WH Ireland Limited and its affiliates (together “WHI” or the “Firm”) provide a wide variety of Private Wealth and Investment Banking products and services to a wide range of corporates, institutions and individuals. The Firm takes all reasonable steps to maintain and operate effective organisational and administrative arrangements to identify and manage situations which may arise in which a client’s interest could conflict or could be perceived to conflict with those of WHI or those of other WHI clients.
This document is designed to provide clients with a high level summary of the underlying conflicts of interest policies and arrangements WHI has in place.
2. Identifying conflicts of interest
A conflict of interest can be described as a situation in which someone in a position of trust has competing interests (professional and/or personal) which make it difficult to fulfil their duties fairly. Potential and actual conflicts of interest may arise between the Firm (including its subsidiary and affiliates, senior management, employees, agents and consultants) and its client and/or between one client of the firm and another client.
Examples of areas where potential conflicts of interest could arise include, but are not limited to, the following:
- Information Flows - The Firm could use knowledge of client orders to front run when acting in a proprietary capacity;
- Order Handling - Client orders could be handled in a manner that may benefit the Firm and/or its employees or one client at the expense of other clients (e.g. the execution of proprietary orders could be given preference over client orders);
- Personal Account (“PA”) Dealing – Employees of the Firm could front run client orders with their own PA dealing activities;
- Outside Business Interests - Employees of the Firm could receive confidential or inside 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 change their portfolios unnecessarily in order to increase commission. (“Churning”);
- Research - The production and/or distribution of research by WHI could be used to the advantage of the Firm or some clients over other clients (e.g. dissemination process is designed to ensure clients receive research simultaneously).
WHI may provide research to the investment community, whilst also providing investment banking services to the subject company;
- Corporate Finance – WHI could act for both the target firm and purchaser in a Merger or Acquisition;
- Proprietary Positions – WHI may hold, trade, deal or provide market making activities in, securities bought or sold by or for a client;
- Allocation – The Firm may act as a discretionary fund manager for more than one client, and may not allocate appropriately;
- Inducements – WHI 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;
- Gifts and Hospitality - WHI and/or its employees could receive substantial gifts and entertainment (including non-monetary gifts) that may influence behaviour in a way that conflicts with the interests of the clients of the firm;
- Supervision – The oversight and supervision of some business areas could result in a conflict of interest (e.g. where a Corporate Financier gets involved and oversees market making, trading and distribution, which is usually performed by Market makers, Sales and Trading team independently).
3. Managing conflicts of interest
WHI has taken all reasonable steps to ensure that it will act with the requisite degree of independence and manage potential and actual conflicts of interest giving rise to a material risk of damage to the interests of one or more of its clients.
Specific conflicts management arrangements include, but are not limited to:
3.1 Policies and Procedures
The control and support functions of the Firm have developed and implemented policies and procedures to ensure that employees of the firm act appropriately in situations which may give rise to conflicts of interest.
3.2 Information barriers/Chinese Walls
It is important that WHI manages information flows in order to prevent improper access to client information or other types of confidential or inside information. The following controls have been implemented to control information flows:
- Need to know principle - Relevant persons who are in receipt of any form of confidential information are required to disclose such information on a need to know basis only.
- Chinese Walls - WHI have establish information barriers, known as “Chinese Walls”, which are administrative and physical barriers designed to restrict the flow of confidential information and to manage potential conflicts of interest.
- Watch list and restricted list - the Compliance department maintains a watch list and a restricted list. Trading activities are monitored against these lists in order to identify any breaches of information barriers.
3.3 Segregation of duties
The different business areas within WHI conduct their day-to-day business independently of each other. Employees in one business area do not have business responsibilities other than with respect to that area and its clients. Reporting lines are separate to prevent or limit any person from exercising undue or inappropriate influence over how others carry out services or activities for the clients of their business area.
WHI has arrangements on inducements that set out the circumstances under which it and its employees may accept and provide inducements to and from third parties. The Firm is required to disclose inducement arrangements to clients as and when they arise and prior to the provision of any relevant service. WHI and its employees may not pay or accept any fee or commission, or provide or receive any non-monetary benefit, in relation to the Firm’s activities with one or more clients that would impair the Firm’s duty to act in the best interests of its clients.
3.5 Gifts and hospitality
To ensure the integrity of WHI employees is not compromised permissible gifts and hospitality provided and received over £25.00 requires disclosure to Compliance. The provision of gifts or hospitality over the value of £150.00 requires pre-approval from the WHI Executive Board and Compliance.
3.6 Order handling
The Compliance department has established policies to ensure that, when executing client orders, a fair and equitable outcome for clients is achieved. In particular, the following requirements must be observed:
- Fair and timely execution - Client orders must be dealt with fairly and executed in a timely manner.
- Fair allocation/aggregation - If one or more client orders are aggregated with the Firm’s trades or other client transactions, the trades must not be allocated in a manner detrimental to any client. If the aggregated order is only partially executed, the trades must be allocated to clients fairly.
- Separation of principal and client trading – WHI does not operate a proprietary book, however market makers may execute client orders whilst operating a principal book. WHI has implemented segregation of duties, such that traders manage client orders.
3.7 Personal account dealing
Employees of WHI should avoid any personal transactions that may conflict with the interests of the Firm and its clients. WHI has a personal account dealing policy that prevents employees from engaging in certain activities in order to avoid actual or potential conflicts of interest and that there can be no suggestion that an employee has benefited improperly from the misuse of non-public information, put himself in a position of conflict with clients or dealt in any way which will disadvantage clients. Due to information barriers employees may not be aware of conflicts that exists elsewhere within the business, therefore employees of WHI may not deal in relevant financial instruments without obtaining prior approval from Compliance and their line manager.
3.8 Outside business interests
Employees of WHI must obtain pre-approval from their line manager, the Compliance department, and in particularly sensitive cases a member of the Executive Board before taking on outside business interests, such as directorships, employment or other roles and interests, in order to prevent a real or apparent conflict of interest.
The remuneration of WHI employees should not be structured in a manner that encourages behaviour which is not in the best interests of clients and which does not promote sound risk management practices, including conduct risk.
WHI publishes institutional research that is classified by the FCA as “non-independent research”. The research is produced in accordance with local regulations on research production and the Firm has implemented arrangements designed to ensure the integrity of research is of the highest standard, prevention of personal account dealings ahead and 24 hours after dissemination of publication and all clients receive research simultaneously.
WHI has established reporting lines that are structured to eliminate actual or potential conflicts of interest.
Where specific measures are not adequate to ensure with reasonable confidence that material risk of damage to the interests of WHI clients will be prevented, the Firm may clearly disclose the nature and sources of the conflicts of interest to the client before the provision of services. This will allow the client to make an informed decision on whether to proceed with the service in the situation concerned.
Disclosure of conflicts of interest does not exempt WHI from the obligation to maintain and operate effective organisational and administrative arrangements. The use of disclosure without adequate consideration as to how conflicts could be managed is not permitted.
Ultimately, if WHI considers that a conflict of interest cannot be managed in an appropriate manner to ensure a client will be treated fairly, it may decline to act.