Overview & Scope
Gale & Phillipson (G&P) always seek to act in the best interest of its clients and to treat its customers fairly. G&P requires all representatives of the firm to act honestly, fairly and professionally to act in the best interest of its clients in all circumstances. These principles apply in particular to conflicts of interest.
Furthermore, the Financial Conduct Authority (FCA) Principles require firms to take reasonable care to organise and control their affairs responsibly and effectively. They require firm to manage conflicts of interest between different clients or between itself and its clients fairly. Conflicts in this context relate to any situation which may affect the firm or individual’s ability to act in the best interests of the client. This document sets out Gale and Phillipson’s (‘G&P’) policy on Conflicts of Interest.
The content of G&P’s Conflicts of Interest policy applies to all employees and representatives of G&P, including appointed representatives of any companies within the Gale and Phillipson group.
G&P takes all reasonable steps to manage the risk of conflicts by:
- Identifying and preventing any potential circumstances which may give rise to conflicts of interest, and which pose a risk of damage to clients’ interests;
- Establishing and maintaining appropriate controls to manage those conflicts; and
- Maintaining systems at all times in an effort to prevent actual damage to clients’ interests through the identified conflicts.
The directors fully support this and are committed to ensure that all conflicts between our firm and our clients, and between clients, are managed fairly with no party disadvantaged.
What is a Conflict of Interest?
A conflict of interest is where, in acting for a client, there is something which could affect, or could be perceived to affect, our ability to act in the client’s best interest. A conflict of interest could be where the firm or an individual representing the firm has, or may have:
- A material interest in a transaction to be entered into with, or for a client
- A relationship which gives rise to a conflict of interest in relation to such a transaction
- An interest in a transaction that is, or may be, in conflict with the interest of any firm’s clients
- Clients with conflicting interests in relation to a transaction
Common conflicts of interest
The most common scenarios in which conflicts are likely to arise, and the steps taken to avoid them are as follows:
Conflict of interests between clients
Conflicts of interest may arise between different clients of G&P, where information obtained in respect of one client may be of value to another. An example of this would be where G&P is asked to advise separated or divorced couples.
Given G&P frequently provides advice to couples on their overall affairs, it is difficult to avoid this type of conflict completely. However as part of client take-on, G&P endeavours to identify potential conflicts with existing clients, and where any such potential conflicts are identified, the case is referred to the Compliance Officer to decide whether services can be provided to the new client, and if so, what steps should be taken to avoid conflicts arising.
Impact of services provided to other clients
G&P provides investment management services to a range of clients and there may be situations where services for one client may impact on those provided for another. For example:
- Orders placed for similar investments may result in orders being combined. In such cases the aggregation may operate to a client’s advantage but in others to their disadvantage. Where orders are aggregated, they will be allocated to clients on a pro rata basis;
- Investment instructions for one client may conflict with those of another client. This may particularly be the case on corporate actions, where one client may vote in favour of the action whilst another votes against. However conflicts may also arise where different clients wish to invest/disinvest in a particular investment with conflicting impact on the price of the investment.
- If G&P participated in limited offers as agent for certain investments on behalf of clients, a conflict could arise in between clients by favouring one client over another. In such cases, client orders will be placed in the order that they are received in order to avoid a conflict.
Services sold not in the interest of client
A conflict may arise where G&P could provide services to a client in order to generate fees, but the services are not suitable for that client. For example, provision of investment management or platform services might be inappropriate for a client that expects to withdraw all of their funds within the next 2 years. Minimum fees may mean that a service does not provide value for money.
In order to manage such potential conflicts, all advisers are required to ensure that recommendations, including those that recommend the use of other G&P services, are suitable for the clients concerned. There are various controls operated under our internal procedures to ensure that advisers provide suitable, competent advice and their recommendations are not influenced by any aspects of their or the firm’s remuneration.
In addition, regular assessments are made for all clients receiving discretionary investment management services to ensure that those services remain suitable for the client. Furthermore clients for whom a minimum fee applies are regularly reminded of this so that they can consider whether the service continues to provide value for money for them.
In the course of providing investment services to clients, G&P may conduct investment research and employees may gain access to investment research that is not publicly available during the normal course of their employment. This may lead to a conflict of interest where an employee wishes to enter into a personal transaction which makes use of that knowledge.
In order to manage such potential conflicts, the firm has a Personal Account Dealing Policy whereby in-scope employees are required to notify the Compliance Officer regarding certain investment transaction undertaken, and in some cases obtain prior approval before entering into the transaction.
A conflict may arise where a third party providing services to G&P or its clients offers non-monetary benefits to either G&P or G&P staff, as these could be deemed to be inducements in making decisions or recommendations in respect of a client’s affairs.
In order to manage such potential conflicts, G&P has a policy on what type of benefits may be accepted, as set out below. Where benefits outside the scope of this policy are offered, such benefits will be declined.
Specific Procedures for managing conflicts
All advisers and any other staff involved in the delivery of services to clients are required to complete ‘Self Assessment Forms’ to declare any dealings in ‘Personal Account’ transactions.
All advisers and staff involved in the delivery of services to clients are required to disclose any positions of responsibility that they may hold which allow the control of client assets, such as acting as a trustee, executor or holding a power of attorney, regardless of whether they are remunerated for such responsibilities.
Should individuals hold such positions of responsibility the situation, considering the potential risks, would be managed internally. Where it is felt that the situation could not be managed effectively, such individuals may be required to remove themselves from such a role or the firm may decline to act for the client given the potential conflict.
