Conflicts of Interests Policy
CAYMAN NATIONAL BANK & TRUST COMPANY (ISLE OF MAN) LIMITED
CAYMAN NATIONAL FUND SERVICES (ISLE OF MAN) LIMITED
1.1. General statement
It is important to identify and manage conflicts of interest which arise or may arise in the course of providing a service, as their existence may lead to a material risk of damage to a client’s interests.
The following sets out the policy of those companies within the Cayman National (Isle of Man) group of companies (referred to hereafter collectively as “CNIOM”) and associated entities to effectively manage the conflicts of interest that may arise where those companies provide services to clients in the course of carrying on regulated activities.
This policy is prepared and published in order to comply with our local rules and regulations and is not intended to create third party rights or duties or form part of any contractual agreement between any company within CNIOM and any client. This policy may be amended at any time if a material change occurs and will be reviewed on an annual basis.
The companies within CNIOM currently comprise:
• Cayman National Bank & Trust Company (Isle of Man) Limited
• Cayman National Fund Services (Isle of Man) Limited
• CN Director Limited
• Cayman National Nominees Limited
• Cayman National Secretarial Limited
• Beeston Management Limited
• Beeston Secretarial Limited
1.2. Cayman National Group
The companies within CNIOM are all subsidiary companies (either directly or indirectly) of Cayman National Corporation Limited, based in the Cayman Islands.
Cayman National Corporation Limited is able to demonstrate that it has appropriate and effective arrangements in place to ensure that, where appropriate, businesses within the Group operate independently of each other and will therefore not be deemed to have knowledge of each other for conflicts of interest purposes.
1.3. CNIOM
CNIOM provides a range of client driven services in banking & custody, fiduciary and fund administration sectors. The services offered are primarily designed for private clients, companies, trust entities, intermediaries, professional clients and funds. These include;
• Banking services
• Custody services
• Third party fund administration
• Administration of trust and fiduciary relationships
• Company administration, including provision of corporate and individual directors
In order to achieve and demonstrate long term success in its objectives, CNIOM asserts that its clients’ interests will always take priority during the development of a suitable proposition but acknowledges that a range of other risk based and commercial factors will be assessed before implementing a final solution. The appropriateness of products and services offered by CNIOM will continue to be actively monitored.
CNIOM or any associate or any party to whom it may have delegated its functions or to whom it relies upon to deliver core services (a “Supplier”), may without prior reference to a client, effect transactions in which CNIOM or the Supplier has, directly or indirectly, a material interest or a relationship of any description with another party, which may involve a potential conflict with CNIOM’s duty to the client.
There may be a potential conflict of interest in relation to the access of any such Supplier to certain information. This is mitigated by the contractual relationship between CNIOM and the outsource supplier and also by rules and regulations including data protection.
In the event of any such transaction, however, CNIOM will ensure that:
1. such transactions are effected on normal commercial terms negotiated at arms length and on terms which are not materially less favourable to the client than if the potential conflict had not existed;
2. such transactions do not adversely affect the performance of CNIOM’s duties and responsibilities to the client; and
3. it takes reasonable steps to ensure fair treatment for the client in accordance with local rules and regulations.
1.4. Treating Customers Fairly
Cayman National Corporation Limited is not required, under Cayman Islands regulations, to operate a formal Treating Customers Fairly (“TCF”) policy.
That said, there is an embedded ethical culture that highlights what is acceptable and unacceptable behaviour. As such, conflicts of interest and the identification, management and mitigation thereof are central to this philosophy and culture.
1.5. Disclosure and Types of Conflict
CNIOM will clearly disclose the general nature and source of a conflict of interest, if such has been identified, to the client before undertaking business for the client. The disclosure will be made in writing and include sufficient detail to enable the client to make an informed decision about the service, in the context of which the conflict of interest is believed to have arisen.
The following disclosure is made in compliance with that policy and notes some of the general types of potential conflicts of interests or duties which may arise in the companies within CNIOM because:
1. a director or employee of CNIOM, or of an associate, is a director of, holds or deals in securities of, or is otherwise interested in any company whose securities are held or dealt in on behalf of a client;
2. a transaction is effected in securities/ foreign exchange in respect of which CNIOM or an Associate may benefit from a commission, fee, mark up or mark down payable otherwise than by a client, and/or CNIOM or an associate may also be remunerated by the counterparty to any such transaction;
3. CNIOM deals on behalf of a client with, or in the securities of, an associate;
4. CNIOM may act as agent for a client in relation to transactions in which it is also acting as agent for the account of other clients and/or associates;
5. a transaction is effected in units or shares of funds, or of any company of which CNIOM or an associate is the manager, operator, administrator, banker, adviser, custodian or trustee;
6. CNIOM may effect transactions involving placings and/or new issues with an associate who may be acting as principal or receiving agent’s commission;
7. a transaction is effected in securities of a company for which CNIOM or an associate has underwritten, or managed or arranged an issue or offer for sale within the previous 12 months;
8. a transaction is effected in securities in respect of which the firm or an associate, or a director or employee of CNIOM or an associate, is contemporaneously trading or has traded on its own account or has either a long or short position; and
9. CNIOM may, when acting as agent for a client, match an order of the client with an order of another client for whom it is acting as agent.
