In compliance with the requirements established by the European Directive 2004/39/CE (Markets in Financial Instruments Directive, also known as the MiFID Directive), Equita SIM SpA ("Equita") has:
- Identified, as regards investment services and ancillary services provided, the circumstances that generate, or could generate, a conflict of interests liable to have an adverse effect on the interests of one or more clients
- Defined effective procedures to follow and measures to be taken to manage such conflicts
- Established an appropriate system to record conflicts of interest that risk seriously harming clients' interests.
Below, for each of the points indicated above, we summarise the main activities and actions implemented.
Equita performs various investment services and ancillary services for its clients (e.g. investment banking services, individual asset portfolio management, proprietary trading, and execution of orders on clients' behalf, etc.). This circumstance increases the possibility of situations of conflict arising between Equita's interests and those of its clients. Specifically, in order to identify conflicts of interest, we have considered the situations of conflict existing (or potentially existing) between Equita and a customer or between the interests of two or more customers. Going into greater detail, for the purposes of identifying conflicts of interest, Equita has considered – as the minimum criterion of analysis - whether, following provision of a service, Equita, a relevant person or a party with a link of direct or indirect control over the same:
- Are able to make a financial gain, or avoid a financial loss, to the client's detriment
- Are stakeholders in the result of the service provided to the client, other than the result for the client
- Have any incentive to give preference to the interests of clients other than the client to whom the service is provided
- Perform the same activity as the client
- Receive, or may receive, from a person other than the client, in relation to the service provided to the latter, an incentive – in the form of money, goods or services – other than the commissions or fees normally received for such service.
After having identified the potential circumstances of conflicts of interest, Equita – so as to avoid any such conflicts having an adverse impact on clients' interests - has taken appropriate organisational measures to assure that assignment of multiple functions to relevant persons working on activities implying a conflict of interest does not prevent them from acting independently.
Below, we summarise the main measures implemented to manage the different potential circumstances of conflicts of interest identified:
- Business and professional ethics:
Equita has adopted an Internal Code of Conduct forming the set of principles observance of which is deemed of fundamental importance for proper operations, for the reliability of operational management, and for the company's image. The Code contains general obligations of diligence, correctness, and fairness. Of particular importance in this respect are the:
- Rules concerning transactions in financial instruments (managed and/or the object of investment by Equita) on their own personal account by relevant persons
- General obligations of conduct for relevant persons, in performing the services offered by Equita.
- Rules of separation and functional and hierarchical independence
The organisational structure adopted establishes clear definition of roles and responsibilities and appropriate functional separation of activities considered incompatible with prevention of conflicts of interest. To this end, it has been arranged that functions holding the phase of a process or of an entire process potentially able to generate conflicts be assigned to distinct, separate units (and consequently managers). Separation and functional and hierarchical independence are also assured thanks to information technology approaches able to assure separate access of staff members to the Company's various departments/archives.
- Rules of conduct for provision of services
Equita has introduced:
- Its own system of house procedures designed to establish rules of conduct in providing its services, in order to direct action towards the principles of independency, transparency, and correctness
- The ban on operating, or operational restrictions (e.g. quantitative limitations, time constraints, and restrictions for a certain financial instrument, etc.), for the investment service concerned, saving some exceptions that can be authorised solely via an escalation procedure
- Measures for management of confidential and privileged information
- A complaints handling procedure structured in such a way as to assure an independent judgement
- Measures designed to impede or control the exchange of information between relevant persons/parties involved in activities involving a conflict of interest rest, when such exchange involves interests potentially in conflict with those of the customer on whose behalf the services are provided
- Measures designed to eliminate any direct connection between the remuneration or revenues of the relevant persons/parties who prevalently perform activities that may originate situations of conflict of interests.
- Control systems
Equita has equipped itself with a system of internal controls able to assure (a) healthy and prudent management, (b) respect of the rules of transparency and correctness vis-à-vis its clients, (c) appropriate identification of conflicts that might arise with clients and (d) compliance with the organisational and administrative rules adopted to manage them.
The effectiveness of the measures for managing conflicts of interest illustrated in this document is monitored by the Board of Directors.
To this end, the Board of Directors performs checks and controls on the work of the various control functions concerned (from which it receives, at least annually, specific reporting on the activity performed).
As a rule, Equita does not retrocede part of its commissions to parties other than clients, nor does it pay incentives in money or services. As envisaged by Equita's Internal Code of Conduct, in special cases commission retrocession agreements or, more generally, agreements concerning provision of incentives to third parties, can be made only when observance of current regulations is assured.
It has also been established that Equita may accept incentives in the following circumstances:
- When receipt of commissions or non-cash benefits is designed to enhance the quality of service provided to customers (e.g. professional updating of employees via receipt of training courses)
- When receipt of commissions or non-cash benefits does not conflict with the duty to operate in the client's best interest
- When commissions or non-cash benefits are made known to the client.
The Company obtains soft commissions (from traders, for example) only when the requisites currently identified (in 2007) by the Committee of European Securities Regulators (CESR) are met. For example:
- When, in the case of training services for staff, the course has concrete technical contents, useful to the persons to whom it is given for providing the investment services for which they are responsible
- When, in the case of goods/objects (PCs, for example), the good or service obtained is strictly related to the investment service and is actually used to provide that service.
If the measures taken to manage conflicts of interest are not enough to ensure, with reasonable certainty, that the risk of damaging clients' interests is avoided, Equita will clearly inform the clients – before acting on their behalf – of the nature and sources of such conflicts of interest so that the clients concerned can take an informed decision on the services provided.
Equita has also established that a register be kept to record situations where a conflict of interest has arisen or may arise that risks having an adverse impact on the interests of one or more clients.