CF Global Trading, LLC Disclosures
- Customer Identification Program
- Summary & Disclosure of Business Continuity Plan
- SEC Rule 606 Order Routing Disclosure
- Customer Complaints
- FINRA Broker Check
- SIPC Disclosure
- Statement to Clients
- Extended Hours Trading Risk Disclosure
CF Global Trading (UK) Ltd Disclosures
CF Global Trading (UK) Ltd is authorised and regulated by the Financial Conduct Authority, No. 211134. It is a separate but affiliated entity of CF Global Trading, LLC.
CF Global Trading (Hong Kong) Limited Disclosures
CF Global Trading (Hong Kong) Limited is licensed and regulated by the Securities and Futures Commission. It is a separate but affiliated entity of CF Global Trading, LLC.
CF Global Trading, L.L.C. (“CF Global” or “We”) understands that our clients’ privacy is important and we are committed to maintaining their confidentiality. The following disclosure explains our policy regarding non-public information and the process we have in place to protect our clients’ privacy and the confidential information we receive from our clients.
We collect non-public information about clients and counterparties from various sources, which include the following:
- Information we receive on applications and other forms (such as name, address, e-mail address, telephone number, Social Security Number, assets and income);
- Information about our clients’ financial transactions with us or others; and
- Information that we receive from non-affiliated third parties (such as credit rating agencies) or other entities who may service our clients’ accounts from time to time.
We may use our clients’ information in order to operate our business in a prudent manner in accordance with industry standards and applicable law, which may include servicing and maintaining accounts and transactions, offering a broad range of services and products, verifying income and assets, responding to inquiries and requests, preventing fraud, monitoring and archiving communications and verifying our clients’ identity in accordance with the USA PATRIOT Act.
We do not disclose any non-public information to any non-affiliated third parties other than as permitted by law. We may disclose or share non-public information about our clients to our affiliates or third parties involved in servicing our clients’ accounts. We do not otherwise provide information about our clients to outside firms, organizations or individuals except to our attorneys, accountants and auditors and as permitted by law. We will, however, release information about our client if directed to do so by such client or if compelled or required to do so by law or self-regulatory organization (“SRO”) regulations.
We restrict access to our clients’ information to those employees who need to know such information to provide products or services to our clients. We maintain physical, electronic and procedural safeguards to guard and protect all clients’ information from unauthorized access, accidental or intentional manipulation, loss and destruction. Employees who violate these policies are subject to disciplinary action, including termination. Our clients’ information is secure and is not shared with a third party unless such third party is involved in servicing our clients’ relationship with CF Global or as required, in limited situations, by law or SRO regulations.
CF Global Trading, LLC Customer Identification Program
To help the U.S. government fight the funding of terrorism and money laundering activities, Federal law requires all U.S. financial institutions, such as CF Global, to obtain, verify and record information that identifies each individual or institution that establishes a customer relationship with such financial institutions.
If a client enters into a customer relationship with CF Global, which includes opening an account at CF Global, we will request certain financial and legal information about such client, including such client’s legal name, tax identification number and address, and the identity of any individuals with any authority or control over such client. We also verify such information to the extent required as follows:
- Taking steps to check the information provided – to verify that the clients are who they say they are.
- Consult applicable governmental agency lists of known or suspected criminals, terrorists and terrorist organizations to determine if anyone on any such list is attempting to open or maintain an account.
- Conduct, in certain instances, additional due diligence when accounts are opened for foreign persons, institutions or other clients.
The U.S. Department of the Treasury, U.S. Securities and Exchange Commission (the “SEC”) and FINRA rules already require clients to provide most of this information.
If a client refuses to provide the information requested or a client’s identity cannot be verified, CF Global may not be able to establish or maintain a business relationship with such client. If such client has already established a relationship with CF Global, we may have to terminate such relationship. If a client establishes a relationship with CF Global and refuses to provide this information, we may be required to report such refusal to appropriate governmental authorities.
Pursuant to U.S. regulations issued under section 311 of the USA PATRIOT Act, 31 CFR 103.192, we are prohibited from opening or maintaining a correspondent account for, or on behalf of the “Specified Institutions” or Jurisdictions of Primary Money Laundering Concern (https://www.fincen.gov/resources/statutes-and-regulations/311-special-measures). The regulations also require us to notify you that your correspondent account with our financial institution may not be used to provide the Specified Institutions with access to our financial institution. If we become aware that the Specified Institutions are indirectly using the correspondent account you hold at our financial institution, we will be required to take appropriate steps to prevent such access, including terminating your account.
