Conflicts of Interest Policy
Introduction and Purpose
Mountstone is authorised and regulated by the FCA to provide regulated activities to its clients and investors.
When undertaking its services Mountstone always acts in the clients’ best interests and puts their interests ahead of its own. Acting for clients may create conflicts between the interests of Mountstone and its clients and investors or between the interests of different clients and investors.
FCA rules require Mountstone to manage conflicts of interest fairly, both between itself and its clients and investors and between a client and another client and respective investors. The purpose of this policy is to outline the framework Mountstone has in place to identify, manage, monitor and review conflicts of interest.
An actual or potential conflict may arise when, in the exercise of its activities and services, the interests of Mountstone (including its managers, employees and appointed representatives or any person directly or indirectly linked to them by their control or shareholding) and the interest of its clients and investors, are directly or indirectly in competition, and which could significantly prejudice the client’s and investor’s interests.
This policy applies to all staff which includes permanent and temporary employees, contractors, interns and outsourced business suppliers.
This section outlines Mountstone’s policy for ensuring controls are in place to identify and manage conflicts of interest that may arise in carrying on its business to ensure that all of Mountstone’s clients and investors are treated fairly.
Identifying Conflicts of Interest
Mountstone has procedures to identify situations in which activities carried out by it could constitute conflicts of interest and that could lead to potential risks of damage to its clients’ and investors’ interests. To identify them, Mountstone takes into account the activities it is authorised to carry out as well as those carried out on its behalf by delegates, sub-delegates, external valuers or other counterparties and service providers.
Mountstone takes all reasonable steps to identify conflicts of interest that arise in the course of its business between:
Mountstone, including its managers, employees or any person directly or indirectly linked to it by control, and the duty that Mountstone owes to its clients and investors; and
two or more clients or investors.
For the purpose of identifying the types of conflicts of interest that arise in the course of providing its services, Mountstone takes into account whether it, its managers, employees, other relevant person or a person directly or indirectly linked by way of control:
is likely to make a financial gain, or avoid a financial loss, at the expense of a client or investor;
has an interest in the outcome of a service or an activity provided to the client or investors which differs from the client’s or investor’s interest in that outcome;
has a financial or other incentive to favour a client or group of clients or investors, over the interests of another client or investor.
carries out the same activities for the client and for another client; or
receives an inducement from a third party in the form of monies, goods or services other than the standard commission or fee for that service.
Overview of circumstances which may give rise to Conflicts
Examples of areas where potential conflicts of interest could arise include, but are not limited to, the following:
Inducements – Mountstone could offer or receive inducements in respect of certain services, which could incentivise the recipients of the inducement to not act in the client’s best interests.
Information Flows - Mountstone may have access to material non-public information through the ordinary course of their business activities that could be used to benefit Mountstone, employees or clients at the expense of other clients (e.g. employees could use knowledge of client orders to front run proprietary trading activities).
Order Handling - Client orders could be handled in a manner that may benefit Mountstone, employees or one client at the expense of other clients (e.g. the execution of one client’s orders could be given preference over another client’s orders).
Personal Account (PA) Dealing – Employees could deal on their own account to the disadvantage of clients (e.g. they could front run client orders with their own PA dealing activities).
Outside Business Interests - Employees could receive material non-public information through outside business interests, such as directorships, which they could use to gain an advantage or avoid a loss.
Remuneration – Employees could be incentivised to encourage inappropriate trading which has no discernible benefit for clients (e.g. advising a client to churn their trades) in order to increase their commission.
Investment Research - The production and/or distribution of investment research by Mountstone could be used to the advantage of Mountstone or some clients over other clients (e.g. the investment research could be used internally before being circulated to clients).
Side Letters – Preferential terms to one investor over another;
Redemptions – Conflicts of interest between those redeeming and those retaining fund shares;
Supervision – Failure to segregate, within its own operating environment, tasks and responsibilities which may be regarded as incompatible with each other or which may potentially generate systematic conflicts of interest.
