Managing Conflict of Interest
FIN-XO Securities Inc. (FIN-XO, we or our) offers a wide range of products and services to individuals, companies and institutional investors. In the context of our varied activities, we are committed to ensuring that the interests of our clients always have precedence. Moreover, as an investment dealer and member of the Investment Industry Regulatory Organization of Canada (IIROC), we must ensure effective management of any situation which could give rise to a conflict of interest. We seek to manage conflicts of interest in the best interests of our clients.
A conflict of interest arises when the interests of different persons, particularly your interests and those of FIN-XO or one of our Employees (which includes our administrators, managers, associates, staff, or agents) or Advisors are incompatible or divergent. Situations may arise that may influence or be perceived to influence FIN-XO or one of our Employees or Advisors to act in their own interests or those of a related entity and not in the client’s best interest.
Accordingly, conflicts of interest may occasionally arise between you and:
FIN-XO or you and your Advisor;
other clients whom we represent; or
a person or company with whom we have a relationship.
We have adopted policies and internal procedures to effectively address conflicts of interest in the client’s best interest. Canadian securities laws require us to take reasonable steps to identify and respond to material conflicts of interest in your best interest. We also are required to tell you about them, including how the conflicts might impact you and how we address them in your best interest.
We have policies and procedures in place to address how we will manage material conflicts of interest in your best interest, which are described below:
We seek to avoid or minimize conflicts where reasonably possible. We seek to avoid actual or perceived favouritism or discrimination amongst clients and to ensure that no client receives preferential treatment over another in the operation and management of their account and execution of trades.
We avoid conflicts prohibited by law as well as material conflicts that we cannot effectively manage in your best interest. Some conflicts cannot be avoided. In situations in which we do not or cannot avoid conflicts and in which our interests may compete with yours, your interest is always put first.
We control or manage acceptable conflicts by physically separating different business functions, restricting the internal exchange of information, whether in person or electronically, reducing the possibility of one part of our organization unsuitably influencing another, removing the financial incentive of an Employee or Advisor to favour a particular product or service over another that may be more suitable, and establishing and continuing testing of our operational review and approval processes.
Material Conflicts Arising from Being a Member of the iA Financial Group
We are a wholly owned indirect subsidiary of iA Financial Corporation Inc. (iA Financial Corporation). Our relationship to iA Financial Corporation and its other financial services subsidiaries (the iA Financial Group) creates conflicts of interest when we provide products and services to you that are sourced from or provided by other members of the iA Financial Group.
iA Financial Corporation and its various financial services subsidiaries, including FIN-XO, are commercial businesses that seek to maximize profits while providing fair, honest and appropriate services to clients. This means that we may encourage you to do more business with us and the other members of the iA Financial Group, and we may engage affiliates to provide us with products and services for your account, but will always do so in a way that we consider to be in your best interest. We will only enter into these transactions or arrangements where we are permitted under applicable securities laws and where we believe they are in your best interest.
Although FIN-XO is under common ownership with the other members of the iA Financial Group and may from time to time have directors and officers in common with these other firms, FIN-XO is a separate and distinct corporate entity.
Any relationships that a FIN-XO director or officer might have with another iA Financial Group entity do not raise material conflicts as none of the individuals is in a position to personally influence clients of FIN-XO to invest in any of the investment products of the iA Financial Group, nor are they compensated by any of the iA Financial Group entities on a commission or other basis that could result in decisions being made, or influence being exerted, against the interest of any of our clients.
In addition to applicable regulatory provisions and contractual provisions respecting any business arrangements that may exist between FIN-XO and the other iA Financial Group entities, the directors, officers, Employees and Advisors of each of the firms are subject to iA Financial Group’s Code of Business Conduct governing their actions, in addition to our internal compliance policies and procedures.
FIN-XO generally carries on its activities independently from the other firms owned by iA Financial Corporation. However, from time to time there may be certain cooperative business arrangements between it and the other firms, such as arrangements relating to introduction of clients, distribution of products, advisory relationships or administrative support.
The conflicts described in this section raise perceptions that FIN-XO will favour the business interests of the various members of the iA Financial Group, rather than your interests. These conflicts and the methods used to manage them will always be in the client’s best interest as described below.
Related Service Providers to FIN-XO
The following iA Financial Group entities provide services to you and/or FIN-XO:
iA Clarington Investments Inc. manages the iA Clarington family of investment funds, which FIN-XO Advisors may recommend as investment options for your accounts with FIN-XO.