CF Global Trading, LLC Summary & Disclosure of Business Continuity Plan
CF Global has prepared, and has always maintained a current Business Continuity Plan (“BCP”) in compliance with Financial Industry Regulatory Authority (“FINRA”) Rule 4370. This document outlines our plans to continue our business and meet our existing obligations to our clients in the event of a significant business disruption (“SBD”). Our BCP is summarized below:
CF Global’s policy is to respond to a SBD by safeguarding our employees’ lives and our property, making a financial and operational assessment, quickly recovering and resuming operations, protecting all of our books and records and allowing our clients to transact business. We will make every reasonable effort to meet our obligations to our clients at all times. We have in place a BCP that outlines essential parts of our business and discusses in detail:
(1) Data back-up and recovery (hard copy and electronic);
(2) All mission critical systems;
(3) Financial and operational assessments;
(4) Alternate communications between our clients and us;
(5) Alternate communications between our employees and us;
(6) Alternate physical location of our employees;
(7) Critical business constituents, banks, and counter-party impact;
(8) Regulatory reporting;
(9) Communications with regulators; and
(10) How CF Global shall assure our clients’ prompt access to their funds and securities (if applicable) in the event that we determine that we are unable to continue our business.
During the time that CF Global may not be in operation, we shall provide alternative contact information to our clients via our website at www.cfglobal.com in order to effect transactions and for any other required client activity. In the event you are unable to reach us via the information provided on our website or by calling us at 212.888.4711, please contact our clearing firm Merrill Lynch, Pierce, Fenner and Smith Incorporated (Broadcort) at 646.743.0110.
CF Global Trading, LLC SEC Rule 606 Order Routing Disclosure
SEC Rule 606 requires all brokers and dealers to make publicly available for each calendar quarter a report on its routing of non-directed orders in national market system securities during that quarter. The reports must identify the significant venues to which clients’ orders were routed for execution during the applicable quarter and disclose certain aspects of the broker or dealer’s relationship with such venues. The most recent such quarterly report for CF Global can be found at the following link: https://vrs.vista-one-solutions.com/sec606rule.aspx.
Furthermore, pursuant to SEC Rule 606(b), at the request of any of our clients, we will provide to such requesting client information regarding the identity of the venue to which such requesting client’s orders were routed for execution in the six (6) months prior to such request, whether such orders were directed orders or non-directed orders and the time of the transactions, if any, that resulted from such orders. Should you require such information, please send an email to CFGTcompliance@cfglobal.com with a subject line of “Rule 606 Request” and all pertinent information necessary to identify the orders(s) subject to the request.
CF Global Trading, LLC Customer Complaints
Any customer complaint should be forwarded to CF Global’s Chief Compliance Officer via email at CFGTCompliance@cfglobal.com or via telephone at 212.888.4911. Physical mail in relation to these items should be directed to: CF Global Trading, L.L.C., Attn: Compliance, 60 East 42nd Street, Suite 1455, New York, NY 10165.
CF Global Trading, LLC FINRA Broker Check
The FINRA BrokerCheck program allows the public to learn current regulatory information about FINRA members and registered representatives. You can obtain more information by visiting: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/.
CF Global Trading, LLC SIPC Disclosure
CF Global is a member of the Securities Investor Protection (“SIPC”). Information about account protection coverage provided by SIPC can be obtained by visiting their website atwww.sipc.org.
CF Global Trading, LLC Notice to Canadian Clients under National Instrument 31-103
Pursuant to the international dealer registration exemption in National Instrument 31-103, the Company is informing you of the following:
- CF Global Trading LLC (the “Company”) is not registered in Canada and is advising you, its client, in reliance upon an exemption from the dealer registration requirement under National Instrument 31-103.
- The name and address of the agent for service of Company in Ontario is:
Laurie J. Cook
Borden Ladner Gervais LLP
4400 – 40 King Street West
- Clients may have some difficulty in enforcing any legal rights they may have against the Company because the Company is resident outside Canada and all or a substantial portion of its assets are situated outside Canada. The Company is not fully subject to the requirements of the Securities Act (Ontario) and the regulations thereunder concerning proficiency, capital, insurance, record keeping, segregation of funds and securities, statements of account and portfolio, and conflicts of interest.
