Purpose and scope
As an organisation offering financial services to clients, Index Solutions may from time to time have an interest which conflicts with the interests of its clients/investors. It is also possible that conflicts could arise between the parties over time.
Index Solutions has established a conflict of interests policy setting out the controls and procedures which help to identify and appropriately deal with any conflicts.
This conflict of interest policy is directed not only to directors but to all employees i.e. management or any staff member that has access to confidential information and is designed to assist employees in identifying situations that could present potential conflicts of interests and to provide Index Solutions with a procedure which, if observed, will allow a transaction to be treated as valid and binding even though the responsible person has or may have a conflict of interest with respect to the said transaction.
Index Solutions – Index Solutions , a duly incorporated company in terms of the Companies Act.
Conflict of interest – Any circumstances described below in the paragraph “conflict of interest defined”.
Employee – Includes Directors, Key Individuals and all Employees i.e. management, or any staff member that has access to confidential information.
Key individual – In relation to an authorised financial services provider, or a representative, carrying on business as;
- a) a corporate or unincorporated body, a trust or a partnership, which means any;
– natural person responsible for managing or overseeing, either alone or together with other so responsible persons, the activities of the body,
– trust or partnership relating to the rendering of any financial service; or
- b) a corporate body or trust consisting of only one natural person as a member, director, shareholder or trustee, means any such natural person.
Financial interest – A financial interest includes cash, cash equivalent voucher, gift, services, advantage, benefit, discount, domestic or foreign travel hospitality, accommodation, sponsorship or other incentive, or valuable consideration other than:
- a) an ownership interest;
- b) Training, that is not exclusively available to a selected group of providers or representatives, on –
(i) products and legal matters relating to those products;
(ii) general financial and industry information;
(iii) specialised technological systems of a third party necessary for the rendering of a financial service; but excluding travel and accommodation associated with that training.
Ownership interest – means;
- a) any equity or ownership interest, for which fair value was paid by the owner, other than equity or an ownership interest held as an approved nominee on behalf of another person; and
- b) includes any dividend, profit share or similar benefit derived from that equity or ownership interest.
Immaterial financial interest – any financial interest with a determinable monetary value the aggregate of which does not exceed R1,000 in any calendar year from the same third party in that calendar year received by:
- a) a provider who is a sole proprietor;
- b) a representative for that representative’s direct benefit;
- c) a provider (Index Solutions) who for its benefit or that of some or all of its representatives, aggregates the immaterial financial interest paid to its representative.
Financial services provider – Means any person, other than a representative, who as a regular feature of the business of such person;
- a) furnishes advice; or
- b) furnishes advice and renders any intermediary service; or
- c)Renders an intermediary service.
Representative – Means any person who renders a financial service to a client for or on behalf of a FSP, acting in terms of their conditions of employment or any other mandatory agreement; but excluding a person who renders clerical, technical, administrative, legal, accounting or other services in a subsidiary or subordinate capacity; and which clerical, technical, administrative, legal, accounting or other service does not require judgment on the part of that person or does not lead a client to conclude any specific transaction in respect of a financial product in response to general enquiries.
Third party – Means;
- a) a product supplier;
- b) another FSP;
- c) an associate of a product supplier or a FSP;
- d) a distribution channel;
- e) any person who in terms of an agreement or arrangement with a person referred to in paragraph a) to d) above provides a financial interest to a provider or its representatives.
Conflict of interest defined
A conflict of interest is a situation in which financial or other personal considerations have the potential to compromise or bias professional judgment and objectivity. Employees of the company must never permit their personal interests to conflict, or appear to conflict, with the interests of the company, its clients or affiliates. Conflicts of interest may be direct or indirect i.e. the interest of the employee or of another person such as a relative or of friend of the employee or that of an organisation in which the employee or such other person might have an interest. The fact that one of the interests does exist does not mean that the conflict if it exists is material enough to be of a practical importance. The facts of each situation will determine whether the interest in question is such as to bring it within the area of potential conflict.
One of the facts taken into consideration is the amount of business involved, i.e. whether the employee could influence the decision of Index Solutions in respect of the transaction and the influence the employee could have on an Index Solutions decision with respect to the transaction, and whether the interests is of such nature that it might affect the objectivity or the business judgment of the employee. In assessing whether a conflict exists, one must take into consideration the impact such conflict will have on the company reputation and financial loss.