Employee Duties and Responsibilities
All employees are responsible for ensuring that they are compliant with this policy which includes:
Remaining vigilant to potential conflicts of interest arising;
Identifying and notifying the Compliance Officer of potential or actual conflicts of interest;
Adhering to operating policies and procedures (available on the GATEway) that relate to conflicts management such as: PA dealing; gifts and hospitality; outside business interests; inside information notification etc;
Confirming compliance with relevant conflict policies through Mountstone’s periodic affirmations.
Ownership and Implementation
The Compliance Officer is the owner of this document and is responsible for its content and implementation, oversight of the application of the policy and assisting employees with the identification and management of conflicts of interest. The Compliance Officer will ensure that the policy is regularly tested and updated where necessary.
Monitoring and Management of Conflicts
Mountstone has put in place procedures to ensure that we can effectively identify and manage conflicts of interest where there is a material risk of damage or loss to one or more clients, these include:
Client take-on procedures to obtain sufficient information in order to undertake the appropriate conflicts checks prior to formal engagement.
Senior Management are required to regularly consider whether all potential conflicts have been identified and where a conflict is identified ensure that either:
any conflict of interest can be managed appropriately and that the conflict has been disclosed to the client; or
we decline to act for the client,
Employee disclosure requirement regarding external business interests, personal account transactions and gifts.
The following outlines the procedures to be followed and measures to be adopted in order to manage conflicts of interest.
Mountstone has client and investor take-on procedures which enable senior management to consider and manage conflicts of interest at the beginning of the relationship. Mountstone has also implemented a process to ensure that senior management oversee the delivery of all activities to ensure that there are no additional conflicts between clients, investors and Mountstone.
If an employee suspects that a conflict has occurred in relation to an ongoing client, the employee should notify Compliance immediately to ensure that potential and actual conflicts of interest can be identified and managed.
Identification of conflicts is the responsibility of all employees at Mountstone. All employees are made aware of their responsibilities to identify situations which give rise to a conflict or which might give rise to a conflict under Mountstone’s conflict of interest policy.
In the event that an employee is unsure as to whether a situation represents a potential conflict of interest or not, the employee is required to raise the issue immediately with the Compliance Officer.
Senior Management and Compliance will assess all conflicts of interest situations. Such assessment shall include (but not limited) assessing the following:
Whether the situation represents an actual or potential conflict of interest;
How the conflict of interest can be appropriately managed;
The materiality of the conflict of interest;
Whether the conflict of interest requires immediate notification to senior management for further assessment;
Whether it is necessary to disclose the conflict of interest to the clients to agree a course of action with the client(s) or resolve the conflict via another route.
Mountstone will take the necessary actions to resolve and manage actual or potential conflicts of interest. This may include (but is not limited to):
Managing the situation so as to prevent the conflict of interest arising;
Managing the situation so as to ensure the interests of Mountstone or its employees are not permitted to disadvantage or lead to a loss for the client(s);
Notifying the conflict of interest to the client(s) so that either a satisfactory course of action may be decided upon or the client may elect not to use the service insofar as there is a conflict.
The Compliance Officer will maintain a Conflicts of Interest Register of all circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of clients.
The Conflicts of Interest Register will be used to summarise potential or actual conflicts of interest which may arise or have arisen and the controls, persons involved, owner, policies and procedures in place to manage these conflicts – including client disclosures and subsequent instructions.
Senior Management Review
Compliance will provide Senior Management on a frequent basis, and at least annually, written reports on any conflicts of interest / potential conflicts of interest that may arise including details of the situation giving rise to the conflict or potential conflict, the assessment analysis and the measures taken to mitigate the conflicts.
Periodically (no less than annually) senior management shall analyse the conflicts that have arisen as well as potential conflicts of interest and review the systems and controls that are in place for preventing and mitigating the conflicts of interest in order to ensure that they continue to be effective and relevant for dealing with conflicts of interest situations.