CF Global Trading, LLC Extended Hours Trading Risk Disclosure
You should consider the following points before engaging in extended hours trading. “Extended hours trading” means trading outside of regular trading hours.” “Regular trading hours” generally means the time between 9:30 a.m. and 4:00 p.m. Eastern Standard Time.
Risk of Lower Liquidity: Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular trading hours. As a result, your order may only be partially executed, or not at all.
Risk of Higher Volatility: Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in extended hours trading than in regular trading hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price when engaging in extended hours trading than you would during regular trading hours.
Risk of Changing Prices: The prices of securities traded in extended hours trading may not reflect the prices either at the end of regular Trading hours, or upon the opening the next morning. As a result, you may receive an inferior price when engaging in extended hours trading than you would during regular trading hours.
Risk of Unlinked Markets: Depending on the extended hours trading system or the time of day, the prices displayed on a particular Extended hours trading system may not reflect the prices in other concurrently operating extended hours trading systems dealing in the same securities. Accordingly, you may receive an inferior price in one extended hours trading system than you would in another extended hours trading system.
Risk of News Announcements: Normally, issuers make news announcements that may affect the price of their securities after regular trading hours. Similarly, important financial information is frequently announced outside of regular trading hours. In extended hours trading, these announcements may occur during trading, and if combined with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security.
Risk of Wider Spreads: The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security.
CF Global Trading, (UK) Ltd Order Execution Policy
Under the EU Markets in Financial Instruments Directive 2014/65/ EU (MiFID II) and the rules of our regulator, the Financial Conduct Authority [FCA], we are required to have an order execution policy and to take all sufficient steps to obtain the best possible results for our clients when executing or receiving and transmitting client orders.
Our execution policy is applicable to CF Global Trading (UK) Ltd [CFG]’s Professional Clients and Eligible Counterparties as determined in accordance with the client classification rules of the FCA. CFG does not engage in retail client business.
CFG’s execution policy is applicable to clients and where we have received an order:
- To execute on their behalf in respect of financial instruments covered by the Markets in Financial Instruments Directive; or
- Which we pass on (i.e. transmit) at our discretion to another broker or dealer (“third party”) for execution.
This duty of best execution only applies when executing orders “on a client’s behalf”.
We will be executing orders “on a client’s behalf” where the client legitimately relies on us to protect his or her interests in relation to the pricing or other aspects of the transaction that may be affected by how we execute the order. For example, this will be the case when we:
- execute an order by dealing as agent;
- execute an order by dealing as matched principal on behalf of a client; and
- “work” an order on a client’s behalf.
This policy only applies to transactions in financial instruments falling within the scope of MiFID II. It will therefore cover cash equities and equity-like shares, depositary receipts, debt instruments, funds and derivatives in interest rates, currencies, equity and indices.
When executing a client order we will seek to obtain the most favourable terms taking into account our regulatory obligations, any specific terms that the client may impose and the sequence that we receive orders. Where there is only one venue and therefore the only pricing consideration is execution time, comparable prices are precluded.
The Quality of Execution
CFG’s policy in providing Best Execution is so far as possible, and subject to the processes set out below, to exercise the same standards and operate the same processes across all the different markets, exchanges and venues on which it executes your orders.
When we execute an order on your behalf, or receive and transmit an order for execution on your behalf, we take all sufficient steps to achieve the best possible result for your order in accordance with MiFID II and our Execution Policy, subject to any specific instructions that you give us, the priorities you place upon us in filling the order, the nature of your order, the market or the source of liquidity (“venue”) in question and any other factors relevant to execution.
The diversity in markets and venues mean that different factors including price, costs, the need for a timely execution, the liquidity of the market, the size of the order, whether it is executed on a regulated market, MTF, OTF or OTC will have to be taken into account when assessing Best Execution. Price is not always the final determinate: Where liquidity is a priority, the best reflected price may be irrelevant. In the absence of express and explicit instructions from you, we will exercise our own discretion in determining the factors that need to be taken into account to provide you with the best possible execution including our understanding and experience of the market in question, our knowledge of your investment process, and the nature of the trading service you require of CFG.
