Effective as of March 2024

Introduction to Conflicts of Interest under MiFID II/UCITS

The Markets in Financial Instruments Directive II (MiFID II) and the UCITS Directive require firms like Crown and Bates to identify and manage all conflicts of interest, whether material or not, that arise from our business activities. Disclosure of a conflict should only be used as a last resort, if the following policies and procedures are not sufficient to protect the client’s interests.

This policy is reviewed annually, and senior management receives a report on any recorded conflicts.

Regulatory and Legal Background

This policy is informed by the following regulatory frameworks:

  • MiFID II (Markets in Financial Instruments Directive)
  • Financial Conduct Authority (FCA) Sourcebook – SYSC 10
  • FCA Sourcebook – Principles for Business (PRIN 2.1.1. (8))
  • FCA Sourcebook – COBS 11a and COBS 12

Employee Responsibilities

All employees and contractors are required to be familiar with this policy and report any conflicts of interest to the Head of Compliance. Failure to comply with this policy may be considered a breach of contract.

The Head of Compliance is responsible for maintaining the Conflicts Register and working with employees to identify and manage conflicts of interest.

Types of Conflicts of Interest

Conflicts of interest may arise in various aspects of Crown and Bates’ business when providing services to clients. These conflicts include, but are not limited to, situations where Crown and Bates or a relevant person:

  • Could make a financial gain (or avoid a loss) at the client’s expense.
  • Has an interest in the outcome of a service provided or transaction carried out, which differs from the client’s interest.
  • Has a financial or other incentive to favor one client over another.
  • Carries out the same business as a client.
  • Receives an inducement from a third party related to a service provided to the client, aside from standard commissions or fees.
  • Faces a conflict between the interests of Crown and Bates and the funds it manages or between two or more funds managed by Crown and Bates.

Examples of Conflicts of Interest

Some non-exhaustive examples of potential conflicts of interest include:

  • Employees trading in securities of corporate clients while holding confidential information.
  • Advising clients to buy or sell securities issued by corporate clients to benefit the corporate client or Crown and Bates’ broking business.
  • Allocating securities in new issues based on past business dealings with Crown and Bates, rather than client interests.

Identification and Management of Conflicts

Crown and Bates has procedures in place to manage conflicts of interest while maintaining the necessary degree of independence, in compliance with COBS 10. Key measures include:

  • Procedures to prevent/control the exchange of information between departments where this could harm client interests.
  • Separate supervision of employees involved in conflicting activities.
  • Measures to prevent undue influence over employees providing services to clients.
  • Restrictions on employees participating in multiple activities where conflicts may arise.

Key Controls for Managing Conflicts

To ensure conflicts of interest are managed effectively, the following controls are implemented and monitored for compliance:

  1. Conflicts of Interest Register: Crown and Bates maintains a register documenting conflicts, how they are managed, and the actions taken.
  2.  Chinese Walls: Information barriers are in place to prevent sensitive data from being shared inappropriately between different business units.
  3. Personal Account Dealing (PAD): Employees must seek approval for personal trades, especially those involving securities issued by corporate clients.
  4. Restricted Trading Lists: Certain securities are restricted from employee trading to prevent conflicts.
  5. Training and Competency: Employees receive ongoing training to ensure they uphold the highest standards of integrity.
  6.  Gifts and Entertainment: Any gift or entertainment exceeding £100 requires approval from the Compliance Officer to prevent conflicts.
  7. Best Execution: Crown and Bates’ Order Execution Policy ensures fair treatment for all clients across markets and instruments.
  8. Outside Interests: Employees may not engage in external employment or business interests without written approval from the Board.
  9. Compliance Monitoring: The Compliance Department monitors policies, ensures they are followed, and updates the Conflicts Register as needed.
  10. Remuneration: The remuneration policy ensures that staff are not incentivized in a way that creates conflicts of interest between employees, clients, and shareholders.
  11. Declining to Act: Crown and Bates will decline to act for clients when conflicts of interest cannot be reasonably managed.
  12. Telephone and Email Monitoring: Regular monitoring is conducted to identify potential conflicts.
  13. Employee/Contractor Attestation: Annually, all employees/contractors must declare any conflicts of interest they have identified and confirm their compliance with this policy.

Disclosure of Conflicts

If the internal measures in place are insufficient to manage a conflict, Crown and Bates will disclose the conflict to the client before conducting any business. Such disclosure must:

  • Be provided in a durable medium (e.g., paper or email).
  • Clearly explain the nature of the conflict, how it may affect the client, and the risks involved.
  • Include sufficient detail for the client to make an informed decision.

Policy Review

This policy is reviewed annually, with any changes presented to the Board of Crown and Bates for approval. If you have any further questions or concerns, please contact us at info@crownandbates.com.

Last Reviewed: March 2024