Conflict of Interest Management Policy
1. Rationale for the Conflict of Interest Management Policy
1.1 It is a fundamental requirement for good business practice, and to help mitigate the risk of legal liability, that all potential conflicts of interest are either avoided altogether or properly managed when they exist.
1.2. In terms of section 3A(2) of the General Code of Conduct for FSPs under the Financial Advisory and Intermediary Services Act No 37 of 2002 (“FAIS Act”), as a financial services provider, the company is required to adopt, maintain and implement a conflict of interest management policy that complies with the provisions of the FAIS Act.
2. Definitions
In this Policy, unless otherwise indicated, the following words have the meaning ascribed to them below:
2.1 “associate” shall have the meaning ascribed to it in the FAIS Act;
2.2 “conflict of interest” shall mean any situation in which a financial services provider or a representative has an actual or potential interest that may, in rendering a financial service to a client:
2.2.1 influence the objective performance of his, her or its obligations to that client; or
2.2.2 prevent a provider or representative from rendering an unbiased and fair financial service to that client, or from acting in the interests of that client, including, but not limited to a financial interest, an ownership interest and any relationship with a third party;
2.3 “financial interest” shall mean any cash, cash equivalent, voucher, gift, service, advantage, benefit, discount, domestic or foreign travel, hospitality, accommodation, sponsorship, other incentive or valuable consideration, other than:
2.3.1 an ownership interest; or
2.3.2 training that is not exclusively available to a selected group of providers or representatives, on (i) products and legal matters relating to those products; (ii) general financial and industry information; (iii) specialised technological systems of a third party necessary for the rendering of a financial service but excluding travel and accommodation associated with that training;
2.4 “financial service” shall have the meaning ascribed to it in the FAIS Act;
2.5 “financial services provider” shall have the meaning ascribed to it in the FAIS Act;
2.6 “ownership interest” shall mean any equity or proprietary interest for which fair value was paid at the time of acquisition, other than an equity or proprietary interest held as an approved nominee on behalf of another person;
2.7 “policy” shall mean this conflict of interest management policy;
2.8 “representative” shall mean any person who renders a financial service to a client for or on behalf of a financial services provider, in terms of conditions of employment or any other mandatory agreement; and
2.9 “third party” shall mean a product supplier, another provider, an associate of a product supplier or a provider, a distribution channel and any person who in terms of an agreement or arrangement with any of the aforementioned persons provides a financial interest to a provider or its representatives.
3. Identification of Conflict of Interest
3.1 The company faces a conflict of interest where the company has a direct or indirect beneficial interest resulting from dealing with or on behalf of clients or for clients with third parties, which interest may affect the company’s ability to act or be seen to be acting in the best interests of its clients.
3.2 Representatives face conflicts of interest if they have a beneficial interest that may affect their ability to act in the clients’ best interests. Where a representative deals on behalf of a client with a third party, such a beneficial interest would include a material gift from the third party or a financial interest in the third party (for example as owner or part owner) or a special relationship (for example a spouse, child, parent, sibling etc.) with somebody who has a financial interest in the third party, whether as owner, director or employee.
3.3 Potential or perceived conflicts of interest can be as damaging to the company’s reputation as actual conflicts of interest and must be avoided where possible, and only where that is not possible, after all attempts have been exhausted, must the conflicts be mitigated as far as possible.
3.4 When faced with a situation involving a potential conflict of interest, representatives must ask themselves whether or not full public disclosure of the matter would lead an outside observer to believe or conclude that a conflict of interest exists.
4. Management of Conflict of Interest
In managing conflicts of interest, the company must:
4.1 Maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent a conflict of interest from giving rise to a risk of damage to the interests of the company’s clients.
4.2 Establish, maintain and regularly update a record of the kinds of services and activities undertaken by the business which might give rise to a conflict of interest. The record should also be updated where there are significant changes to the nature of services and activities undertaken, the structure of the business and new product launches.