CFG always acts as either agent or matched principal on your behalf and always charges a transparent commission. A “net price” will only be shown when specifically requested by the client. CFG never marks up or marks down the price of a security including OTC markets and never takes positions for ourselves except in the event of an error.
We believe the policy and processes, defined below, provide the best balance across a range of sometimes conflicting factors to achieve the most favourable terms reasonably available on a consistent basis. CFG is, however, not under an obligation to obtain the best possible result for each individual order, and our commitment to provide you with Best Execution does not mean that we owe you any fiduciary or other responsibilities over and above our specific regulatory obligations.
CFG will take into consideration a range of different factors to determine the manner in which best execution will be executed including, but not limited to:
- Size and nature of the order
- Likelihood of execution
- Speed of execution
- Likelihood of settlement
- Cost of execution
CFG seeks to obtain the most favourable terms reasonably available when executing an order on your behalf. To achieve this CFG will:
- Ensure its regulatory obligations are met with regard to client classification;
- Carefully consider the elements of order execution including the factors set out above, while taking into account:
- The characteristics of the client order
- The client’s specific instructions and the sequence with which the order is received
- The characteristics of financial instruments that are the subject of that order
- The characteristics of the execution venues to which that order can be directed
- Employ sophisticated technology for routing, monitoring and executing orders such that the execution outcome is competitive and in the best interests of the client on a consistent basis; and
- Regularly review overall execution quality.
Execution Process – Venue Selection
In meeting our obligation to take all sufficient steps to obtain the best possible result when executing your order in transferable securities, we may access various sources of liquidity, including: Regulated Markets. Multilateral Trading Facilities, Systematic Internaliser, Organised Trading Facilities, Market makers and other alternative liquidity providers or non EEA entities performing similar functions.
CFG considers the combined effect of all execution criteria and execution factors referred to above when determining the best venue for execution. Where comparative factors differ across execution venues (e.g. cost of execution, cost of settlement), CFG applies the following priorities to determine the most appropriate venue unless specifically instructed otherwise:
- Price and size improvement. Dependent on the nature of the order, CFG may be able to obtain a more favourable outcome by accessing alternative pools of liquidity, or aggregating similar orders to realize benefits of scale. CFG will also seek opportunities for client orders to benefit from order size guarantees offered by brokers, exchanges and other market participants;
- Speed and certainty of execution. Especially during volatile market conditions CFG will focus on execution venues that have a proven track record for providing liquidity and competitive pricing. At all times CFG seeks to provide the fastest execution reasonably possible under the parameters of the client’s instructions; and
- Overall execution quality and cost. When determining how and where to route or execute an order, CFG draws on extensive experience with various markets, market makers and electronic networks focusing on prompt, reliable and cost effective solutions.
CFG uses automated systems to route and execute some client orders. When a customer order is received it is routed to the Best Execution venue as determined by the criteria above. Certain large orders may require special handling to minimize market impact and be managed by CFG’s trading desk in a manner consistent with CFG’s Best Execution principles. This may include algorithmic trading tools where deemed appropriate by the CFG’s traders’ discretion.
CFG uses Direct Electronic Access (DEA) mechanisms through various investment banks and local brokers and do not maintain direct membership to any exchanges, although our associate firm, CF Global Trading LLC, does have membership to ARCA and BATS. In these cases, CFG maintains full control of the order. In other instances, we may transmit the order to another broker as an agent or an introducing broker in which case we monitor the execution closely. We carefully select the brokers we use and satisfy ourselves that they have arrangements in place to enable us to comply with our Best Execution obligation to you. Orders in Asia and the Americas may be passed to an affiliate.
In extreme volume and volatility situations, exchange system constraints require automated trading solutions to be switched off and/or electronic routing to be suspended in favour of manual execution. Such events lead to further execution delay and increased market volatility. Clients should be aware of the following risks associated with volatile markets, especially at or near the close of the standard trading session: an order may be executed at a substantially different price from the quoted bid or offer, or the last reported sale price at the time of the order entry, or an order may be only partially executed or may be executed in several transactions at different prices; and opening prices may differ substantially from the previous day’s close.
We continuously assess the execution venues available in respect to any product that we trade in order to ensure they continue to allow us to provide you with the best possible results for your orders.