The circumstances giving rise to conflicts of interest includes all cases where there is:
1. conflict between the interests of CNIOM, an individual member of staff, certain persons directly or indirectly connected to CNIOM and the duty that CNIOM owes to a client;
2. conflict between the differing interests of two or more clients, as CNIOM owes a separate duty to each of them.
Conflicts may arise and all staff must take into account whether any of the parties described above:
1. is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
2. 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;
3. has a financial or other incentive to favour the interest(s) of another client or group of clients over the interests of the client;
4. carries on the same business as the client; or
5. receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service.
Specific potential conflicts of interest may arise within each firm within CNIOM relating to clients, personal account dealing and certain private conflicts of interest. Each of these is explained in more detail below.
Examples of such conflicts or potential conflicts:
1. Potential conflict as a director/trustee on behalf of client, where CNIOM or another company within the Cayman National group is appointed as investment managers/bankers/custodians. There needs to be clear procedures that the appropriate research has been conducted. Regular reviews need to be carried out to demonstrate that an impartial approach has been taken.
2. Senior staff need to be aware of potential conflicts where they are appointed in their personal (employed) capacity as trustee/director for multiple client entities and the potential conflict between their obligations as an employee of CNIOM and their duties as a director of an administered entity.
3. Staff may be privy to price sensitive information, particularly related to investment matters and must not use it for personal gain.
4. Senior staff who sit on lending committees need to be aware that any facility for a family member/friend or member of his/her direct report staff could give rise to a potential conflict of interest when following the approval process.
5. There is a potential conflict if staff had an interest in the outcome of a service provided to the client or of a transaction carried out on behalf of a client, which is distinct from the client’s interest in that outcome. However this is mitigated by the fact that staff are not commission based, but are performance assessed.
6. When a CNIOM director sits on an external board where CNIOM administer the fund or provide custodian services, he has a fiduciary duty to the fund to act in its best interests which may conflict with his obligations as an employee.
7. All directors of companies in CNIOM are required to declare if they have external directorships. If those external interests contract with or provide services to CNIOM this may cause a conflict. A register is maintained of this information and this should be regularly reviewed.
8. There would be a conflict if the staff member were to receive an inducement in relation to a service provided to the client, in the form of monies, goods or services.
9. The staff member has a financial or other incentive to favour the interests of another client or group of clients over the interests of the client.
1.6. Managing conflicts of interest
It may not be possible to prevent actual conflicts of interest from arising. In that case, CNIOM will seek to manage the conflict of interests by;
1. establishing an information barrier (Chinese wall);
2. segregation of duties;
3. independent oversight;
4. disclosure to the client;
5. declining to provide the service; or
6. establishing and maintaining an appropriate register of staff/ Director interests.
1.7. Chinese walls
A “Chinese Wall” is a system designed to restrict the flow of information between parts of a firm, or group of companies, performing potentially conflicting functions. The principle is that, in general, those within one Chinese Wall should have no knowledge of confidential transactions taking place within another Chinese Wall and are therefore wholly unaware of, and are able properly to operate without regard to, a conflicting interest outside their Chinese Wall.
The operation of a Chinese Wall may involve a range of practices including the segregation of data and computer systems, as well as physical separation of certain businesses so they are unable to access the same part of the office. The operation of Chinese Walls will be established at Board level and enforced by the Compliance Department.
1.8. Segregation of duties
There are a number of distinct tasks within CNIOM that could potentially lead to conflicts of interest. In the main, these are mitigated by them being subject to segregation (for example in terms of input and acceptance of instructions) and/or by dual/multiple sign-off of a particular transaction.
1.9. Independent oversight
The management oversight and determination of appropriate remuneration of members of staff is conducted by CNIOM senior management. Remuneration for advisory and sales staff may be partly based on business production.
The organisation structure of each company within CNIOM ensures that staff involved in day to day activities are subject to appropriate management and supervision. Thus each company is able to demonstrate that it has appropriate and effective arrangements in place to ensure that conflicts of interest are properly managed.
In addition, CNIOM has a Compliance Department which is responsible for ensuring that control structures and procedures across CNIOM are compliant with relevant laws, regulations, codes of practices relating to the various business activities, initiating appropriate standards and policies and also applying consistency, where appropriate with Cayman National Group standards and policies.
1.10. Disclosing to the Client
Where a conflict or a potential conflict arises this will be disclosed to the client as appropriate.
1.11. Declining to provide the service
If it is not possible to avoid or manage a conflict of interest, CNIOM may have no choice but to decline to provide the service requested.
1.12. Register
A conflict of interest register will be maintained and regularly reviewed to ensure that it accurately reflects the relevant information. It will also be tabled for discussion at Board meetings of the individual constituent companies of CNIOM regularly, but no less than on an annual basis. The register will be maintained and held by the Compliance Officer.