Conflicts of Interest Statement
Highness expects that all employees will avoid any activity, interest or association which might interfere or appear to interfere with the independent exercise of their judgment in the best interests of the firm, its clients and the public. Employees must avoid any situation in which their personal interests are in conflict with their duties at the firm.
When an employee knows a conflict of interest exists or is perceived to exist, all details of the conflict of interest are to be provided to the CCO immediately. If an employee is uncertain as to whether a conflict of interest exists or could arise, the matter should be directed to the CCO. The CCO is responsible for resolving conflicts of interest.
A conflict of interest occurs whenever interests of Highness or an employee could conflict with those of a client/prospective client or where the firm or an employee have obligations to more than one party whose interests are different.
Examples of conflict-of-interest situations include:
- connected or related issuers, where the firm might be tempted to recommend the issuer to a client to bolster the trading or price rather than because it is a good investment for the client;
- director positions of an issuer held by an employee, where the individual may receive confidential or market sensitive information. In such a case, the employee will have a duty to the issuer to keep the information confidential and not use the information for personal benefit or to benefit clients; or
- dealing as principal, where the client and the firm have opposite interests in terms of the price of the transaction.
NI 31-103 takes a principle-based approach to conflicts. Under s. 13.4 of NI 31-103, Highness must take reasonable steps to identify existing and potential material conflicts that it would expect to arise, between the firm or its employees and a client. Material conflicts of interest will be disclosed in the best interest of the client.
All employees who have dealings with clients must report to the CCO any situation that might give rise to a real or perceived conflict of interest, including but not limited to:
- outside activities (formerly referred to as outside busines activities);
- outside activities by a spouse or other relative living in the same residence;
- shareholdings in an issuer of greater than 10% of the issued shares on a fully diluted basis, whether voting or not;
- family affiliation with the controlling management or ownership of an issuer;
- lawsuits or other significant adversarial actions against an issuer, no matter who initiated them;
- information about any undisclosed interests or business of the firm or an employee that a client would reasonably expect to be told to make an informed decision about a recommendation.
When a conflict or perceived conflict has been identified, the CCO must manage the issue. There are three methods of managing conflicts or perceived conflicts of interest:
- disclosure of the conflict to the client;
- supervision to ensure that the party with the conflict acts only in the client’s best interests;
- refraining from conducting the business that results in the conflict.
If the conflict is managed through disclosure, the disclosure and delivery of it to the client must be documented. For an individual client, the documentation can be maintained in the client file; where it involves several unrelated clients, it can be maintained in the representative’s file or identified in the client relationship disclosure information.
If the conflict is managed through supervision, the procedures can be maintained in the client file where only a single client is affected. Where the conflict involves several unrelated clients, the procedures implemented to protect clients must be documented. The controls must be approved by the CCO.
If Highness or its employees refrain from conducting business, all parties must be notified, and the decision must be approved and documented by the CCO. Business may continue if the conflict has been addressed in the best interest of the client and the continuation has been approved by the CCO.
Generally speaking, whenever a conflict-of-interest matter arises, and before taking any action in the matter, Highness will determine what action it proposes to take in respect of the matter, having regard to its duties under securities legislation (including its standard of care); and its written policies and procedures on the matter.
CONFLICT OF INTEREST DISCLOSURE
Highness has taken reasonable steps to identify existing and foreseeable material conflicts of interest in its current business structure and activities including between the firm and its clients and/or anyone acting on Highness’ behalf. Conflicts are not always immediately obvious, so an in-depth analysis of the firm has been conducted to highlight any perceived, actual and foreseeable conflict of interest issues.
Disclsoure of material conflicts will note the nature and extent of the confict; the potential impact and risks that the conflict can create; and how it will be addressed.
Potential conflicts of interest are disclosed to new investors by way of the RDI in the New Client Application. The RDI and this policy sufficiently disclosure the key conflicts of interest. Should this change, Highness will draft a supplementary disclosure document and send it out electronically to existing clients, update the policy on its site and include it in the New Client Application for new clients.
It is important that clients read Highness’ conflict of interest disclosures. This Policy will be posted on the Highness site so that it easily accessible and clients can read updates.
Clients can contact Amana Manori and can request the policy in alternative formats such as paper, etc.
NO PROPRIETARY PRODUCTS. Highness does not produce, manufacture, promote or distribute proprietary products. As such Highness does not restrict or manage any client transactions or the payment/collection of any client funds.
Highness has detailed procedures, referral agreements and referral agreement disclosures forms (outlining compensation received for such introduction) for introducing third party products to eligible investors. Highness enters into such agreements on success basis only and does not have any internal compensation models that will unfairly entice, influence or incentivize the decision to introduce what products to which clients. All introductions will be made where employees believe the offering suits the clients investment objectives, horizons and risk profile. As such, any recommendations will be made by putting the clients’’ interest first.
Clients’ must look at the issuers conflict of interest policies and disclosures for risk, impact and consequences related to their investments. Pre-trade disclosure will also come from the issuer.