The CFG execution venues can be found at [add website address] which details the instruments we are involved with and which execution venues are used for each instrument. The list is not exhaustive but represents those execution venues and third parties that we place significant reliance upon.
We believe that the execution venues detailed are appropriate to providing best execution to you as these venues enable us to obtain, on a consistent basis, the best possible result for the execution of client orders. The charges passed down to the client are consistent with the cost to the firm of dealing with each execution venue so as not to unfairly discriminate against any one execution venue.
Where we are not responsible for the actual execution but instead transmit the order to a third party for execution, we will ensure that the third party is contracted to providing us best execution.
In certain financial instruments, there may only be one execution venue, and in executing a trade in such circumstances we shall presume that we have provided the best possible result in respect of these types of financial instruments.
Fees and Inducements
The fees that CFG charge the client are detailed in the client’s Terms and Conditions and don’t vary regarding execution venue. CFG receive no inducements from any execution venue.
Review & Monitoring
CFG monitors the effectiveness of its order execution arrangements and order execution policy on an on-going basis to identify and, where appropriate, correct any deficiencies. CFG will assess on a regular basis, using the execution venues or the broker to whom we transmit orders for execution. The information from the periodic reports of the top five execution venues and the execution quality report will be taken into account when available. This is to provide for the best possible result for our clients on a consistent basis and to establish whether CFG needs to make changes to its execution arrangements.
As part of the monitoring process, CFG have access to sophisticated Transaction Cost Analysis (TCA) analytics, currently supplied by LiquidMetrix (but this could be subject to change) to aid the reviewing and monitoring process. CFG, if requested, can produce these TCA reports to show the quality of execution and process.
Executing brokers used by CFG within the European Economic area (other than EEA member states who have not yet implemented the Best Execution rules of MiFID II) are required to have their own execution arrangements that enable CFG to comply with this policy. CFG will assess and where necessary seek appropriate assurances as to whether these brokers are meeting obligations regarding execution quality. CFG will also assess and seek assurance that brokers in other jurisdictions are consistently providing quality execution.
CFG will review this policy whenever a material event occurs that affects or contributes to the Best Execution outcome. Should no such event occur, the review will take place at least on an annual basis. Our most updated policy is available our website at www.cfglobal.com
Specific Client Instructions
Where you provide CFG with a specific instruction in relation to an order or a part of the order or any particular aspect of it, including the selection of a venue, we will execute the order in accordance with these instructions and in doing so, CFG will be deemed to have taken all sufficient steps to provide the best possible result in respect of that order or aspect of that order. This may prevent us from taking the steps that we have implemented to obtain the best possible result for your order. To the extent that your specific instructions are not comprehensive, we will apply this policy to those aspects not covered by your instructions. The particular execution roles and responsibilities of CFG and its client will depend on the type of execution instruction received. At all times, the client passing the order to CFG retains responsibility for Best Execution to its end client.
Client Limit Orders
The FCA requires unexecuted client limit orders to be made public immediately unless the client expressly instructs otherwise. By consenting to this policy, you are expressly instructing CFG not to make such orders public unless we believe that by doing so, it will be to your advantage.
CFG are required to gain express consent prior to executing an order in an instrument admitted to trading on a Regulated Market, Systematic Internaliser, MTF or OTF outside of such a Regulated Market, Systematic Internaliser, MTF or OTF.
Please sign and return a copy of this notice to our compliance department since we will otherwise be prevented from achieving the best possible result where this is achieved by executing your order outside of a Regulated Market, Systematic Internaliser, MTF or OTF.
CONSENT FORM TO CF GLOBAL TRADING (UK) LIMITED ORDER EXECUTION POLICY
We consent to CF Global Trading (UK) Limited Order Execution Policy including inter alia:
- CF Global Trading (UK) Limited executing orders outside a Regulated Market, Systematic Internaliser, MTF or OTF; and
- Unexecuted limit orders not being made public immediately.
FOR AND ON BEHALF OF:
PRINT NAME (s):
Please note that we are required to obtain your prior consent to this policy. As a Professional Client or Eligible Counterparty, you will be deemed to provide such consent when you give an order.
CF Global Trading (UK) Ltd Pillar 3 Disclosure
Click here to download the latest Pillar 3 Disclosure in PDF format.
