1. Introduction and scope

Feri Trust (Luxembourg) S.A. (hereinafter referred to as ‘FTL’) is committed to avoiding any conflict of interest that might arise within the meaning of

• Article 109 Section 1b) and Article 111 Section d) of the law of 17th December 2010 on the organisms of shared assets, further regulated by CSSF Regulation 10-04 in reference to UCITS funds;

• Article 13 of the law of 12th July 2013 on the managers of alternative investment funds, and of Section 2 of Level 2 AIFM DVO to Article 14 of the AIFM Directive in connection with the management of investment funds or alternative investment funds, further regulated in CSSF Regulation 12-01 with reference to alternative investment funds;

• both referred to hereinafter as ‘funds’.

Conflicts of interest arise when several persons have an interest in the legitimate realisation of certain business opportunities, or the business opportunity of one person is dependent on the specific decision of another person. Insofar as it is not possible to avoid conflicts of interest, FTL conducts its business in a manner that ensures the proper management of conflicts of interest.

FTL will make organisational arrangements and take administrative steps to implement all measures necessary to identify, prevent, resolve and monitor conflicts of interest. To this end, the FTL Board has adopted these guidelines which specify the detailed requirements.

These guidelines apply to all departments and employees of FTL, to their clients and to funds managed by FTL, as well as to Relevant Persons within the meaning of the following definitions. In such cases where activities are outsourced, FTL will ensure that appropriate arrangements are put in place by the service provider. Compliance with applicable laws in connection with policies, prohibitions and obligations arising from FTL guidelines shall be binding for all employees and Relevant Persons.

This policy on conflict of interest is an integral part of the comprehensive compliance management of FTL.

2. Definitions

2.1. Investors, clients, Relevant Persons

‘Investors’ within the meaning of the policy on conflict of interest are:

1. Investors who have subscribed to a fund managed by FTL;
2. Investors who have subscribed to a different fund not managed by FTL;

‘Clients’ for the purposes of this policy are all clients of FTL.

‘Relevant Persons’ are members of the FTL Board and all staff of FTL or of any outsourcing company appointed by FTL, as well as any other natural or legal person who, under an agreement for the transfer of responsibilities to third parties, is directly involved in the provision of services which enable FTL to manage funds.

2.2.  Conflicts of interest within the meaning of this Policy

This policy on conflicts of interest applies to all conflicts of interest that may result in a risk of damage or loss to the investors in a fund managed by the FTL. Such conflicts of interest may arise in connection with the management of funds in the following combinations or legal relationships:

• the management company, together with its officers, employees or any other person who is connected directly or indirectly with the management company by a controlling role and the funds it manages or the investors in these funds;
• the fund or the investors in these funds and any other fund or the investors in that fund;
• the fund or the investors in these funds and another client of the management company;
• the fund or the investors in these funds and a fund managed by the fund management company or the investors in this fund or
• two clients of the management company.

3. Managing conflict of interest

3.1. Situations involving conflict of interest

A conflict of interest for FTL or for an external provider working on its behalf and/or a Relevant Person in the management of the Fund is particularly indicated if the following circumstances arise with regard to FTL and/or a Relevant Person:

• obtaining a financial advantage for FTL, for an external provider working on its behalf or for a Relevant Person at the expense of the fund or its investors;
• interest in the result of a service provided for the fund by FTL, by an external provider working on its behalf or a by Relevant Person, which does not correspond to the interests of the investors in the fund managed by FTL;
• avoidance of a financial loss for FTL, for an external provider working on its behalf or for a Relevant Person to the detriment of the fund or its investors;
• the interests of FTL, of an external provider working on its behalf or of a Relevant Person in the service provided to the fund are (except for remuneration) not congruent with the interests of the fund;
• favouring the interests of an individual investor, of a group of investors or of other funds to the detriment of the fund managed by FTL;
• simultaneous performance of identical work for more than one fund;
• existence of a financial or other incentive to favour the interests of one fund over the interests of another that is also managed by FTL;
• receipt of remuneration from a third person in the context of fund management.

3.2.  Preventing conflicts of interest

To prevent the possibility of conflicts of interest, FTL or an external provider working on its behalf or a Relevant Person must undertake to comply with the highest standards. These include acting in a lawful and professional manner at all times as well as upholding general market rules, whereby the interests of investors are always taken into account. Appropriate organisational arrangements and administrative measures to avoid conflicts of interest are to be put in place, applying the principle of proportionality in relation to the size and structure of FTL and the nature, scope and complexity of its business.

Precautionary measures to be taken for the prevention of conflicts of interest must be reasonable and effective. In particular, steps must be taken to ensure that any persons concerned are familiar with and adept in any procedures that are necessary for the proper discharge of their duties. For this purpose, process descriptions and work instructions are to be drawn up and training carried out. In this context, documentation must be kept, describing functions, reporting and responsibilities.

