1.1 “Relevant Persons” means (a) a director, employee, or equivalent, manager or appointed representative (or where applicable, tied agent) of any member of the Square Mile Group; any other natural person whose services are placed at the disposal and under the control of the Square Mile Group and who is involved in the provision by the Square Mile Group of regulated activities; (b) a natural person who is involved in the provision of services to the Square Mile Group or its appointed representative (or where applicable, tied agent) under an outsourcing arrangement for the purpose of the provision by Square Mile of investment services and activities.
1.2 “ Square Mile Group” means Square Mile Investment Consulting and Research Limited and Square Mile Investment Services Limited.
1.3 “Square Mile” or “the Square Mile” means Square Mile.
1.4 “EEA” means European Economic Area.
1.5 “Conflicts of Interest Register” means a register of conflicts of the Square Mile Group.
2.1 FCA Principle 8 (Conflicts of Interest) states:
2.1.1 Square Mile must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
2.1.2 These requirements have been amplified in the FCA sourcebook SYSC (Senior Management Arrangements, Systems and Controls).
2.1.3 The FCA’s ‘Common Platform’ of organisational requirements, principally for Square Mile affected by MiFID and CRD, has applied since 1 November 2007. The Common Platform is designed to make clear to Common Platform Firms (such as Square Mile) what is expected of it and of its senior management. It does this by having management oversight and systems and controls in various areas, including conflicts of interest.
2.2 This policy sets out the key areas where Square Mile and Relevant Persons may be subject to conflicts of interest in the provision of services to clients. The policy covers those circumstances, which either constitute or could give rise to a conflict of interest entailing a material risk of damage to the interest of one or more clients.
2.3 This policy describes the structures that have been put in place to limit the consequences of any actual or potential conflicts of interest. These structures make use of both separation of function and Chinese Walls and are designed to ensure that Relevant Persons maintain an appropriate degree of independence.
2.4 It is the responsibility of all Relevant Persons to familiarise themselves with this policy and report conflicts of interest through the appropriate channels to the Compliance Officer.
3. Activities of the Firm
The main activity of Square Mile and its principal source of income is the provision of investment management services to professional clients.
4. Circumstances which Constitute or could give rise to a Conflict of Interest.
4.1 SYSC 10.1.4 R sets out that, for the purpose of identifying the types of conflict that arise in the course of providing a service and where there may be a material risk of damage to the interests of a client, Square Mile must take into account, as a minimum, whether Square Mile or a Relevant Person, or a person directly or indirectly linked by control to Square Mile:
a. is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
b. has 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;
c. has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;
d. carries on the same business as the client; and/or
e. receives 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.
4.2 We have set out in the Conflicts of Interest Register specific conflicts of interest that could arise entailing a material risk of damage to the interest of one or more clients for each business line.
5. Measures Designed to Manage Conflicts of Interest
5.1 The general procedures and measures Square Mile has taken to manage the conflicts of interest identified above are summarised below. These procedures and measures are designed to ensure that Relevant Persons maintain an appropriate degree of independence. Business specific mitigating measures are included in the Conflicts of Interests Register.
a. Square Mile has robust governance arrangements. Key business decisions are taken by the Board and are recorded in Board minutes.
b. The Compliance Officer reports directly to the Board.
c. Square Mile has rules laid out in the standard employment Terms and Conditions, governing employee conduct, including Personal Account Dealing (“PAD”) rules, which control and mitigate conflicts of interest. It also maintains a Conflicts of Interest Register.
5.1.2 Reporting Lines
Square Mile has defined and clear reporting lines. The Compliance Officer maintains a Staff Organisation Chart.
5.1.3 Segregation of Functions
The rules in SYSC 5.1 requiring segregation of functions are met by segregating duties as appropriate to avoid conflicts of interest wherever possible. These duties are set out via job descriptions, procedure manuals and the Staff Organisation Chart. Ensuring these duties remain segregated is the responsibility of line managers as advised by the Compliance Officer.
5.1.4 Remuneration Arrangements
Remuneration policies are designed to avoid rewarding behaviour that could lead to the disadvantage of clients. The Square Mile Remuneration Committee is responsible for all material decisions relating to staff remuneration.
There is no incentive for any member of staff to disregard the interests of his or her clients due to differing interests arising through another department’s activities. The potential conflicts arising and arrangements for controlling/mitigating them are identified in the Conflicts of Interest Register.
5.1.5 Disclosure of Personal Conflicts
Relevant Persons are required to disclose their conflicts of interest to their line manager who in turn informs the Compliance Officer. The Compliance Officer records any such conflicts in the Conflicts of Interest Register and informs the Board of any actions taken.
5.1.6 Chinese Walls
Chinese Walls separate certain business activities carried out within Square Mile.
5.1.7 Other Measures
When recruiting individuals, the Compliance Officer considers their fitness and propriety, technical and, where required, managerial skills. Suitable background checks are made and references are sought for new employees.
Compliance training relevant to conflicts of interest forms part of the Square Mile’s annual training programme. The Compliance Officer ensures that appropriate training is devised and delivered.
c. Compliance and Procedures Manuals
Systems and controls are documented in the compliance and procedures manuals, which are reviewed at least once a year to ensure they are fit for purpose.
d. Periodic Audit
The Compliance Officer oversees and executes a suitable monitoring programme at least once a year to verify that Square Mile’s systems and controls are being implemented.
e. Verifying Compliance
The principal means of verifying that these policies have been complied with is an annual compliance review undertaken by the Compliance Officer. The Compliance Officer is responsible for considering compliance with this policy on a monthly basis and will report formally to the Board on an annual basis. An independent review from an external firm of Compliance Consultants is also undertaken.
f. Disclosure to Clients
If our arrangements to manage a conflict of interest are not sufficient to ensure with reasonable confidence that the risk of damage to the client’s interests is prevented, we will inform the client, in a durable medium, of the general nature and/or source of the conflict in such a way that an informed decision can be made by that client before business is undertaken.
6. Responsibilities of Staff
6.1 It is the responsibility of all Relevant Persons to familiarise themselves with this policy and to report conflicts of interest to their line manager/Compliance Officer as appropriate. Failure to adhere to this policy may be considered to be a breach of an employee’s contract with Square Mile.
6.2 Overall responsibility for Square Mile’s conflicts of interest lies with the Board. The Compliance Officer is responsible for the day-to-day administration of this policy.
6.3 The Compliance Officer works with Square Mile’s management to eliminate conflicts of interest and record conflicts and any mitigating actions in the Conflicts of Interest Register and report the situation to the Board for consideration.
6.4 The Board via the Compliance Officer is responsible for ensuring that staff are aware of those aspects of this policy that are relevant to them. Relevant Persons are responsible for the implementation of any such relevant aspects.
7. Disclosure of Conflicts to Clients
7.1 SYSC 10.1.8 R requires that where the arrangements made by Square Mile are not sufficient to ensure with reasonable confidence that the risk of damage to the client will be prevented Square Mile:
a. must clearly disclose, in a durable medium, the general nature and source of the conflict of interest to the client before undertaking business for the client; and
b. must provide sufficient detail to enable that particular client to take an informed decision in relation to the service offered.
8. Recording Conflicts of Interest
8.1. Square Mile maintains a Conflicts of Interest Register where it records the kinds of services and activities in which a conflict of interest, entailing a material risk of damage to the interests of one or more clients, has arisen, or may arise. This register is kept up to date by the Compliance Officer.