Alexander David: Dedicated, independent broker providing online share dealing, investing & share trading

Conflicts of Interest Policy

ADS provide a range of services to a number of different clients. As a result circumstances may arise whereby the interest of the client may conflict with the interests of the firm or with those of another client. It is of vital importance that any risk of a conflict of interest is identified and managed appropriately, both to comply with FSA Rules and our wider duties to customers, and also to ensure that the integrity of our services is not eroded.

Our conflict of interest policy is deeply ingrained in our policies and procedures; we are committed to treating our customers fairly and we will never knowingly put ourselves in a position whereby our own interests, or our duty to another party, prevent us from discharging our duty to our clients. We fully train our staff in our conflicts policy and if they become aware that ADS has a material interest in a transaction to be entered into by a customer, or a relationship which gives rise to a conflict of interest in relation to that transaction, the employee must disregard ADS's interest when advising the customer.

In dealing with and for our customers ADS observe two fundamental principles:

• that we do not disclose any information which has been given to us by our customers on a confidential basis, and do not use such information for our own benefit or for the benefit of any other customer, without the original customer's consent; and
• that we act at all times in a way which ensures the fair treatment of all our customers. This means that we need to identify and deal with the potential for any conflicts of interest which may arise either between a customer and the interests of the Company or between two or more customers.

ADS pays particular attention to the FSA principal based rules and, in respect of conflicts of interest, our responses to the FSA Statement of Principals related to conflicts of interest are as follows:

ADS policy is to prevent a deliberate failure to disclose the existence of a conflict of interest in connection with dealings with a client.

ADS policy is to prevent a failure, without good reason, to disclose the existence of a conflict of interest in connection with dealings with a client.

A conflict arises where the firm has an interest in the outcome of a transaction over and above their normal interest. ADS have identified many instances where this could arise. One example would be if a firm recommends the use of a sister company in order to generate extra income. Another example might be where a firm is approached to act for one party to a takeover when it has already had preliminary discussions with the other party. A third example would be when a firm recommends to customers that they should buy a share in which the firm has large position. Alternatively a firm could recommend that customers apply for a new issue of shares because the firm is hoping to obtain other lucrative business from that company and therefore wants the issue, and its part in it, to be successful.

ADS’s policies are designed to prevent such conflicts.

Chinese Walls are a method of restricting the internal flow of information between parts of a firm, or group of companies performing different and possibly conflicting functions.  Their purpose is to allow an entity to conduct particular activities simultaneously that would otherwise, if universally known, create conflicts of interest. For a Chinese walls Policy to be effective, the organisation and arrangements supporting them are made clear to all employees and enforced rigorously.

The Company cannot act for a customer in a transaction if it has a material interest in a security or related transaction, unless we first disclose this fact to him.  The test is an objective one; is the interest such that it could reasonably be assumed to lead to our acting against the customer's interests?  If you discover such a conflict of interest during the course of an assignment, this would immediately be brought to the attention of the Compliance Department.

Under the FSA’s principles-based approach, firms are responsible for identifying and managing any conflicts of interest arising in their business that might compromise the impartiality of the firm’s research analysts and their research. ADS has issued a  policy which sets out the potential conflicts of interest which may affect the impartiality of ADS’s investment research and the systems, controls and procedures employed to ensure, as far as is practicable, those conflicts are effectively managed.

Please refer to our Research Policy for further details on how Alexander David deals with conflicts specifically related to investment research.

As noted above, ADS is required under FSA rules to minimise the impact of conflicts of interest arising in respect of investment research. The EU Directive on Market Abuse and its implementing measures add to these provisions by requiring that investment analysis meets specified standards as to content and includes certain disclosures to enable those to whom it is distributed to make an informed judgement as to whether or not it may be biased.

The new requirements apply in respect of 'research recommendations', and this term is not synonymous with 'investment research' - the term used by the FSA in its rules and guidance on investment research. The term 'research recommendations' only relates to information concerning financial instruments admitted to trading on a regulated market. The term 'investment research', although narrower in meaning, is not restricted to information about securities traded on regulated markets, and therefore extends to securities traded on unregulated markets.

ADS has adopted the policy of making the required disclosures where appropriate irrespective of whether the information concerns financial instruments traded on a regulated market or not.  

In addition, ADS maintains a “restricted list” of companies upon which research is being prepared which is monitored by Compliance Department with respect to employee share dealing.

We have adopted policies to ensure that we manage any conflicts of interest which may arise during a securities offering in such a way as to ensure that all clients are fairly treated fairly. 

Any obstacles to proceed (with new business) due to potential conflict of interest must be checked and clearance noted in the records.

Client orders must be dealt with sequentially and in accordance with the timing of their reception. They must be accurately recorded and allocated. ADS and its employees must not misuse information relating to client orders.

If one or more client orders are aggregated with a transaction for ADS’s own account, the trades must not be allocated in a manner detrimental to the client. If the aggregated order is only partially executed, the trades must be allocated to the clients in priority to ADS. Unfair precedence should not be given to ADS or to any particular client.

ADS has established a policy regarding personal account dealing. The rules in this policy relate to all employees whether their personal accounts are held at ADS or any other firm. The overarching principle of the policy is that staff must not deal in any security at a time or in a manner which may entail material risk of damage to the interests of a client. 

Remuneration, commission and bonus structures are designed so as not to create any incentive for an employee to act contrary to a client’s interests.

The general principle is that an employee must neither give, offer, solicit nor accept any gift or other benefit which could act as a significant inducement to the recipient to behave contrary to his duties.  The principle in this rule is to ensure that the Company avoids any conflict to a material extent in connection with or likely to prejudice the duty it owes to its customers.

Records of actual and potential conflicts and the procedures in place to manage them are kept for a minimum of 5 years.