policies
conflicts of interest
A conflict of interest can be defined as a circumstance where Sidekick’s professional interests are directly or indirectly in competition with those of our clients or employees.
The existence of a conflict of interest does not necessarily imply wrongdoing on anyone’s part. Conflicts of interest must, however, be declared as soon as possible; and adequate measures put in place to manage any associated risks.
All employees should declare all potential conflicts – the CCO can provide advice in the event that it is unclear whether or not to declare. We will take all appropriate steps to identify conflicts of interest. All conflicts of interest will be prevented wherever possible, mitigated, managed or ultimately disclosed (to our clients) as a measure of last resort if they cannot be resolved satisfactorily. Any conflicts will be considered individually and treated on a risk-based approach.
There may be circumstances where there is no direct financial gain, but another tangible benefit has occurred; this should also be declared as a potential conflict. This should be considered holistically and could therefore include family or close associates[1] acting on the advice of employees or where common links exist within commercial ownership structures.
This also includes where the individual or their close associate is a company Director or has ownership of a shareholding. This may be particularly relevant for Non-Executive members of Sidekick’s Board who should be subject to ongoing assessments (led by the Chair with input from the CEO) of their ability to remain independent.
Conflicts of interest can be sub-categorised into conflicts between (1) Sidekick including its employees and our clients (Firm to Client) or (2) between our clients (Client to Client).
Firm to Client
A conflict may arise where Sidekick (or its employees):
- Make a financial gain or otherwise benefit at the expense of our client(s).
- Have an interest in the purpose of the services provided to client(s) which is different to that of our client(s).
- Engages in the same activity as our client(s).
- Receives an inducement[2] from a 3rd party in connection with the services provided to our client(s).
- Allow outside interests (including personal relationships or financial interests) to influence a commercial decision.
Client to Client
A conflict may arise where Sidekick (or its employees):
- Have a financial interest in the interests of a particular client(s) at the expense of another client(s).
- Engage in simultaneous trading activities for multiple clients at the same time.
There are likely to be range of measures which we can take to satisfactorily manage both main types of conflicts of interest, the most common practices we will adopt are as follows:
- Segregation of duties – to ensure that sufficient independent oversight exists within key processes. Ultimately, employees may be excluded from decision-making in the event that they are conflicted by their outside interests (for example, within the negotiations for a supplier contract).
- Supervision – ensuring that relevant employees are not managed or held accountable in such a way that would also give rise to a conflict which cannot be mitigated.
- Information barriers – designed to control the exchange of information. This could include scenarios where Sidekick issues any market commentary or investment research which is likely to influence the trading behaviour of our clients which could in turn generate commercial activity.
- Personal account dealing controls – this is explained in more detail later in this policy, but we will restrict the likelihood of an employee’s personal financial interests from conflicting with those of our clients.
- Restricting and/or monitoring of outside business interests.
- Order handling guidelines to create a clear and transparent process for how all such transactions are to be executed; including where instructions for multiple clients are being dealt with simultaneously.
We will ensure that we are in a position to evaluate any payment order flow arrangements – i.e., where our brokers could be unduly incentivised to send order flow to particular entities.
The order handling process will be predominantly executed by our custody providers which therefore mitigates against the risk that employee investments could receive preferential treatment. - Remuneration – removing any direct or structural links with the potential to create conflict. This may be particularly important where functions are under a duty to remain independent, but the reward structure is based on narrow organisational performance targets.
- Fees & charges – ensuring that senior management are sufficiently clear on their obligations when agreeing contractual terms with providers, particularly where the services are multi-purpose in nature.
Inducements
It is Sidekick’s general policy not to accept or pay any fees, commission or non-monetary benefit from/to any party other than our clients in relation to our portfolio management activities. This is to ensure that there is no inherent product or provider bias within our business model and that we are ultimately acting in our client’s best interests at all times.
This does not apply to any fee, commission or non-monetary benefit which will enhance the quality of the service we can provide to our clients – as long as any potential conflicts are considered and managed appropriately in line with this policy. This could include, for example, the fees payable to our custodians or for the purposes of executing trades on behalf of our clients.
Firms are permitted to retain what are referred to as “acceptable minor non-monetary benefits ” although these should still be subject, on a case-by-case basis, to a consideration of whether or not a conflict of interest has been created and whether the item would constitute a declarable gift or entertainment (see below). The examples in the footnote are not exhaustive – as well as being a demonstrable ‘value-add’ to the client, the benefit should not be of a scale or nature so as to impair our overall ‘best interests’ duty to the client nor adversely impact our decision making.
Research
The overarching requirement is again mainly through a conflicts of interest lens, the objective of the FCA’s rules are to prevent research from being used an inducement to other services offered by the same provider. We should ensure that all research is paid for from Sidekick’s own resources and not provided by firms with whom we are contracted for another purpose – this is commonly known as ‘unbundling’.
Trial periods should not last no longer than 3 months and not be commenced within at least 12 months of any previous trial period.
There is a list of specified forms of research content on which the FCA has provided a view on what is/is not likely to constitute an inducement. This is not replicated within this policy, but any such arrangement should be subject to evaluation by the CCO and the Chief Investment Officer prior to sign-up.
The ultimate objective of any approach which we decide to take will be to remove, in so far as is possible, the conditions or the perception that Sidekick or its employees have not acted in the best interests of our clients.
The simplest form of mitigation is likely to be preventing the conflict from occurring in the first place.
We would only disclose the existence of a conflict to a client in the event that we could not satisfactorily manage the risks internally. Where disclosure would be required, we would:
- Describe, in a durable medium, the general nature and source of the conflict of interest to the client before undertaking their business.
- Clearly state that the organisational and administrative arrangements established by the firm to prevent or manage that conflict are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented.
- Explain the risks that arise as a result of the conflict and the steps taken to mitigate these risks
- Provide sufficient detail to enable that client to make an informed decision in relation to the service in the context of which the conflict has arisen.
This course of action would be taken as a ‘last resort’ only. It is the responsibility of all employees to understand the requirements of this conflicts of interest policy and to declare any and all sources of conflict without delay. In practice, this would usually be carried out during the employee onboarding process but, otherwise, should be declared direct to the CCO on an ongoing basis in the event that conflicts arise. Conflicts may be enduring or event-driven and therefore mitigating controls may not need to be permanent.
A central conflicts of interest register will be maintained.
The Board and Executive Committee will be provided with regular metrics on the level of risk presented by existing conflicts of interest; this will be supplemented by an annual report.
Sidekick’s employees are expected to apply sound judgement at all times – collectively, we should avoid personal conflicts wherever possible and declare them immediately when they do arise.
No commercial decisions should be taken where there is a connection with an employee’s personal or outside business interests until steps have been taken to manage the conflict.
[1] Defined as a spouse, partner, close relative or business partner.
[2] A pledge, promise or any other action (whether financial or not) which causes an individual to follow a course of action.