4.3 Disclose to clients the nature of a conflict of interest before undertaking business for the client in cases where the measures to manage conflicts are not considered sufficient to ensure that risks of damage to the interests of a client will be prevented. This disclosure must contain sufficient detail to enable the client to make an informed decision about the relevant service or product.
4.4 Maintain and keep up to date a process which, as a minimum, must include the processing, procedures, controls and measures that are used to manage those conflicts of interest.
4.5 Ensure that all employees are responsible for identifying specific instances of conflicts of interest and are required to notify the compliance officer of any conflicts they become aware of. The compliance officer together with the relevant line manager will assess the implications of the conflicts of interest and how it should be managed.
5. Financial Interest
5.1 The company or its representatives may only receive or offer financial interest from or to a third party as determined by applicable regulation from time to time.
5.2 The company may not offer any financial interest to its representatives for:
5.2.1 giving preference to the quantity of business secured for the company to the exclusion of the quality of the service rendered to clients; or
5.2.2 giving preference to a specific product supplier, where the representative may recommend more than one product supplier to a client; or
5.2.3 giving preference to a specific product of a product supplier, where the representative may recommend more than one product to a client.
6. Resolving Conflicts of Interest
6.1 The first and most important line of defence against conflicts of interest lies with the staff members of the company including the key individual of the company and representatives.
6.2 Once a conflict of interest has been identified it must be appropriately and adequately controlled, managed and/or avoided, where necessary.
6.3 Conflicts of interest, actual or perceived, should be assessed in respect of their value, exposure and/or their potential reputational risk.
6.4 The compliance officer and the responsible senior manager must agree on the controls that need to be put in place to manage conflict of interest.
6.5 Clear and concise disclosures to enable the recipient to fully understand a conflict of interest are amongst the various internal controls in place to manage and mitigate conflict of interest.
6.6 Specific instances of conflict of interest may require management intervention in addition to documented controls already in place and these can include escalation to a management forum for a decision on how to manage a conflict of interest.
6.7 The compliance officer must maintain records of all conflicts of interest identified and their resolution, including the persons involved and the controls used.
7. Measures to avoid Conflicts of Interest
The company communicates this policy to all employees on a regular basis to ensure that all employees are aware of the process to identify and resolve conflicts.
8. Potential Conflicts of Interest that could affect the Company
The following are potential conflicts of interest that could affect the company and/or the representatives:
8.1 Directorships or other employment.
8.2 Interests in business enterprises or professional practices.
8.3 Share ownership.
8.4 Beneficial interests in trusts.
8.5 Professional associations or relationships with other organisations.
8.6 Rebate or referral payments.
8.7 Commission.
8.8 Personal associations with other groups or organisations, or family relationships.
9. Disclosure of Conflict of Interest
9.1 At the earliest reasonable opportunity, the company and/or its representative must, in writing, disclose to a client any conflict of interest, including:
9.1.1 measures taken to avoid or mitigate the conflict of interest;
9.1.2 any ownership interest or financial interest that the company or the representative may be or become eligible for; and
9.1.3 the nature of the relationship or arrangements with a third party that gives rise to a conflict of interest in sufficient detail to enable the client to understand the exact nature of the conflict of interest.
9.2 Notification of an actual or potential conflict of interest should be made to a person with the responsibility for the issue or area, such as the relevant management team, supervisor and head of the department or key individual.
9.3 In accordance with an employee’s obligation to act in the best interest of the company, it is not permissible for representatives to engage in conduct that would amount to a conflict of interest with the company.
10. List of all Associates of the Company
Xago Technologies has no associated companies except third party shareholders.
11. Names of Third Parties in which the Company holds an Ownership Interest
The company has no external equity interests.
12. Names of Third Parties that hold an Ownership Interest in the Company
None.
13. Adherence
13.1 The provisions of this policy are mandatory. It is not expected that dispensations to this policy will be required other than in exceptional circumstances.
13.2 A breach of this policy may result in disciplinary action, which may lead to dismissal