Conflicts of Interest Policy
- Conflicts of Interest
- Chinese Walls
- Segregation of duties
- Disclosing an Interest
- Declining to Act
- Gifts and Inducements
- Appendix A (List of Conflicts)
- Appendix B (Gifts Register)
Principle for Business number 8 (Conflicts of interest) requires CF Global (UK) limited (CFG) to pay due regard to the interests of each customer and to manage any conflicts of interest fairly, both between itself and its customers and between a customer and another client. The specific rules for dealing with conflicts of interest can be found under the Senior Management Systems and Controls (SYSC) rules which can be found at SYSC 10.1 onwards.
2 Conflicts of Interest
Conflicts of Interest appear in situations where CFG:
- 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 or group of clients over the interests of the client;
- carries on the same business as the client; or
- 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 standard commission or fee for that service.
We must not knowingly advise, or deal in the exercise of discretion, in relation to that transaction unless we take reasonable steps to ensure fair treatment for the customer.
This is normally achieved by managing the conflict of interest by taking reasonable steps in one or more of the following ways:
- identifying the circumstances which may give rise to a conflict of interest;
- having procedures in place which would be followed in order to prevent a conflict:
- having procedures in place to ensure no conflict with persons whose principal functions involve carrying out activities for clients;
- having procedures in place to ensure that there is no direct link between remuneration of individuals engaged in client activity and their remuneration:
- declining to act for a customer.
3 Managing Conflicts
CFG may be able to demonstrate that it has taken reasonable steps to ensure fair treatment for its customers by relying on this Conflicts of Interest policy. In such cases, relevant employees are required to disregard any material interest or conflict of interest when advising a customer. If considered appropriate by the directors, CFG may, at its discretion disclose its material interest or conflict of interest to its customer.
The FCA requires firms to identify all known conflicts within this policy (see Appendix A) along with the method of dealing with the conflict. The Firm should pay special attention to the activities of investment research and advice, proprietary trading, portfolio management and corporate finance business, including underwriting or selling in an offering of securities and advising on mergers and acquisitions. In particular, such special attention is appropriate where CFG or a person directly or indirectly linked by control to the firm performs a combination of two or more of those activities.
The measures for dealing with conflicts will be designed to ensure that relevant persons engaged in different business activities involving a conflict of interest carry on those activities at a level of independence, appropriate to the size and activities of the firm and of any group to which it belongs and to the materiality of the risk of damage to the interests of clients.
Examples of types of procedures for managing conflicts
(i) effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients;
(ii) the separate supervision of relevant persons whose principal functions involve carrying out activities on behalf of, or providing services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the firm;
(iii) the removal of any direct link between the remuneration of relevant persons principally engaged in one activity and the remuneration of, or revenues generated by, different relevant persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities;
(iv) measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out services or activities; and
(v) measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate services or activities where such involvement may impair the proper management of conflicts of interest.
4 Chinese Walls
Another method by which CFG can manage conflicts of interest is to establish and maintain internal arrangements restricting the movement of information within the firm. This requires information held by a person in the course of carrying on one part of our business to be withheld from, or not to be used by, persons with or for whom we act in the course of carrying on another part of our business. Such an arrangement is referred to as a Chinese Wall.
The FCA’s rules with regard to Chinese Walls are set out in SYSC 10.2. CFG has adopted these rules in determining its own policies with regard to Chinese Walls which is as follows:
(1) when CFG establishes and maintains a Chinese wall it may:
(a) withhold or not use the information held; and
(b) for that purpose, permit persons employed in the first part of its business to withhold the information held from those employed in that other part of the business;
but only to the extent that the business of one of those parts involves the carrying on of regulated activities or ancillary activities.
(2) information may also be withheld or not used by the firm when this is required by an established arrangement maintained between different parts of the business (of any kind) in the same group. This provision does not affect any requirement to transmit or use information that may arise apart from the rules in COBS.
(3) for the purpose of this rule, “maintains” includes taking reasonable steps to ensure that the arrangements remain effective and are adequately monitored, and must be interpreted accordingly.
