise effective control, in order for services to be provided, the Company shall subject them to the obligation to keep that information confidential, by having them sign a written agreement.
In the case of information relating to Company clients which is considered to be privileged information that could lead to market manipulation, persons holding such information are prohibited from using it on own account or on behalf of a third party, and thereby harming the client’s interests. To achieve this, the Compliance Officer shall ensure:
i) That a list is kept of persons who, by virtue of their post, could have access to client privileged information. That list is regularly updated.
ii) That if one of the executives or employees of the Company’s divisions or departments considers that it is likely that client privileged information is in his possession, he is obliged to promptly inform the Compliance Officer about this. He is also obliged to disclose how that information came into his possession. The Compliance Officer will then notify the Chief Executive Officer and the Company’s Internal Auditor to ascertain whether it is information of this sort and for the Company to take further steps.
iii) Until the Company decides on the steps to be taken, executives and employees of the Department holding the information are only allowed to enter into transactions on behalf of the client the information relates to, and on behalf of other clients, after the Investment Officer gives his approval.
In addition to the above, the obligations of relevant persons within the Company relating to how they should behave if they hold privileged information are set out in the Code of Conduct for Company Employees. That document also refers to the type of information deemed to be ‘privileged’.
8. Gifts to Company executives and employees
For the purposes of this paragraph, gifts are substantive benefits in the form of cash, goods or services to Company executives and employees for services that they provided or will provide in the context of their duties, on the Company’s behalf.
The Company considers gifts to be any ‘performance’ (in the legal sense of the term) such as cash, cheques, gift vouchers, units in investment products goods sent directly to the home address or to relatives of Company executives or employees, or which are intended to be offered to Company executives or employees, whose value exceeds € 100. All gifts worth more than € 50 must be reported to the Compliance Officer.
The Company has set limits for all forms of entertainment, such as performances or tickets sent to Company executives or employees, or which they wish to offer. Their value may not exceed € 500.
In these cases, Company executives and employees are obliged to notify the Compliance Officer in writing and to inform him about who has offered the gift, the reason (if known) and its special features.
Company executives or employees are allowed to accept the gifts only if the Compliance Officer provides his written consent. The Compliance Officer may agree to the gift being accepted only if one of the following conditions is met:
i) The gift is intended to improve the services provided to the client it relates to, without affecting the principle of equal treatment of Company clients.
ii) The gift is contingent on the Company’s obligation to act in the best possible manner bearing in mind the client’s interests.
iii) The gift is not worth more than € 100.
If the Compliance Officer does not agree with the gift being accepted, then relevant person is obliged not to accept it. However, if he has already accepted it, he is obliged to hand it over to the Company, which will donate it to charity.
Company executives and employees must take into account the detailed limits set out in Group policy on the kinds of ‘performance’ that can be considered to be gifts, entertainment, etc., which they intend to make to relevant persons or receive from them, or make to clients, government officials or senior civil servants. In all events, before attempting the transaction, the Compliance Officer must be notified in writing and it must be ensured that the offer of the gift does not come into conflict with the law, good faith and morals.
9. Staff remuneration
There is no bonus scheme offering pay to employees who carry on an activity, that goes beyond normal pay, where payment is dependent of the achievement of targets that are directly or indirectly associated with another activity, except where the Internal Auditor has issued a recommendation on this matter and the Board of Directors has given its approval.
10. Transactions with other companies in the Group the Company belongs to
The Company ensures that all transactions with companies in the Group to which it belongs are entered in the Company’s accounting books in line with the Greek accounting standards.
The Company ensures that transactions with other companies in the Group it belongs to are conducted in accordance with the conditions laid down in the transfer pricing legislation. Important activities are outsourced, and a company in the Group is chosen in the context of the Company’s best execution policy only if the companies in the Group meet the conditions laid down in the Company’s relevant policies. Efforts are also made to ensure that the counterperformance policy (described below in the annex to these rules with that title) is implemented.
Where there are transactions with companies in the Group to which the Company provides investment services, the Company ensures that the interests of the companies in its Group do not outweigh the interests of other clients.
