Information on Conflicts of Interest
Article 34(2) of Markets in Financial Instruments Directive II (‘’MiFID II’’) and the Financial Conduct Authority (‘’FCA’’) Principle 8, requires a firm to manage conflicts of interest fairly, both between itself and its clients and between a client and other clients. Tellimer maintains and operates effective organisational and administrative arrangements, taking all reasonable steps to identify, monitor and manage such conflicts of interest. Tellimer has policies and procedures in place to meet this obligation (set out below is a summary of that policy and the key information for its clients and counterparties (together "clients")). Tellimer is taking steps to safeguard the interests of its clients to ensure their interests are placed at the forefront of activity and ahead of the interests of Tellimer.
Purpose of the Conflicts of Interest Policy
Tellimer is committed to maintaining the highest level of integrity and professional standards in providing services to its clients. It seeks to identify circumstances that may give rise to conflicts of interest or lead to risk or damage to a clients' interest and to establish appropriate mechanisms and systems to manage those conflicts. Tellimer maintains systems and controls to prevent actual damage to clients' interests through the identified conflicts.
Where we are unable to manage a conflict effectively to mitigate damage to a client, this document outlines the disclosure process Tellimer will follow.
What is a Conflict of Interest
A conflict of interest under MiFID II is a conflict that can arise in any area of Tellimer’s business while providing its clients with a service that may benefit Tellimer (or another client for whom Tellimer is acting) whilst potentially damaging another client of Tellimer.
There may be a conflict where Tellimer (or anyone connected to Tellimer):
- is likely to make a financial gain (or avoid a loss) at the expense of its client;
- is interested in the outcome of the service provided to its client where the interests of Tellimer is distinct from that of the client;
- has a financial or other incentive to favour the interests of one client over another;
- carries on the same business as a client;
- receives money, goods or services from a third party in relation to services provided to a client other than standard fees or commissions; or
- is in possession of information in the ordinary course of its business which would benefit the individual, Group, or a client.
Tellimer has sought to identify conflicts of interest that exist in its business which are associated with its service provision. Tellimer has put in place measures it considers appropriate to the relevant conflict(s) to monitor, manage and control the potential impact of those conflicts on its clients.
The conflicts identified based on the investment activities provided by Tellimer are outlined below:
- those between clients with competing interests;
- those between clients and Tellimer where their respective interests in an outcome may be different;
- those between the personal interests of employee of Tellimer and the interests of Tellimer or its clients where those interests may be different;
- conflicts that may arise because of being part of a group where interests between those members may be different.
The Firm maintains a Conflicts of Interest Register which details specific conflicts and practices adopted to manage those identified.
Policies and Procedures
Tellimer has procedures in place to address conflicts of interest. These procedures will be subject to Tellimer’s monitoring and review process and include primary methods which may be used by Tellimer to manage actual and potential conflicts of interest. These and the associated controls adopted are reviewed at least annually.
The following lists the key information clients may require to understand the measures Tellimer takes to safeguard the interests of its clients:
Integrity and Standards of Conduct
Tellimer ensures in its dealings with clients that its employee act with integrity at all times. The induction programme, training, competency, monitoring programme and procedures in line with the FCA’s guidelines at Tellimer are designed to ensure that all relevant employees are familiar with, and observe, the FCA Principles for Businesses and the Statements of Principle and Code of Practice for Approved Persons.
All employees are subject to on-going monitoring and training that covers industry standards as well as Tellimer’s policies and procedures.
Personal Account Dealing (“PAD”)
Tellimer has a policy on PAD and ensures it is understood and accepted by all employees regardless of their position or seniority.
Relevant employees shall not deal in stock within 5 days of a research recommendation being published.
Further, PAD procedures require all permanent employees, and certain designated others, to obtain pre-approval by line management and the Compliance department when PA dealing. All employees are required to complete a training course on PAD rules.
Confidentiality and Information Barriers
Tellimer has put in place procedures to control and prevent the flow of information between Tellimer’s business units and entities where the interests of clients of one business unit or entity may conflict with the interests of clients of another Tellimer business unit or entity, or with Tellimer’s own interests. Furthermore, Tellimer insists on strict client confidentiality to ensure that information is disclosed only to those entitled to receive it (or prior approval has been granted by the compliance department).
To manage this potential conflict of interest, Tellimer has ensured that different business lines: (a) use segregated systems for business activity; (b) Implement restricted access barriers; (c) are physically separated (creating chinese walls); (d) relevant persons who provide services to, or carry out activities for, clients who represent interests that may conflict with other clients or those of the Firm, are supervised effectively and separately; (e) there is no direct link between the remuneration of a relevant person and the remuneration of a separate relevant person engaged in a different activity where a conflict of interest may arise in relation to those activities; and (f) there are measures to prevent a relevant person from being simultaneously involved in separate investment or ancillary services where such involvement could impair the proper management of conflicts of interest.
