Back Custom print Link Text Only Rich Text Print

  • BC-2.10 BC-2.10 Conflicts of Interest

    • BC-2.10.1

      Investment firm licensees must undertake all reasonable steps to identify conflicts of interest between themselves (or any person directly or indirectly linked to them by control) and their clients, which may arise in the course of providing a regulated investment service.

    • BC-2.10.2

      Where conflicts arise, investment firm licensees must:

      (a) Disclose any material interest or conflict of interest to the client in writing (which may include a disclosure in the investment firm licensee's terms of business) either generally or in relation to a specific transaction, and take reasonable steps to ensure that the client does not object;
      (b) Establish information barriers between activities such as proprietary trading and portfolio management; and
      (c) Produce a written policy of independence, which requires an employee to disregard any conflict of interest or material interest when advising a client or exercising discretion.
      Amended: July 2015
      Amended: January 2007

    • BC-2.10.3

      If an investment firm licensee determines that it is unable to manage a conflict of interest or material interest using one of the methods described in Rule BC-2.10.2 it must decline to act for the client.

    • Personal Account Transactions

      • BC-2.10.4

        Investment firm licensees must establish and maintain adequate policies and procedures, to ensure that:

        (a) An employee does not undertake a personal account transaction unless:
        (i) The investment firm licensee has, in a written notice, drawn to the attention of the employee the conditions upon which the employee may undertake personal account transactions and that the contents of such a notice are made a term of his contract of employment or services;
        (ii) The investment firm licensee has given its written permission to that employee for that transaction or to transactions generally in financial instruments of that kind; and
        (iii) The transaction will not conflict with the investment firm licensee's duties to its clients;
        (b) It receives prompt notification or is otherwise aware of each employee's personal account transactions; and
        (c) If an employee's personal account transactions are conducted with the investment firm licensee, each employee's account must be clearly identified and distinguishable from other clients' accounts.
        Amended: January 2007

      • BC-2.10.5

        The written notice in sub-Paragraph BC-2.10.4(a)(i) must make it explicit that, if an employee is prohibited from undertaking a personal account transaction, he must not, except in the proper course of his employment:

        (a) Procure another person to enter into such a transaction; or
        (b) Communicate any information or opinion to another person if he knows, or ought to know, that the person will as a result, enter into such a transaction or procure some other person to do so.
        Amended: January 2007

      • BC-2.10.6

        Where an investment firm licensee has taken reasonable steps to determine that an employee will not be involved to any material extent in, or have access to information about, the investment firm licensee's investment business, then the conditions or restrictions on personal account transactions, in Rule BC-2.10.4, need not be applied to that employee.

      • BC-2.10.7

        Investment firm licensees must establish and maintain procedures and controls so as to ensure that an investment analyst does not undertake a personal account transaction in a financial instrument if the investment analyst is preparing investment research:

        (a) On that investment or its issuer; or
        (b) On a related investment, or its issuer;

        until the investment research is published or made available to the investment firm licensee's clients.

        Amended: January 2007

    • Investment Research

      • BC-2.10.8

        Where an investment firm licensee issues investment research, its conflicts policy must specify the types of investment research issued by it. An investment firm licensee that prepares and publishes investment research must have adequate procedures and controls to ensure:

        (a) The effective supervision of investment analysts by following at the very least the items listed in Paragraph BC-2.12.11;
        (b) That any actual or potential conflicts of interest are managed in accordance with Rule BC-2.10.1; and
        (c) That the investment research issued to clients is not biased.
        Amended: January 2007

      • BC-2.10.9

        Investment firm licensees that publish investment research must take reasonable steps to ensure that the investment research:

