Summary of Conflict of Interest Management Policy
June 1, 2009
1. PURPOSE
Societe Generale Private Banking Japan (the “Company”) is committed to preventing conflicts of interest between its various businesses and activities and between its clients. Specifically, the Company has established a Conflict of Interest Management Policy (the “Policy”) to implement an internal control system for properly managing any conflicts of interest.
2. DEFINITIONS
“Client” means any existing or potential client of the Company.
“Conflict of interest” means a situation where there are competing interests or the appearance of competing interests which may undermine the objectivity and impartiality of the Company and/or may unfairly impair the interests of one or more clients of the Company. A conflict of interest may arise (a) between the Company and/or its Group Companies and our clients, or (b) between different clients of the Company, in cases where the Company and/or its Group Companies are acting for two or more clients who are parties to the same Target Transaction.
“Group Companies” means the financial instruments dealers, banks, insurance companies, or equivalent in foreign countries which are categorized as the parent institutions of the Company, subsidiaries of the parent institutions or the affiliated institutions of the parent institutions. The main institutions with respect to the Company are as follows:
- Societe Generale, Tokyo Branch
- Societe Generale Securities (North Pacific) Limited., Tokyo Branch
- Lyxor Asset Management Japan Co., Ltd.
- Societe Generale Bank and Trust
“Target Transaction” means any transaction which may give rise to a conflict of interest. The types and examples of Target Transactions are described in the Article 5. The types and examples listed in the Article 5 are not exhaustive and are intended to be used as reference to identify Target Transactions. Other matters such as the reputation risk of the Company must also be considered.
3. INTERNAL CONTROL ON CONFLICT OF INTEREST MANAGEMENT
The Legal & Compliance Department of the Company shall supervise the overall conflict of interest management and perform the following duties:
(1) Identify any Target Transaction, and instruct the business units to properly manage conflict of interest if the interests of clients may be unfairly impaired.
(2) Request reports from the relevant business lines on the status of conflict of interest management for any Target Transaction on a regular or ad-hoc basis, and verify whether the conflict of interest has been properly managed.
(3) Review and enhance the procedures and structure for the management of conflicts of interest if necessary.
(4) Regularly conduct training sessions about the requirements stipulated in this Policy to the relevant employees.
(5) Report the status of identifying and managing the Target Transactions to the Executive Committee (“EXCO”)* on a regular or ad-hoc basis. However, the Legal & Compliance Department shall immediately report to the the Audit Committee through EXCO any case that may have a material effect on the Company’s operations or significantly impair the interests of clients.
In principle, the decision by the Legal & Compliance Department shall supersede the decision by business units in relation to any matter relating to conflicts of interest management. If there is a disagreement between the Legal & Compliance Department and a business unit about a decision regarding conflicts of interest management which cannot be settled, the Legal & Compliance Department shall escalate the issue to the EXCO for its decision.
* EXCO: the highest decision making committee at the Company, which consists of the CEO, DCE (Products & Marketing) and DEC (Internal Control & Support).
4. METHODS TO MANAGE CONFLICT OF INTEREST
The Company shall ensure that the interests of clients are properly protected by selecting one or more of the following methods to manage a conflict of interest, considering the nature of Target Transaction:
- To discontinue the Target Transaction or, in cases where the Company and/or its Group Companies are conducting another transaction or transactions with the client (the “Secondary Transaction”), to discontinue the Secondary Transaction;
- To properly disclose to the client of the apparent conflict of interest which may arise through the Target Transaction, to inform them of the measures to be implemented to manage the conflict of interest to protect the client, and to obtain the client’s consent for the Company to proceed;
- To separate the business unit conducting the Target Transaction and the business unit conducting the Secondary Transaction with the client in terms of communication of information, and to have the various mandates executed fully independently of one another;
- To amend the terms and conditions of the Target Transaction or the Secondary Transaction with the client; and/or
- To implement other methods as appropriate
If the Company discloses the existence of a conflict of interest to the clients, the Company shall explain the details of conflict of interest, the reasons to conduct the Target Transaction, and other necessary matters in such manner that enable the client to sufficiently understand in view of the client’s level of sophistication. However, the Company shall only make such disclosure in a way that shall not violate the confidentiality duty to clients assumed by the Company.
5. TYPES AND EXAMPLES OF TRANSACTIONS THAT MAY CAUSE CONFLICT OF INTEREST
(1) Types of the transactions that may cause Conflict of Interest
- The Company or its affiliates receives or may receive any benefit such as money, goods or services from a transaction with a third party in addition to normal commissions or fees (Violation of Fiduciary Duty);
- The Company or its affiliates engages in a competing/conflicting transaction with the client (Agency of its own);
- The Company or its affiliates act as an agent of the counterparty of the client (Agency of both side);
- The Company or its affiliates conduct a transaction with the competitor of the client (Competitive transaction);
- The Company or its affiliates receive any benefit by using the non-public information of the client (Abuse of information); or
- The terms and conditions of a transaction are not expected to be the same level as normal transactions because the Company or its affiliates acts multiple roles in such transaction (Internalization of transaction).
(2) Examples
- While providing any advice for financing or M&A to a client, the Company or its affiliates makes a principal investment to such client, extends a loan to such client, purchase assets from such client, or conducts other transactions with such client;
- Based on the non-public information about a potential transaction in securities, the Company or its affiliates execute any proprietary transaction for such securities;
- Any employee of the Company receives any gift or entertainment (including any non-monetary benefits) that may cause conflict of interest.