Industrial Alliance Investment Management Inc. is the portfolio manager of the iA Clarington family of investment funds. FIN-XO Advisors may be licenced as insurance agents with PPI Management Inc. and may recommend that you acquire insurance and insurance products, such as segregated funds, provided by Industrial Alliance Insurance and Financial Services Inc.
In all cases, FIN-XO monitors the services and products provided and ensures that they are provided at market rates and are suitable for your account.
Investments in Related and Connected Issuers
Under certain circumstances, FIN-XO may cause your account to invest in securities in which the issuer of the securities or another party to the transaction is a party having an ownership or business relationship with us. Since these transactions may create a conflict or the appearance of a conflict between our interests and yours, we have adopted policies and procedures to assist in identifying and minimizing any conflicts of interest that may arise.
iA Financial Corporation is a publicly traded company with securities listed on the Toronto Stock Exchange and as such it is a related issuer to FIN-XO. The iA Clarington investment funds are all related and connected issuers to FIN-XO. For a full list of the related and connected issuers to the firms within the iA Financial Group, please visit: www.fin-xo.com/statement-of-policies.
Other Material Conflicts of Interest
Compensation of Advisors: We may compensate our Advisors by a combination of one or more of the following:
compensation based on the value and/or types of assets under administration;
bonus based on various performance criteria; and
percentage of sales commissions, spreads, and trailer fees received by FIN-XO.
Advisors may also receive compensation or benefits based on referrals to other members of the iA Financial Group. When assessing the overall performance of our Advisors, we may consider referrals and/or include referrals as a part of the Advisor’s overall sales/revenues.
We address the conflicts inherent in the compensation and incentives received by our Advisors by ensuring that the compensation paid and incentives provided, rewards our Advisors in putting your interests first ahead of their own.
Different products may have differing levels of compensation, and different account types (fee-based and transactional) may have differing fees. Our compensation plans do not incent our Advisors to recommend specific products or services, including any particular type of account. Where both transactional and fee-based accounts are available, we regularly review whether a fee-based account is appropriate, given your circumstances and investment needs and objectives. Further, to avoid duplicate fees being charged in fee-based accounts, products with embedded commissions will be excluded from your assets for the purpose of calculating fees.
Outside Activities: At times, our executives and Advisors may participate in outside activities such as participating in community events, pursuing personal outside business interests or serving on a board of directors of a charity. Before engaging in any outside activity, our policies require these individuals to disclose situations where a conflict of interest may arise and to determine how such conflicts may be addressed. Our Employees and Advisors may only engage in such outside activities if approved by their supervisor. The approval may be subject to terms and conditions that help address perceived or actual conflicts of interest. Our Employees and Advisors are also required to annually confirm their outside activity to their supervisors to ensure accuracy and completeness.
Gifts and Entertainment: Our executives and Advisors are not permitted to accept gifts or entertainment beyond what we consider consistent with reasonable business practice and applicable laws. We set maximum thresholds for permitted gifts and entertainment to avoid any perception that the gifts or entertainment will influence decision-making.
Personal Trading: Our policies and procedures and the iA Financial Group’s Code of Business Conduct require our Advisors to act in accordance with applicable laws that prohibit insider trading, front running and similar conduct. Individuals may be required to obtain prior approval before making trades in their personal securities accounts. Our Employees are prohibited from accessing non-public information for their direct or indirect personal benefit. We place securities on a “restricted list” to avoid trading when we have non-public information.
Personal Dealings with Clients: Conflicts of interest can arise where our Advisors have personal financial dealings with you, such as acquiring assets outside of your investing relationship, borrowing money from or lending money to you, or exercising control over your financial affairs. To address these conflicts, FIN-XO has policies and procedures in place which prohibit personal financial dealings with clients who are not family members.
Referral Arrangements: Referral arrangements may exist between FIN-XO and other iA Financial Group members and/or other regulated/non-regulated entities. A referral arrangement happens when a prospective client is referred to or from FIN-XO by a party and that party or FIN-XO may receive a referral fee. The purpose of referrals is to introduce our clients or potential clients to qualified persons who are best suited to help clients achieve their financial objectives.
If a referral arrangement is in place, a written disclosure will be provided to you wherein the specific details of the referral arrangement will include:
the name of each party to the referral arrangement;
the purpose and material terms of the referral arrangement, including the nature of the services to be provided by each party;
any conflicts of interest resulting from the relationship between the parties to the referral arrangement and from any other element of the referral arrangement;
the method of calculating the referral fee and, to the extent possible, the amount of the fee; and
the category of registration of each registrant that is a party to the agreement, with a description of the activities that the registrant is authorized to engage in under that category and, giving consideration to the nature of the referral, the activities that the registrant is not permitted to engage in.