Attribution of knowledge
When any of the rules of COBS or CASS apply to CFG when it acts with knowledge, the firm will not be taken to act with knowledge for the purposes of that rule if none of the relevant individuals involved on behalf of the firm acts with that knowledge as a result of arrangements established under SYSC 10.2.2 R
Where CFG establishes and maintains a Chinese Wall, individuals on the “other side of the wall” will not be regarded as being in possession of knowledge denied to them as a result of the Chinese Wall.
Acting as outlined above does not amount to market abuse, making misleading statements or engaging in misleading practices.
5 Segregation of Duties
CFG strives to ensure that the performance of multiple functions by its relevant persons does not and is not likely to prevent those persons from discharging any particular functions soundly, honestly and professionally. Our policies concerning the segregation of duties within the firm and the prevention of conflicts of interest are laid out below.
CFG is aware that effective segregation of duties is an important element in the internal controls of a firm in the prudential context. In particular, it helps to ensure that no one individual is completely free to commit the firm’s assets or incur liabilities on its behalf. Segregation also help to ensure that the firm’s governing body receives objective and accurate information on financial performance, the risks faced by the firm and the adequacy of its systems.
CFG ensures that, in general, no single individual has unrestricted authority to do all of the following:
- initiate a transaction;
- bind the firm;
- make payments; and
- account for it.
Where CFG is unable to ensure the complete segregation of duties due to its limited employee base, it has adequate compensating controls in place including the frequent review of an area by relevant senior managers.
The firm ensures that its relevant persons are aware of the procedures which must be followed for the proper discharge of their responsibilities.
The firm monitors and, on a regular basis, evaluates the adequacy and effectiveness of its systems, internal control mechanisms and arrangements in relation to conflicts of interest and will take appropriate measures to address any deficiencies.
6 Disclosing an Interest
(1) Disclosing a conflict of interest is not a form of managing that conflict of interest. CFG will only disclose a conflict of interest when CFG’s administrative and organisational arrangements have failed in this regard or are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interest of the clients will be prevented. As such, it is a measure of last resort to address CFG’s regulatory obligations.
(2) The disclosure must:
(a) be made in a durable medium; and
(b) include sufficient detail, taking into account the nature of the client, to enable that client to take an informed decision with respect to the service in the context of which the conflict of interest arises.
Disclosing an interest to a customer would normally be required where the firm has an interest in a transaction on which it is advising or where the firm derives, or will derive, consultancy, non-executive director or other fees from customers involved in a transaction.
Disclosure of a material interest or conflict of interest to a customer must be made in writing. Oral disclosure is to be avoided. Disclosure must be made before we advise our customer on a transaction and we must be able to demonstrate that we have taken reasonable steps to ensure that the customer does not object to our material interest or conflict of interest.
7 Declining to Act
If CFG determines that it is unable to manage a conflict of interest using one of the methods described above, we should decline to act on behalf of the customer concerned.
8 Gifts and Inducements
Clients, for a variety of reasons, may offer gifts to employees such as annual celebrations or to commemorate the completion of a large and/or complicated transaction. Often, it would be considered impolite to refuse. Care must be taken to ensure that such gifts cannot be construed as an inducement to provide a service more favourably to that client ahead of another.
Our rules with regard to gifts and inducements are as follows:
- Gifts with a value of less than £150.00 need not be declared
- Gifts with a value greater than £150.00 must be notified to the Compliance Officer for inclusion in the Gifts and Inducements register (see Appendix B)
- If a client offers more than one gift in a twelve-month period, with a cumulative value of more than £150.00, these must also be declared to the Compliance Officer as well (see Appendix B)
- The Compliance Officer will send out a memorandum for all gifts to be declared on an annual basis. This memorandum will include a list of all gifts already declared. Any gifts not already declared which have a value greater than £150.00 must be included on this memorandum.
9 Appendix A (List of Conflicts)
|Identified Conflict||Procedures for Dealing with this Conflict|
|Brokers using knowledge gained to trade for their own account||All Personal Account Trading is notified to the Compliance Officer and then reviewed for potential conflicts of interest.|
|Favouring one client over another||There is close supervision of the price distribution process on the broking floor by the Scott Chace|
|Firm front running client orders||The firm does not take positions|
|Brokers passing information to third parties during the day||No use of mobile phones on floor and all phone lines recorded.|
10 Appendix B (Gifts Register)
|Name||Source of Gift||Gift||Estimated Value|