Segregation of duties
We strive to ensure that the performance of multiple functions by individuals that could be subject to a conflict does not and is not likely to prevent those individuals from discharging any particular functions soundly, honestly and professionally. Our policies concerning the segregation of duties within the firm and the prevention of conflicts of interest are laid out below.
We are aware that effective segregation of duties is an important element in the internal controls of a firm. In particular, it helps to ensure that no one individual is completely free to commit the firm’s assets or incur liabilities on its behalf. Segregation also helps to ensure that the firm’s senior management receives objective and accurate information on financial performance, the risks faced by the firm and the adequacy of its systems.
We ensure that, in general, no single individual has unrestricted authority to do all of the following:
- initiate a transaction;
- bind the firm;
- make payments; and
- account for it.
Where we are unable to ensure the complete segregation of duties due to a limited staff base, we have adequate compensating controls in place including the frequent review of an area by relevant senior managers. The firm ensures that its relevant persons are aware of the procedures which must be followed for the proper discharge of their responsibilities.
All relevant staff who are open to a conflict of interest are paid a basic salary including those who hold key support areas such as compliance, finance and operations. This salary is not dependent on business performance. Relevant persons involved in the compliance function will not be directly involved in the performance of services or activities they monitor.
Bonus schemes apply which are linked to business performance, team performance or the individual’s performance. These are at the discretion of the senior management and notified only on payment. The firm implements monitoring which includes reviewing of advice given to clients, the frequency of transactions and portfolio performance to help ensure bonus schemes do not introduce conflicts.
What we do in the event a potential conflict of interest is identified
All employees are required to be aware of situations which may give rise to conflicts of interest and where any such situations are identified, they are required to report the issue to the Compliance Officer and seek instructions on how to proceed.
On notification of a potential conflict, the Compliance Officer will investigate the potential conflict. They will then decide how to proceed, in one of the following ways:
- There is no conflict of interest or the existing controls in place are adequate to manage any potential conflict that may arise. In this case no additional action is required;
- There is a potential conflict of interest but that with additional controls or actions, the conflict can be suitably managed. In this case, the Compliance Officer will specify what additional controls or actions are required in order to adequately manage the conflict; or
- There is a potential conflict of interest and the conflict cannot be suitably managed.
In each case, the Compliance Officer will give instructions as to what, if anything, should be done to manage the conflict and whether the service or transaction can continue.
The Compliance Officer will also decide whether the particular client or clients affected by a potential conflict should be informed of the potential conflict, and if so, whether their consent should be obtained prior to providing the services concerned. Where clients should be notified of a potential conflict, this will be done in writing and where the client’s consent should be obtained, the consent should also be in writing. In both cases, sufficient detail regarding the conflict will be given to the client to enable them to make an informed decision as to whether to continue with the services concerned, taking care to maintain client confidentiality. If the client does not give written consent, G&P will cease to provide the services affected by the conflict of interest.
If the Compliance Officer feels that the conflict cannot be managed appropriately even with additional controls, consent to proceed with the transaction or services will notbe given. In some cases this will mean that G&P will be unable to provide services to new clients or will cease providing services to existing clients. Where the conflict relates to a conflict between different clients of G&P, the Compliance Officer will decide whether G&P can act for either, any or all of the clients involved.
Gifts, Entertainment and other Inducements
G&P, or individuals representing G&P, may be offered some non-monetary forms of benefit from companies it does business with, where these benefits are designed to enhance the quality of the service provided to G&P’s clients. Benefits may include (but are not limited to) attendance of seminars and conferences, training and technical support.
G&P will only accept such benefits where doing so will not:
- give rise to a conflict with any duty G&P owes to its clients;
- impair G&P’s ability to act in the best interests of any of its clients; and
- impair G&P’s ability to comply with any rules laid down by its regulator, the Financial Conduct Authority
There are some circumstances in which employees of G&P may be offered small gifts or minor hospitality in a personal capacity from other companies with which it does business.
Such gifts and minor hospitality may only be accepted where receipt of them does not impair G&P’s ability to act in the best interests of any of its clients, and adhere to G&P’s Gift and Hospitality policy.
This principle also applies to gifts and minor hospitality received from clients if accepting such gifts/hospitality could give reasonably rise to a conflict with any other client of G&P (eg the client is the director of a firm providing fund management services).
In all cases where gifts or hospitality are offered (regardless of whether they are accepted), details of this should be notified to the Compliance Officer prior to accepting them. The Compliance Officer then decides whether the individual may accept the offer, bearing in mind whether it could cause a conflict of interest. A Gifts & Entertainment register is maintained with details of all notifications made.
G&P retains records to demonstrate that potential conflicts of interest have been managed in an appropriate manner. Where clients have confirmed verbally the steps taken to manage the conflict of interest, G&P will confirm this in writing. Records will be maintained on individual client files. Written records will also be kept:
- where clients have been given verbal notification that a conflict of interest exists; and
- where clients have verbally agreed with steps taken by G&P to manage conflicts of interest.
G&P is privately owned predominantly by individuals who currently, or have in the past, play active roles within the business. The G&P Board retain full control of the business. These aspects are taken into account when considering whether there is a potential conflict of interest.
Maintenance and reporting
The Compliance Officer reviews this policy periodically, typically on an annual basis, to ensure that it remains effective and fit for purpose. In addition, routine monitoring will be carried out on the areas specified which could give rise to a conflict eg personal account dealing, gifts and entertainment, etc.
The Compliance Office produces an annual written report for the Board providing details recent conflicts of interest and future potential conflicts, and how these are being managed.