Types of transactions in which conflicts might arise;
- Real or perceived financial gain resulting from recommendations to our clients at a cost to the client.
- An outcome in service delivery or a transaction executed that may differ from the real interest of the client.
- Any non-cash incentives that may be received by the business from affecting any predetermined transaction and / or product.
- Effecting a transaction and / or product that may result in a benefit to another party other than the client.
- Supplying of services to third parties.
- Dealings with other organisations.
- Dealing in property.
- The investment and borrowing of funds and an interest in a business unrelated to the business of Index Solutions.
- Compensation arrangements and employment contracts directly affecting the person / employee involve obvious conflicts.
- Use of confidential information which includes but does not limit whether it is for the benefit of a similar or competitive organisation.
- The potential conflict or activity would result in the reputational risk to the company.
Financial interest (Gifts, gratuities and entertainment, fees etc.,)
Index Solutions may only receive or offer the following financial interest;
- Receive commissions authorised in terms of applicable legislation; or
- Fees authorised in terms of applicable legislation, or fees or remuneration for services rendered to a third party, if those fees are reasonably commensurate to the service being rendered; or
- Fees for the rendering of a service which is not covered by legislation and are specifically agreed to by a client in writing and may be stopped at discretion of the client; or
- A limited immaterial financial interest as defined; not more than a R1000 per annum; or
- A financial interest for a consideration or fair value that is reasonably commensurate to the value of the financial interest that is paid by the provider or representative at time of receipt thereof.
An immaterial financial interest is any financial interest with a determinable monetary value, the aggregate of which does not exceed R1000 in any calendar year from the same third party in that calendar year received by an FSP or its representatives. Where the financial interest is for the representative’s direct benefit, the R1000 limitation applies to the representative. However, where an FSP aggregates the immaterial interest paid to its representatives for itself or that of some or all of its representatives, the R1000 limitation is per FSP (and not per representative).
Index Solutions will not offer any financial interest to any third party for:
- Giving preference to the quantity of business secured for the provider to the exclusion of quality service;
- Giving preference to a specific product supplier where more than one supplier can be recommended to a client;
- Giving preference to a specific product of a supplier where more than one product of that supplier can be recommended.
No gifts, gratuities, entertainment, or other benefits to be given or accepted in order to attract or influence business activity.
Note that the R1000 limit applies per consultant / key individual and not per FSP or product supplier.
This includes but is not limited to:
- Golf days;
- Tickets for sporting events.
Excluded from the above prohibition is bona fide training on products and or technical systems, or general industry information sessions but;
- The sessions cannot be limited to only a selected group of people;
- Index Solutions must invite all Financial Advisors not just those with largest volume of assets;
- All Financial Advisors have to pay for their own costs.
All fees, commission and remuneration received / paid by Index Solutions must be recorded.
All vouchers, gifts, services, advantages, benefits, discounts, domestic or foreign travel, hospitality, accommodation, sponsorship, other incentive or valuable consideration, given or received must be declared irrespective of value and entered into the gifts register.
Management and mitigation of conflicts
All employees are responsible for identifying specific instances of conflict;
- In the event an employee suspects a potential conflict of interest, he / she will be obliged to report it to their Manager, who with Compliance shall determine whether there exists a conflict of interest that is subject to this policy and assess as to whether it is of a material significance, taking into consideration the impact that such a conflict will have on the company’s reputation or financial position.
- All conflicts must be discussed with the Directors before any decision is made.
Once a conflict has been identified, the necessary controls will be put in place in order to appropriately and adequately manage the conflict;
- Maintain appropriate reporting to ensure the integrity of the conflicts of interest management process, which will be reviewed annually.
- Maintain a register of identified conflicts of interest, which will be updated upon the occurrence of a conflict of interest.
- Training on the conflict of interest policy will be provided to all employees on an annual basis.
- Compliance will monitor all documentation to ensure that the policy is being complied with.
- Non-compliance of this Policy can result in disciplinary action being taken against the employee, including possible termination of services.
Disclosure of conflicts
Where a conflict is identified and a decision made, it must be disclosed in writing as soon as possible to the client that the interests may be compromised with regards to the transaction. This applies regardless of whether the decision was made to cease doing business or continue with the business at hand despite the existence of the conflict.
- This policy shall be reviewed at least annually by the Board of Directors.
- Any changes to the policy shall be communicated immediately to all employees.
- All employees are required to read the policy and sign a declaration form acknowledging that they understand the contents of the policy