        (a) Identifies the types of clients for which it is principally intended;
        (b) Distinguishes fact from opinion or estimates, and includes references to sources of data used;
        (c) Specifies the date when it was first published;
        (d) Specifies the period the ratings or recommendations are intended to cover;
        (e) Contains a clear and unambiguous explanation of the rating or recommendation system used;
        (f) Includes a price chart or line graph depicting the performance of the financial instrument for the period that the investment firm licensee has assigned a rating or recommendation for that financial instrument, which must also show the dates on which the ratings were revised; and
        (g) Includes a distribution of the different ratings or recommendations, in percentage terms for all financial instruments in respect of which the investment business licensee publishes investment research.
        Amended: July 2015
        Amended: January 2007

      • BC-2.10.10

        Investment firm licensees must take reasonable steps to ensure that when it publishes investment research, disclosure is made of the following matters:

        (a) Any financial interest or material interest that the investment analyst or a close relative has, which relates to the financial instrument;
        (b) Any shareholding by the investment firm licensee or its associate of 1% or more of the total issued share capital of the issuer;
        (c) Whether the investment firm licensee or its associate acts as corporate broker for the issuer;
        (d) Any material shareholding by the issuer in the investment firm licensee;
        (e) [This Subparagraph was deleted in July 2015]; and
        (f) Whether the investment firm licensee is a market maker in the financial instrument.
        Amended: July 2015
        Amended: January 2007

      • BC-2.10.11

        If an investment firm licensee acts as a manager or co-manager of an initial public offering or a secondary offering it must take reasonable steps to ensure that it does not publish investment research relating to the financial instrument during the period beginning on the day of publication of the listing particulars or a prospectus relating to the offering of that financial instrument and ending on the 30th calendar day after the day on which the financial instrument is admitted to trading.

      • BC-2.10.12

        Investment firm licensees and their associates must not knowingly execute an own account transaction in a financial instrument, which is the subject of investment research, prepared either by the investment firm licensee or its associate, until the clients for whom the investment research was principally intended have had a reasonable opportunity to act upon it.

      • BC-2.10.13

        The restriction in Rule BC-2.10.11 does not apply if:

        (a) The investment firm licensee or its associate is a market maker in the relevant financial instrument;
        (b) The investment firm licensee or its associate executes an unsolicited transaction for a client; or
        (c) It is not expected to materially affect the price of the financial instrument.
        Amended: January 2007

    • Inducements

      • BC-2.10.14

        Investment firm licensees must have systems and controls, policies and procedures to ensure that neither they, nor any of their employees, offer, give, solicit or accept any inducement which is likely to conflict significantly with any duty that they owe to their clients.

      • BC-2.10.15

        Investment firm licensees may only accept goods and services under a soft dollar agreement if:

        (a) The goods and services do not constitute an inducement;
        (b) The goods and services are reasonably expected to assist in the provision of regulated investment activities to the investment firm licensee's clients;
        (c) The agreement is a written agreement for the supply of goods or services described in Rule BC-2.10.14, and these goods and services do not take the form of, or include, cash or any other direct financial benefit; and
        (d) The investment firm licensee makes adequate disclosures regarding the use of soft dollar agreements.
        Amended: January 2007

      • BC-2.10.16

        For the purpose of Sub-Paragraph BC-2.10.15(d), Paragraph BC-2.12.12 sets out the minimum disclosure requirements.

        Amended: January 2007

      • BC-2.10.17

        A soft dollar agreement is an agreement in any form under which an investment firm licensee receives goods or services in return for investment business put through or in the way of another person.

      • BC-2.10.18

        Before an investment firm licensee enters into a transaction for a client, either directly or indirectly, with or through the agency of another person, under a soft dollar agreement which the investment firm licensee has, or knows that another member of its group has, with that other person, it must disclose to its client:

        (a) The existence of the soft dollar agreement; and
        (b) The investment firm licensee's or its group's policy relating to soft dollar agreements.
        Amended: January 2007

      • BC-2.10.19

        If an investment firm licensee has a soft dollar agreement under which the investment firm licensee deals for a client, the investment firm licensee must provide that client with information as set out in Paragraph BC-2.12.12.