Conflict of Interest Management Policy
| Version | 13 September 2021 |
| Implementation Date | |
| Last Review Date | 13 September 2021 |
| Frequency of Review | Annually |
| Next Review Date | 13 September 2022 |
| Policy Owner | Matthew Richardson |
| Responsible Business Unit | Compliance |
Background
Section 3A(2)(a) of the Financial Advisory and Intermediary Services Act (“FAIS”) General Code of Conduct states that every Financial Services Provider (“FSP”), other than a Representative, must adopt, maintain and implement a conflict-of-interest management policy that complies with the provisions of the FAIS Act. This Conflict-of-Interest Management Policy is set out in accordance with The Financial Services Board Notice 58 of 2010, as published in the Government Gazette number 33133 on 19 April 2010. Board Notice 58 of 2010 deals with matters pertaining to conflicts of interests and the regulation thereof. The rationale behind this policy is to uphold the principles of transparency and fairness by alleviating preferential treatment and undue preference, which may accompany a conflict-of-interest situation. Conflicts-of-interests are an inherent part of the financial services industry and requires specific regulation due to the complexity of transactions between numerous legal entities, some of which may be closely associated. These conflicts-of-interest must be avoided but where this is not possible, steps must be taken to mitigate them.
Chartered Employee Benefits (Pty) Ltd (“CEB”) is a registered FSP with FSP number 24323. CEB is committed to conducting its business practices with a high standard of ethical integrity and is dedicated to ensuring that the best interest of our client is upheld. Accordingly, CEB is obligated to comply with the conflict-of-interest provisions prescribed by the FAIS Act and subordinate legislation.
About this policy
This policy is intended to stipulate the process that CEB follows in identifying, mitigating and managing its conflicts of interests. It is furthermore intended to provide guidance to employees in ensuring that their conduct is in line with CEB values. Additionally, it is intended to facilitate the disclosure of any conflict of interest and to create internal governance structures to ensure compliance with this policy. The consequence of non-compliance will be set out herein. This provides our clients with safeguards against the consequences which may result from a conflict of interest.
This policy does not alter our existing conflict-of-interest management procedures but intends to document them in simple form, as required by the Financial Services Conduct Authority (“FSCA”).
CEB keeps and maintains a register in which all actual or potential conflicts are recorded.
All Key Individuals (“KI”), Representatives, associates and administrative staff are obligated to commit themselves to this policy and to conduct business activities in a professional manner and in conformity to this policy. CEB is committed to high levels of integrity and fairness in its business dealings. The quality of the representatives’ compliance with the FAIS Act and its applicable legislation is monitored by KI’s.
This policy sets out how:
- we will identify the circumstances which may give rise to actual or potential conflicts of interest entailing a material risk of damage to our clients’ interests;
- we have established appropriate structures and systems to manage those conflicts; and
- we will maintain systems in an effort to prevent damage to our clients’ interests through identified conflict of interest.
Our contact details
Should you have any questions or require any further information, you may contact the Compliance Officer at:
Chartered Employee Benefits
| Address: | 2 North Road |
| Dunkeld West | |
| Johannesburg | |
| 2196 | |
| E-Mail: | ebcompliance@charteredeb.co.za |
| Tel: | +27(0) 11 502 2800 |
Definitions
| “CEB” | – | Means Chartered Employee Benefits (Pty) Ltd. |
| “Associate” | – | Means, in relation to a natural person, meaning:
|
| “Conflict of interest” | – | Means any situation in which a provider or a representative has an actual or potential interest that may, in rendering a financial service to a client: influence the objective performance of his, her or its obligations to that client; or any relationship with a third party; or prevent a provider or representative from rendering an unbiased and fair financial service to that client, or from acting in the interest of that client, including but not limited to: a financial interest; an ownership interest. |
| “Financial interest” | – | Means any cash, cash equivalent, voucher, gift, service, advantage, benefit, discount, domestic or foreign travel, hospitality, accommodation, sponsorship, other incentive or valuable consideration, other than: an ownership interest; training, that is not exclusively available to a selected group of providers or representatives, on: products and legal matters relating to those products; general financial and industry information; specialised technological systems of a third party necessary for the rendering of a financial service; but excluding travel and accommodations associated with that training. |