3.3.  Organisational arrangements

To avoid conflicts of interest, steps must be taken to ensure that FTL or an external provider working on its behalf, a Relevant Person or an employee authorised by FTL conduct their activities independently and are mindful of potential risks to the fund and its investors and to clients. To ensure the independence of FTL and of Relevant Persons, the following organisational precautions were put in place:

• FTL and/or an external provider working on its behalf are to conduct their business activities independently of the interests of third parties.
• There is to be functional and spatial separation of different business areas, in particular between fund management on the one hand and compliance, control systems and risk management on the other, and separation of duties and responsibilities in relation to its own operations which are deemed to be incompatible with each other or have the potential to cause systematic conflicts of interest.
• Remuneration due to an employee is to be determined in accordance with the regulatory requirements in such a way that Relevant Persons see their incentive in the performance of all funds managed by them, thus obviating any preference for individual funds or clients.
• As and when appropriate, areas of confidentiality are to be defined and barriers put in place – either virtual or physical (so-called ‘Chinese Walls’) – to restrict the flow of information.
• A policy on personal transactions is to be implemented.
• Likewise a policy on employee payments and other benefits acquired from FTL, its employees or Relevant Persons.
• Senior staff at FTL are obliged to complete a questionnaire on potential conflicts of interest whenever a new fund is set up.
• Steps are to be taken to prevent or restrict an unwarranted influence on the activity of a Relevant Person.

3.4. Administrative measures

To avoid conflicts of interest, the Executive Board of FTL and/or an external provider working on its behalf has taken the following administrative measures with regard to monitoring and training for Relevant Persons and staff acting for FTL:

• Processes and measures have been implemented for monitoring whether the employees of FTL comply with the code of conduct and procedures for dealing with conflicts of interest.
• Within the individual departments and between departments, there are certain processes for resolving conflicts of interest in force that must be strictly adhered to when a conflict of interest has been identified.
• Appropriate documentation of the services and activities of FTL, its Board of Directors, staff and Relevant Persons is to be made in those cases where a conflict of interest has been identified.
• In the case of investment opportunities which come under consideration for multiple funds pursuing the same investment strategy, FTL will offer the investment opportunity in compliance with the principle of equal treatment to all eligible funds it manages under the same conditions and, in the case of investment interest from several of its managed funds, will divide up the investment opportunity between the funds having an interest or, if the opportunity cannot be divided, will apply an appropriate allocation method (rotation or random procedure), also ensuring that documentation of such is in place.
• To the extent required by an appropriate resolution or observation of a conflict of interest, Relevant Persons and FTL employees may be asked to cease working on a specific business activity or participating in its management in order to resolve a potential conflict of interest.

Regular training is provided for all affected employees at FTL and/or certification of training having been carried out at an external provider working on its behalf or of Relevant Persons at FTL. 

4.   Dealing with conflicts of interest

4.1.  Officer responsible for avoiding conflicts of interest

The Executive Board of FTL has appointed one of its members to oversee the prevention of conflicts of interest (hereinafter ‘Conflict of Interest Officer’). The Conflict of Interest Officer is the member of the Board at FTL responsible for compliance. The Conflict of Interest Officer is responsible for the ongoing investigation, prevention, resolution and/or the management and monitoring of conflicts of interest.

The Conflict of Interest Officer reports directly to the Board on a regular basis concerning the performance of his/her duties.

It is the responsibility of the Conflict of Interest Officer to ensure that the parties affected by FTL conflict of interest management are always informed about and receive regular training on these guidelines.

Furthermore, it is his/her responsibility to monitor compliance with these conflict of interest management guidelines on a regular basis.

If a conflict of interest has been identified, the Conflict of Interest Officer shall inform the FTL Board of the nature and extent of the conflict of interest and document this accordingly.

4.2.  Resolving and monitoring conflicts of interest

If a conflict of interest has been identified, as defined by the conflict of interest management guidelines, this is to be dealt with immediately and in an equitable manner.

The assessment of a potential conflict of interest is a two-step process: stage one is managed by the Conflict of Interest Officer; if the issue cannot be resolved, it is escalated to stage two, at which point the FTL Board or its Board of Supervisors become involved.

If it should become apparent during an attempt to resolve a conflict of interest that existing and ongoing measures are not appropriate or sufficient, additional measures must be taken, such as:

• thorough examination of all available measures by the relevant Board and implementation of fund-specific information restrictions or other additional measures for separating information;
• resolution of the conflict of interest by transferring conflict of interest management to a higher management level which is responsible for the business strategy of FTL and is able to assess the potential risks correctly;
• termination of the business activity.

4.3.  Disclosing conflicts of interest

FTL is obliged to inform investors of conflicts of interest as soon as it becomes apparent that the organisational measures taken by FTL to identify, prevent, resolve and monitor conflicts of interest are not sufficient to ensure with reasonable confidence that any risk of damage or loss to the interests of investors and/or managed funds has been avoided. The rules on disclosure also apply to potential conflicts of interest that may arise in connection with the delegation/outsourcing or sub-delegation of two specific business areas, namely Portfolio and/or Risk Management. Furthermore, disclosure must be made of any transactions conducted by employees and Relevant Persons in connection with the managed funds.

The duty to disclose non-resolvable conflicts of interest at FTL includes informing investors prior to the execution of the relevant businesses measure about the general nature and the sources of conflicts of interest and developing appropriate strategies and procedures.

Disclosure of potential or actual conflicts of interest may be made by means of a durable medium or, for example, publication on the website of FTL.

Insofar as disclosure of conflicts of interest is effected on the FTL website, FTL is to ensure the implementation and application of the following measures:

• The address of the website is to be made known to investors.
• Information posted on the website is to be updated on a regular basis.