Outside Business Interests
Employees must inform, and seek approval from, the compliance department about their outside business interests.
Production and dissemination of investment research may give rise to several conflicts of interest, as outlined below:
- Remuneration: Other departments do not take decisions on coverage, timing or content of research. The Firm’s remuneration policy is designed to avoid rewarding behaviour that may lead to the disadvantage of its clients. Research analysts’ remuneration is not linked to research recommendations. Distribution Research: The Firm has a policy that requires simultaneous distribution of research to all relevant clients simultaneously.
- Information Leaks: The research department is subject to a “clear desk policy” and is positioned in such a way that employees outside the research information barrier cannot see documentation or hear conversations regarding the timing or content of planned research.
- Research communicated to sales employees ahead of publication: There is an Information barrier in place separating these departments.
Inducements to Employees from Clients
Employees are not allowed to accept gifts, entertainment or any other inducement from any person which might benefit one client at the expense of another when conducting investment business and must always comply with the Gifts and Entertainment Policy.
Tellimer employees are not allowed to place undue pressure upon clients to persuade the client to trade through the firm to the extent that this might give rise to a conflict of interest between that client and its own underlying clients.
Any gift or hospitality given, or received, by the firm or employee will not be in compliance with conflicts of interest requirements, if it is not designed to enhance the quality of the relevant service to the client, or it impairs the firm’s ability to act honestly, fairly and professionally in accordance with the best interest of its clients.
The giving or receiving of a gift and/or entertainment can only be justified when it:
- enhances the quality of the service where it can be shown that additional or a higher level of service is provided;
- does not directly benefit the recipient firm, its shareholders or employees without a tangible benefit to the client; and
Clients are to be informed of the relationship where the counterparty to the transaction is another Tellimer Company or where the services of another Tellimer Company is recommended.
All relevant employees who are open to a conflict of interest are paid a basic salary including those in key support areas such as Compliance, Finance, Legal and Operations. This salary is not dependent on Tellimer’s performance. A bonus structure does exist which is linked to Tellimer’s performance, team performance and/or the individual’s performance. Payment of any bonus is at the discretion of senior management and employees will only be notified on payment.
Separate Supervision and Segregation of Function
Where appropriate, Tellimer has arranged for the separate supervision of those carrying out functions for clients whose interests may conflict, or where the interests of clients and Tellimer may conflict. Tellimer 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.
Tellimer Compliance Monitoring Programme
Tellimer’s compliance department has an established and documented compliance monitoring programme, part of which focuses on conflicts of interest, PAD and Information barriers.
As a last resort, where there is no other means of managing a conflict or where the measures in place do not, in the view of Tellimer, sufficiently protect the interests of clients, the conflict of interest will be disclosed to clients to enable an informed decision to be made by the client as to whether they wish to continue doing business with Tellimer in a particular situation, thus ensuring the conflict can be managed fairly and promptly.
Article 23 (2) of MiFID II requires that, where the arrangements made by the firm are not enough to ensure, with reasonable confidence, that the risk of damage to the client will be prevented, a clear disclosure to the client must be made. This disclosure must:
- Describe, in a durable medium, the general nature and source of the conflict of interest to the client before undertaking business for the client;
- Explain the risks that arise because of the conflict of interests and the steps taken to mitigate these risks; and
- Provide enough detail to enable that client to make an informed decision in relation to the service in the context of which the conflict arises.
- Declining to Act
Due to the nature of the business Tellimer is involved in, it is unlikely that situations will arise whereby the conflict is so severe that even with appropriate management techniques, Tellimer would have to decline to act on behalf of a client. However, in the unlikely event that such a situation arises, where is it deemed that Tellimer best not act for the client, the case should be referred to the Compliance Department.
Tellimer employees are always required to act independently and in the interests of the client when carrying out their day to day duties and obligations during their employment.
Tellimer keeps and regularly updates a record of the types of regulated business activities carried out by, or on its behalf, in which conflicts of interest entailing a material risk of damage to the interests of one or more clients has arisen or may arise. The information contained within the register facilitates the effective identification and management of any potential conflicts of interest.
Tellimer ensures that all appropriate steps and measures are taken to address any deficiencies.
This communication, attachment and any rights attaching hereto (collectively called the "Information") are for informational purposes only. The Information is confidential, may be privileged, and is for use solely by the intended recipient. If you have received this in error, please notify the sender immediately and delete the Information. Unauthorised disclosure or copying is prohibited. The Information has been given in good faith without guarantee and unless the context clearly indicates otherwise is the property of Tellimer Limited (FRN 920001) an Appointed Representative of Met Facilities LLP (FRN 587084) which is authorised and regulated by the Financial Conduct Authority.
The Information is directed to Eligible Counterparties, Professional Clients and Retail Clients (as defined in the FCA Handbook).