| “Ownership interest” | – | Means: any equity or proprietary interest, for which fair value was paid by the owner at the time of acquisition, other than equity or a proprietary interest held as an approved nominee on behalf of another person; and includes any dividend, profit share or similar benefit derived from that equity or ownership interest. |
| “Third party” | – | Means: a product supplier; another provider; an associate of a product supplier or a provider; a distribution channel; any person who in terms of an agreement or arrangement with a person referred to in paragraphs (a) to (d) above provides a financial interest to a provider or its representatives. |
What CEB may give and receive
CEB will only accept financial interest from our service providers if they come in the form of:
- Commission authorised under the Long-term Insurance Act, 52 of 1998
- Commission authorised under the Short-term Insurance Act, 53 of 1998
- Commission authorised under the Medical Schemes Act, 131 of 1998
- Fees under the aforesaid Acts if these fees are reasonably commensurate to the service being rendered
- Fees for rendering a financial service in respect of which no commission or fees are paid as aforesaid, if those fees are specifically agreed to by you in writing and may be stopped at your discretion
- Fees or remuneration for the rendering of a service to a third party, which fees are reasonably commensurate to the service being rendered
- Subject to any other law, an immaterial financial interest
- A financial interest for which a consideration, fair value or remuneration that is reasonably commensurate to the value of the financial interest, is paid at the time of receipt thereof
The financial interests referred to above may only be offered or received by CEB or its Representatives if:
- The payment of those financial interests does not result in CEB or its representatives being remunerated more than once for performing the same service;
- Any actual or potential conflicts between the interests of clients and the interests of the person receiving those financial interests are effectively mitigated; and
- The payment of those financial interests does not impede the delivery of fair outcomes to clients.
CEB may not offer any financial interest to one of its Representatives –
- For giving preference to a specific product of a product supplier, where a representative may recommend more than one product of that product supplier to a client.
- For giving preference to a specific product supplier, where a Representative may recommend more than one product supplier to a client
- That is determined with reference to the quantity of business, without also giving due regard to the delivery of fair outcomes for clients.
- The Representatives of CEB do consider multiple quotations and products, and this is highlighted in the record of advice that each client of CEB receives.
The way in which CEB remunerates its Representatives is set out in a separate remuneration policy that is available to all CEB employees.
CEB also sets out below the conditions and limitations surrounding the receiving of gifts or entertainment by any CEB staff member from a client or product provider. The adherence to the limitations surrounding gifts and entertainment is to manage any potential conflicts of interest that may arise and potentially cause harm to clients of CEB.
Gifts and entertainment
Why do we monitor gifts & entertainment?
The offering or receiving of gifts and/or entertainment has the potential to induce CEB staff, clients or providers to act in a way that they would not normally act and can create a real or perceived conflict of interest. In addition to this, the FAIS Act stipulates annual limits to the giving or receiving of gifts and/or entertainment that must be monitored.
Which gifts may not be accepted under any circumstance?
The following gifts may not be accepted by a CEB staff member:
- Cash (including vouchers);
- Legacies or inheritances.
Annual limits for all FAIS Representatives:
The FAIS Act provides that Representatives may only receive up to R1000 worth of gifts and/or entertainment per Product Provider per year. Anything offered to a Representative above this limit must be politely refused.
Annual limits for all CEB staff:
CEB has implemented an annual gift and/or entertainment limit of R2000 per employee per year. Any gift or entertainment received by a CEB staff member from a client, service provider or product provider will count towards this annual limit. Once this limit has been reached, further gifts or entertainment must be politely refused.
What to do when you receive a gift?
When offered a gift and/or entertainment, you must:
- Report the gift/entertainment to Compliance with the following information:
- Name of the offeror;
- Details of the gift;
- Approximate value of the gift;
- Nature of relationship with the offeror.
- Accept or decline the gift/entertainment depending on value, type and guidance received from Compliance.
Note: All gifts and entertainment must be reported to Compliance immediately
How do we identify conflicts of interest?
