Conflicts of Interest Policy

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IMPORTANT DISCLOSURES UNDER UNITED KINGDOM REGULATIONS

 

 

CONFLICTS POLICY

 

1. DEFINITIONS

 

1.1. “relevant persons” Haitong International Securites (UK) Ltd , and where relevant the wider Haitong International Holdings (UK) Limited and all of their managers and employees,.

 

1.2. “the Wider Haitong International Holdings (UK) Limited”: Haitong International Japaninvest KKHaitong International Securities (USA) Inc.Haitong International Holdings (UK) LimitedHaitong International Securites Company Ltd and Haitong International Research Limited.

 

 

2. INTRODUCTION

 

2.1. This policy is specifically designed to cover the activities of the Haitong International Holdings (UK) Limited EEA entity, Haitong International Securites (UK) Ltd. The non-EEA entities comprising the Wider Haitong International Holdings (UK) Limited are subject to separate local regulation but should follow this policy to the extent that it does not conflict with the local regulations they are subject to. 

 

2.2. This policy sets out key areas where Haitong International Securites (UK) Ltd (“Haitong International”) may be subject to a conflict of interest in the provision of services to clients whilst carrying out regulated or ancillary activities. The policy covers those circumstances which either constitute or could give rise to a conflict of interest entailing a material risk of damage to the interest of one or more clients.

 

2.3. The policy describes the structures that have been put in place to limit the consequences of these actual or potential conflicts of interest. The structures make use of both separation of function and Chinese Walls and are designed to ensure that relevant persons maintain an appropriate degree of independence.

 

 

3. ACTIVITIES OF HAITONG INTERNATIONAL HOLDINGS (UK) LIMITED

 

3.1. The main activity of the Haitong International Holdings (UK) Limited and its principal source of income is the provision of sales advice and investment research to institutional fund managers.

 

3.2. A matrix summarizing the key activities undertaken within the various Group entities is set out at in the List of Group Entities at the bottom of the Appendix.

 

 

4. CIRCUMSTANCES WHICH CONSTITUTE OR COULD GIVE RISE TO A CONFLICT OF

INTEREST

 

4.1. We have listed below actual or potential conflicts of interest that could arise entailing a material risk of damage to the interest of one or more clients.

 

4.2. Investment advice

 

·         Conflicts relating to the interests of Haitong International Holdings (UK) and/or its investor clients who are Sales and Trading customers.

·         Substantial Gifts or entertainment;

·         Conflicts relating to differing interests of investment clients who are Research and Trading customers;

·         Front running of client orders by relevant persons.

 

4.3. Investment research:

 

·         Relevant persons dealing on their own account prior to distribution of research to clients;

•       Selective distribution of research to favoured clients or to relevant persons;

·         Provision of research in relation to an entity or group to for which Haitong International Securites (UK) Ltd is also providing other services leading to pressure to produce favourable research;

·         Substantial gifts or entertainment provided to analysts leading to a lack of Independence through undue influence; and

·         Remuneration structures of analysts leading to a lack in independence.

 

 

5. PROCEDURES AND MEASURES TAKEN TO MANAGE CONFLICTS

 

The procedures and measures we have taken to manage the conflicts of interest identified above are summarized below. These procedures and measures are designed to ensure that relevant persons involved in business areas identified above maintain an appropriate degree of independence. The measures taken have been split into firm/ group wide measures and business specific measures.

 

5.1. Group wide measures

 

5.1.1. Chinese Walls

 

Chinese walls separate certain business activities carried out within Haitong International Holdings (UK). The key Chinese Wall arrangements in place are summarized below:

·         Haitong International Securites (UK) Ltd staff are separated from the rest of the Haitong International Holdings (UK) by formal Chinese Wall arrangements which prevent the flow of confidential information to the rest of Haitong International Holdings (UK) These arrangements include physical segregation of the department and policies and procedures governing the security of documents and electronic data.

 

5.1.2. Reporting lines

 

Reporting lines are designed to avoid conflicts arising. However as a small Group it is not possible to entirely remove conflicts.

 

5.1.3. Remuneration Structures

 

Remuneration policies are designed to avoid rewarding behaviour that could lead to the disadvantage of clients. Remuneration of analysts is not linked to any specific transaction but is based upon the general profits of the firm. Each department’s remuneration is decided separately except that all staff remuneration is linked to the general profits of the firm.

 

5.1.4. Training

 

All staff have received training on the procedures Haitong International Holdings (UK) has put in place to manage conflicts of interest.

 

5.1.5. Substantial Gifts and Entertainment

 

All gifts given and received are reported to the Compliance Officer.

 

5.1.6. Restrictions on personal account dealing

 

All personal account deals require pre-clearance from the Compliance Officer.

 

5.2. Business specific measures

 

5.2.1. Research and Sales - Exposure to unpublished price sensitive information.

 

Should research or sales staff inadvertently receive Unpublished Price Sensitive Information, they must cease activity in their research or sales function in respect of the securities issued by the particular subject company and inform Compliance immediately.

 

5.2.2. Management of Conflicts Relating to Research

 

All of the research produced in the UK by Haitong International Holdings (UK) meets all of the criteria specified to be classified as independent investment research. In order to minimize the potential for conflicts of interest to arise in relation to the provision of research the following measures have been put in place:

·         Research is a client facing service, and is the stand-alone core service. In particular, trading staff do not supervise analysts; do not decide on coverage, timing or content of research and do not determine analyst's remuneration.

·         Haitong International Securites (UK) Ltd does not offer or agree to provide favourable investment research on any company or security, nor to make or change any particular recommendation.

·         Research analysts' remuneration is not linked either to specific transactions nor to their stock recommendations.

·         Sections of draft research reports may be shown to subject companies before publication, but only for the purpose of verification of factual statements. Draft research reports must not include recommendation or price targets or any references to fair value.

·         Any comments relating to the analyst's opinions are required to be ignored or, if necessary, escalated to Compliance.

·         If any inducement were to be offered by any party to an analyst in order to secure favourable treatment from that analyst, this must be reported to Compliance.

·         Responsibility for the content of research recommendations rests primarily with the investment analysts named as having produced them. Editorial control is not given to anyone whose role or interests might reasonably be considered to conflict with the interests of the clients to whom the esearch is to be published or distributed.

·         The timing of publication of research is controlled by the Head of Research. Research is distributed to clients simultaneously.

·         Analysts must not discuss the potential timing or content of research with anyone outside the research department except for the purpose of checking factual accuracy until such time as either the research has been distributed to all relevant clients.

 

List of Group Entities

 

 

Investment Research

Research Sales

Haitong International Securities (UK)

YES

YES

Haitong International Securities (USA) Inc.         

 

YES

Haitong International Japaninvest KK

YES

YES

Haitong International Research Limited

YES

 

Haitong International Holding (UK) Limited

 

 

Haitong International Securities Company Limited

 

YES