Policy on Management of Conflict of Interests
Introduction:
This policy shall be known as Policy on Management of Conflict of Interests ("Policy")
Given the wide range of services offered by IL&FS Financial Services Limited ("the Company") and its commitment to maintain high professional standards, an effective policy on conflict management is critical to protect the interest of clients and, inter alia to ensure that standards of due diligence are not impaired by potential conflict of interests. The Company is therefore required to maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to identify, monitor and manage conflict of interests
This policy is in line with the requirements of:
- SEBI circular no. CIR/MIRSD/5/2013 dated August 27, 2013 for dealing with Conflicts of Interest of Intermediaries, Recognised Stock Exchanges, Recognised Clearing Corporations, Depositories and their Associated Persons in Securities Market
- Provisions of Code of Conduct for Directors & Senior Management of the Company
- Provisions of Code of Conduct for Prohibition of Insider Trading
Applicability:
- This Policy shall be applicable to the Company
- This Policy shall be applicable to all the Directors and all the employees of the Company
Purpose of the policy:
The Conflict of Interest Policy aims to ensure that the Company's clients are treated fairly and at the highest level of integrity and that their interests are protected at all times. This policy lays down the framework to identify and adequately manage conflict of interest thereby safeguarding the Client's interest. This policy outlines the framework for identifying, avoiding and managing conflict of interestsDefinition:
Conflict of interest is a situation in which a party to a transaction can potentially gain by taking actions that adversely affect its counterparty
Conflict of interest is also defined as a situation where the interests of a market intermediary may be inconsistent with, or may diverge from, those of its clients, investors, or others, or where the interests of one group of clients conflict with those of another group
The Conflict of Interest may arise between:
(a) The Company and a Client
(b) The Company and Director/employee and a Client
(c) A Company of the Group and a Client
(d) Two or more Clients of the Company in the course of providing services to these Clients
(e) Potential/past clients
For the purpose of this policy, Clients include:
- Existing Clients of the Company
- Potential Clients (where the Company is seeking individually to enter into a contractual relationship in respect of Regulated Business services); and
- Past Clients where fiduciary or other duties remain in place
It would be impractical to attempt to list all possible situations in which a conflict of interest may arise, however, few of the common examples may be referred to as follows:
(i) The Director and employee shall not engage in any business, relationship or activity which might conflict with the interest of the Company. A conflict of interest, actual or potential, may arise where directly or indirectly:
- the Director/employee and their relatives of the Company engages in a business, relationship or activity with anyone who is a party to the transaction with the Company
- the Director/employee is in a position to derive an improper benefit personally or through any of his/her relatives by making or influencing decisions relating to any transactions
(ii) Any employee and/or his relatives acquires or holds a controlling stake in another Company
(iii) Any employee or his/her relatives holds directorship in other Company
(iv) Director or employee or his relatives influence the composition of the board of directors of a Company
Procedures:
(1) Identification of conflict of interests:
Conflicts of interest need to be identified in the process of decision making and to be assessed prior to the engagement of the transaction
In identifying conflicts of interest, the Company shall consider all of the factual circumstances where the Company or Director or employee:
(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 one Client over another;
(d) Carries out the same business as the Client; or
(e) Receives from a person other than a Client an inducement in relation to a service provided to a Client, in the form of monies, goods or services, other than the standard commission or fee for that service
(2) Management of Conflicts:
(a) The Compliance Officer shall monitor the implementation and effectiveness of Chinese wall, wherever applicable
(b) Adequate records shall be maintained of the services and activities of the Company where a conflict of interests has been identified
(c) Where necessary, Director/employee may be asked to step aside from working on a specific transaction or participation in the decision making of the transaction
(d) The Director/employee shall promptly make full and fair disclosure of any matter that could be expected to impair their objectivity or interfere with duties to it's clients, or prospective clients including any transaction or relationship that could be deemed as a conflict. Every Director/employee is expected to avoid any outside activity, financial interest or relationship that may present a possible conflict of interests. No Director/employee may engage in any activity that involves any conflict except with specific prior approval in accordance with procedures set out in this Policy
(e) Review and implementation of additional control measures/disclosures as may be required
(f) The Compliance Officer/Board of Directors / Committee thereof (as may be applicable respectively) shall take a decision on whether the transactions can be undertaken, where conflict of interest is involved and the manner to deal with it
Measures to avoid or to deal Conflict of Interests:
The Company shall put in place the following arrangements to manage the Conflict of Interest promptly and fairly:
(1) Maintain high standards of integrity in the conduct of their business
(2) Ensure fair treatment of their Clients and not discriminate amongst them
(3) Ensure that their personal interest does not, at any time conflict with their duty to their Clients and Client's interest always takes primacy in their advice, investment decisions and transactions
(4) Make appropriate disclosure to the clients of possible source or potential areas on conflict of interest which would impair the ability to render fair, objective and unbiased services
(5) Endeavour to reduce opportunities for conflict through prescriptive measures such as through information barriers to block or hinder the flow of information from one department to another etc
(6) Not deal in securities while in possession of material non published information
(7) Not in any way contribute to manipulate the demand for or supply of securities in the market or to influence prices of securities
(8) Not have an incentive structure that encourages sale of products not suiting the risk profile of their clients
(9) Not utilise information received from clients or pertaining to them, obtained as a result of their dealings, for their personal interest
(10) Not share information received from Clients or pertaining to them, obtained as a result of their dealings, for personal interest
(11) Strictly implement and abide by the Company's Code of Conduct for Prohibition of Insider Trading which has inter alia mandated the following :
- Appropriate Restrictions on transactions in securities while handling a mandate of issuer or client in respect of such security so as to avoid any conflict
- Restrictions on communication of material non published information while dealing in securities on behalf of others
Rules and Regulations:
The Company shall adhere to all applicable the rules and regulations and any amendments made thereof from time to time with respect to the conflict of interest
Reporting:
The Compliance Officer shall confirm the compliance with the policy and report to the Managing Director/Audit Committee/Board of Directors
Failure to Comply:
Any non-Compliance with this policy may be considered to be misconduct and may be subject to disciplinary action and shall be referred to the Disciplinary Committee
Deviation from Policy:
Any request for deviation from this Policy, which may become necessary due to practical difficulties in implementation or otherwise, shall be referred to the Compliance Officer
Review of the Policy:
The Board shall periodically review the effectiveness of this policy