The below policy statement covers R&H Fund Services (Jersey) Limited, hereafter referred to as (“RHFS”).
“A registered person must either avoid any conflict of interest arising or, where a conflict arises, must address such conflict through internal rules of confidentiality, by declining to act or by disclosing the nature of the conflict to the Fund and, where appropriate, seeking written confirmation that it may continue to provide services to the Fund”.
Where possible RHFS will endeavour to avoid conflicts of interest but in practice it may not always be possible or practical to avoid or prevent conflicts or potential conflicts of interest arising.
In which event the primary focus of RHFS is to seek to ensure, so far as practicable, that such conflicts where they are material are handled in a way that is fair to clients.
RHFS’s general policy in relation to conflict of interests is as follows:
1. Identify any conflict of interest.
2. Assess whether conflicts of interest are material.
3. Manage material conflicts of interest appropriately.
4. Establish and maintain a conflict of interest policy.
5. Use disclosure of material conflicts of interest and client approval to the same as the primary means of managing conflicts of interest.
6. Keep records of material conflicts of interest.
Definition of a Conflict of Interest
A conflict of interest arises in a situation where an individual with responsibility to act in the interest of others may be affected in his/her actions by a personal or business interest.
RHFS recognise that in the financial services sector conflicts of interest obligations arise from the fiduciary duties owed to our clients. An important initial step is therefore to identify who, contractually, are the clients of RHFS. For the most part clients are the fund entities and managed entities with which RHFS has contractual administration relationships which include fiduciary duties.
RHFS also recognise that one of the primary areas of risk and conflict in this context is where instructions are given by the fund promoter or investment manager with whom no contractual relationship exists and who is not therefore a “client” whose interests and instructions RHFS can automatically follow (unless the promoter/investment manager is giving proper instructions to RHFS under delegated authority from the client fund/entity).
Any guidance/instructions received by RHFS which do not constitute guidance/instructions given under delegated authority from a client fund/managed entity need to be carefully considered to check they do not conflict with RHFS’s duties owed to the relevant client fund/managed entity.
The duty to act in the best interest of customers is essentially linked to a duty of undivided loyalty – RHFS must put the particular customer’s interests at all times and in all circumstances ahead of any other interest that may exist.
Please see below for examples of potential conflict of interests within RHFS. This list is not exhaustive.
Dealing with a Conflict of Interest
In dealing with a conflict of interest, the first course of action will be to disclose it. This will allow others, who have not affected by the conflict, to assist in deciding how it should be dealt with.
All conflicts of interest or potential conflicts of interest must be reported to the RHFS Compliance Officer of the respective office and, in addition, in relation to conflicts arising within a corporate/director context, the director is under a company law duty to disclose the conflict to the Fund Board and the Board then has a duty to decide how it should be managed/handled.
There may also be circumstances where a customer’s interests also conflict with that of a member of staff. When this situation arises, RHFS’s policy is that the staff member should not allow themselves to be consciously biased by the interest and they should disclose comprehensively to the customer the nature of the conflict of interest and, if necessary, obtain their consent to continue.
Where a conflict of interest arises in relation to two different customers i.e. the fact of the other customer’s existence may in itself be a breach of the duty of confidentiality owed to that other customer, the following steps should be taken:
RHFS also operates a personal account dealing policy which requires all Directors and employees to have trades approved before dealing to ensure that dealing does not conflict with a client’s interests and does not occur in securities in circumstances where such dealing should be restricted.
All conflicts of interests, or potential conflicts of interest, will be reported to the Board of Directors of the respective RHFS office and ultimately they will decide if a conflict of interest can be permitted or continued.
Conflicts of Interests – Managed Entities and Collective Investment Schemes
There is always a material risk that potential or actual conflicts can arise in the operation of a managed entity or collective investment scheme which RHFS administers. These conflicts are usually between the interests of investors in the scheme and those of the scheme operators or their associates. Where RHFS personnel act as officers/compliance officer to the client entity/managed entity, conflicts arise due to RHFS being the service provider as well as the personnel provider. Also RHFS as administrator may be under a contractual/ Codes of Practice duty to provide services to identify and manage conflicts of interest that the client, fund/managed entity has or is exposed to.
RHFS have a duty to ensure that such conflicts are minimized and that any conflicts which do arise are disclosed. The following principles should be strictly adhered to:
A record of all conflicts of interests disclosed both for RHFS and also the fund entities/managed entities will be held by the RHFS Compliance Officer of the respective office.