SINGLE REGISTRATION CATEGORY. Highness is currently registered as an EMD in Ontario and Quebec. Highness may seek registration in other Canadian offering jurisdictions. As a registered dealer, Highness has the responsibility for KYC, KYP, suitability, etc. so it can objectively assess the merits of introduced products and another alternative to determine what would be the most suitable to the investor. Highness does not allow employees to be registered with any unaffiliated dealer, advisor or investment fund manager unless such position is need for participation on a board, advisory board or independent review committee.
OUTSIDE ACTIVITIES (OA). All representatives and employees must disclose all outside activities to the CCO, including any directorships, personal contracts, or ownership of other entities on their application for registration. Representatives and employees must immediately notify the CCO of any changes to this information. OAs must be reported to the regulators through the NRD system within 10 days.
- activities with another registered firm
- activities with another entity that receives compensation from a registered firm for a registerable activity
- other securities related activity
- provision of financial services activity
- positions of influence (as determined by a reasonable person) such as religious leader, professor or lawyer
- any employment or business activities, whether or not the activities are related to the investment industry
- membership on any board of directors or similar body of a corporation or other entity carrying on business activities, regardless of whether compensation is received
Paid or unpaid roles with any charitable, social, fraternal or religious organization or paid or unpaid membership on any board of directors or similar body of such an organization must be disclosed where the individual is in a position of power or influence and where the activity places the registered individual in contact with clients or a potential client, including positions where the registered individual handles investments or monies of the organization. Highness maintains the following restrictions for all employees relating to outside business activities:
- an employee shall not be employed by or receive compensation from any other company, excluding any Highness related company or affiliated companies, without prior written approval from the UDP;
- an employee must not conduct any outside business activities from Highness’ offices without prior written approval from the UDP; and
- an employee shall not engage in outside business activities if it appears that the individual is acting on behalf of Highness outside an approved role.
When reporting of an outside business activity the employee must include:
- the number of hours per week the employee will be devoting to this business activity or employment
- the employee’s analysis of any potential for confusion by clients and any potential for conflicts of interest arising from the proposed business activities.
All employees that are engaged in OAs must monitor such activities to ensure that they are not in conflict or competition with their duties and responsibilities to Highness. On an annual basis, all employees must provide the CCO with a report identifying all outside business activities in sufficient detail that the CCO can determine whether such activities could potentially conflict with the business of Highness. Any change in outside activities must be reported to the CCO and the employee’s registration information must be amended in accordance with this Manual.
DIRECTORSHIPS. Any employee that wishes to hold a director position with an issuer must receive approval from the CCO and the UDP in writing. Any registrant or officer that is a director with an issuer will not be involved in any due diligence review or other consideration of the relevant issuer’s securities in relation to a recommendation to purchase or sell the securities.
SISTER COMPANY. The principals of Highness own and operate a sister company, Highness Global Inc. (HGI) that provides strategic business advice and management consulting to a carefully curated portfolio of clients. The clients and business model of HGI do not overlap or cross into the business activities of Highness. HGI does not operate in the capital markets and does not facilitate investments between registrant issuers and sophisticated investors. Full disclosure about the clients, business and operations of HGI are available on the HGI site at highnessglobal.com.
GIFTS. Representatives and employees of Highness will only give or receive gifts or gratuities that are customary or of an industry standard to or from any individual who acts on behalf of another firm. All gifts given or received will be disclosed to the CCO and the UDP.
FEES. Highness follows standard industry practices relating to the payment of fees and commissions. When Highness receives referral fees from an investment fund or opportunity, it does not generally accept fees from investor clients – therefore, avoiding potential conflict of interests.
PERSONAL TRADING. All employees have a responsibility to comply with securities laws and exercise appropriate judgment in connection with any trade in securities. All employees should avoid even the appearance of impropriety with respect to trading securities and may occasionally have to forego or delay a proposed or contemplated transaction even if the transaction had been planned before learning of material non-public information. Employees are reminded that violations of this Manual will result in Highness taking disciplinary action, which may include termination.
INSIDE OR NON-PUBLIC INFORMATION. All employees are prohibited from trading for their own account any security in which they have inside or non-public information. The prohibition also applies to trading in securities of other companies whose value might be affected by the non-public information. Clients’ affairs must be held in strictest confidence. At no time, should an employee personally benefit from knowledge of a client’s affairs, or by disclosing confidential information to allow another party, be it a spouse, friend, or client, before such knowledge is generally available to the public.
Insider trading occurs when a person in a special or fiduciary relationship reveals material non-public information to someone who then takes investment action with this non-public information. Information is deemed material when it is of sufficient importance to have caused an informed investor to take investment action. Anyone taking action with such information can be found guilty of insider trading or tipping, even if they have not received such information directly from the person in the fiduciary relationship.
As Highness does not have its own products, manage client accounts, engage in trades on behalf of clients and/or engage in other portfolio activities the risk related to personal trading and insider trading are extremely low. These provisions have been included in the Manual as an abundance of caution and will not prevent Amana Manori from engaging in any self-directed trading activities, investing in listed funds and/or holding exempt securities.
TESTING, UPDATES & TRAINING: This policy will be updated at least annually. The firm’s conflict of interest regime will be tested annually or when a new business activity is undertaken. The key steps in the regime will be to identify the conflict then determine its materiality. Employee training will include an in depth discussion and analysis of the conflicts of interests infrastructure. Any gaps in the regime will be filled from training results.