11. Adequacy and effectiveness testing for the measures to prevent and manage conflicts of interest
Whenever the Board of Directors considers it necessary, the Company organises seminars about how to prevent and manage conflicts of interest.
The Company’s Compliance Officer and Internal Auditor have access to all systems and the records of all Company divisions and departments, and executives and employees are obliged to provide them, at any given time, with any information or assistance they may request.
Every year, the Internal Auditor prepares a report about the degree to which relevant persons have complied with the measures to prevent and manage conflicts of interest. That report is submitted to the Company’s Board of Directors.
If the Compliance Officer or the Internal Auditor carry out an unscheduled audit, an additional report will also be prepared about the reasons for the audit and its results. If the Compliance Officer or the Internal Auditor considers that a specific transaction which was audited entails a material risk of client interests being harmed, he will report this fact to the Board of Directors and propose measures about how to manage the situation in line with the Regulations and the measures to prevent and manage conflicts of interest which the Company has adopted. If the Board of Directors does not adopt the proposed measures, it is obliged to provide reasons in its decision.
If the Board of Directors considers that some of those measures are not satisfactory or effective, it can adopt alternative or additional measures or can amend this policy.
12. Disclosing conflicts of interest to the client
(a) Clients to whom investment services are provided
If the Board of Directors considers that conflict of interest cannot be effectively addressed using the measures adopted by the Company, it must notify the client about the conflict of interest that has arisen.
The content and structure of that notice will differ depending on the client category. The aim is to provide clients with the necessary information to be able to take a well-reasoned decision about whether they want to go ahead with the transaction. The information provided must always be clear-cut.
The notice is sent by the Investment Services Customer Service Department in line with guidance from the Compliance Officer. In all events, the notice must:
i) specify the nature and source of the conflict of interest that has arisen
ii) be sent before the contested transaction is entered into
iii) be in writing, in hard copy and sent to the address the client has given the Company (or by email depending on the permissible communication methods specified in the contract).
iv) provide all necessary information to the client relating to the transaction and any other information that would be useful in making a decision.
(b) Unitholders of Mutual Funds managed by the Company
Where the organisational or administrative arrangements adopted by the Company to manage conflicts of interest are not sufficient to ensure, with a reasonable degree of certainty, that the risk of harm to the interests of the Mutual Funds being managed or their unitholders can be prevented, senior management executives must be informed without undue delay in order to take the necessary decisions to ensure that the Company, in all events, acts in the interests of the Mutual Funds it manages or that of their unitholders. The Company must notify such situations to investors using any appropriate durable media, justifying the decision it has taken.
13. Conflict of Interest reports and records
The Internal Auditor keeps a record of activities that have given rise to conflicts of interest and the measures the Company has taken to address them.
Information is arranged in chronological order and filed in a different place depending on the service provided or the activity carried on which gave rise to the conflict of interest.
The Internal Auditor is obliged to include the following in the records kept and in the monthly reports to the Company’s Board of Directors:
i) Any written notice concerning a conflict of interest submitted to him by a relevant person.
ii) The findings of audits relating to whether the situation reported gives rise to a risk of material harm to client interests.
iii) Reports submitted by the Compliance Officer to the Board of Directors where he considers that the conflict of interest that arose could harm client interests, and the measures he proposed.
iv) The measures that were actually taken.
These records are kept in hard copy or electronic format. This information is held on file for a period of at least 5 years.
14. Clarifications about Board of Directors members
All relevant persons in the Company are subject to the aforementioned restrictions, irrespective of whether they are executives, employees, external associates or members of the Board of Directors.
However, it should be noted that if the relevant person is a member of the Company’s Board of Directors, he is obliged to contact the Company’s Internal Auditor, in the manner referred to in the foregoing paragraphs, and not the Compliance Officer. The Board of Directors has the ability to take further decisions setting out the procedures to be followed, in order to ensure that maximum level of protection for clients. Those decisions are notified to other relevant persons. If they need clarifications, they should contact the Company’s Compliance Officer.