In order to manage conflicts of interest effectively, it must be identified as soon as possible after it occurs or when it is clear that a conflict of interest could arise from a situation. To determine whether there may be a conflict of interest, CEB looks at whether there is a material risk of damage to the client by evaluating if CEB or one of our employees:
- is likely to make a financial gain, or avoid a financial loss, at the expense of the client
- 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
- has a financial or other incentive to favour the interest of another client, group of clients or any other third party over the interests of the client
- 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 legislated commission or reasonable fee for that service
Our policy defines possible conflicts-of-interest as, inter alia:
- conflicts of interest between CEB and the client
- conflicts-of-interest between our clients if we are acting for different clients and the different interests’ conflict materially
- conflicts-of-interest where associates, product suppliers, distribution channels or any other third party is involved in the rendering of a financial service to a client
- storing confidential information on clients which, if we would disclose or use, would affect the advice or services provided to clients. We may only receive commissions authorised in terms of applicable legislation, which is set out above
CEB maintains a register of potential conflict risks, taking into consideration all business areas and income streams. The register is updated with all new conflicts identified, and to ensure completeness, it is reviewed on an annual basis. Apart from the register of actual conflict of interests, record must be kept of potential conflict of interest and closely monitored by the KI/assigned staff.
All employees, including internal compliance officers and management, are responsible for identifying specific instances of conflict and are required to notify the KI of any conflicts they become aware of. The KI will assess the implications of the conflict and how the conflict should be managed and act impartially to avoid a material risk of harming clients’ interests.
How we avoid and mitigate conflict of interests
CEB will create awareness and knowledge of applicable stipulations of the General Code of Conduct and relevant legislation relating to conflict-of-interest, through training and educational material.
We will ensure that all employees and representatives of CEB understand and adopt the Conflict-of-Interest Management Policy.
We regularly inspect our commissions, remuneration, fees and financial interests proposed or received in order to avoid being non-compliant.
CEB keeps a register for the recording of a conflict of interest and once a conflict of interest has been identified, it is appropriately addressed and managed.
If an employee of CEB suspects the possibility of a potential conflict-of-interest occurring, this must be brought to the attention of the Compliance Team for recording in the register and for investigation into the severity of the conflict.
After the Compliance Team has been briefed on the possible conflict-of-interest, one of the relevant KI’s will assess this identified conflict. The KI’s will consider whether the conflict is actual or perceived, what the value of the conflict or exposure is and the potential reputational risk. Compliance and management will then agree on the controls that need to be put in place to manage the conflict.
Where there is no other way of managing a conflict, or where the measures in place do not sufficiently protect clients’ interests, the conflict must be disclosed to the affected clients to allow them to make an informed decision on whether to continue using our services. In all cases, where appropriate and where determinable, the monetary value of non-cash inducements will be disclosed to clients in the record of advice and in the FAIS disclosure document.
We may decline to act for a client in cases where we believe the conflict of interest cannot be managed in any other way.
Our Conflict-of-Interest Management Policy is published in appropriate media and we ensure that it is easily accessible for public inspection at all reasonable times. This policy is available and stored electronically on the Chartered App that is available to all employees, and the CEB website. A copy will be provided upon the client’s request.
How we continuously monitor the Conflict of Interest Management Policy
This policy will be reviewed annually by the Compliance Team, with sign-off required by KIs before the reviewed policy is able to be implemented.
How we train staff on Conflict of interests
All employees and Representatives are required to read this policy to understand what constitutes a conflict of interest and the steps to follow once a potential conflict of interest has been identified.
Comprehensive training on the Conflict-of-Interest policy will be provided to all employees and Representatives as part of specific and/or general training on the FAIS Act. Training will be incorporated as part of all new appointees’ induction and refresher training provided on an annual basis.
The Compliance Officers will include monitoring of the Conflict-of-Interest Management policy as part of their general monitoring duties and will report thereon in the annual compliance report.
Non-compliance will be subject to disciplinary procedures in terms of FAIS and employment conditions and can ultimately result in debarment or dismissal as applicable.
Avoidance, limitation or circumvention of this policy via an associate will be deemed non-compliance.
How we protect our clients
We confirm we will not offer any financial interest to our KIs or representatives for-
(i) favouring quantity of business over quality of service; or
(ii) giving preference to a specific product supplier where more than one supplier can be recommended to a client; or
(iii) giving preference to a specific product of a supplier where more than one product of that supplier can be recommended.
With regard to existing third-party relationships, being the product suppliers listed in our FAIS Disclosure letter, we confirm that we do not have an ownership interest nor are we subject to exclusive training. Furthermore, there aren’t any other circumstances which could lead to a potential conflict of interest. Should any conflicts arise with regard to any of these prior to entering into any business transaction with the client we undertake to disclose it.