Conflicts of Interest Disclosure Statement
Introduction
Vestcap Investment Management Inc. (“Vestcap” or the “Firm”) is an independent investment management company incorporated under the laws of Canada. Vestcap is privately owned. The Firm’s offices are located in Toronto, Ontario and Montreal, Quebec.
The Firm is registered under the category of Portfolio Manager (PM) within the provinces of Ontario (principal regulator), Alberta, British Columbia, Manitoba, Nova Scotia and Quebec.
Vestcap is in the business of providing discretionary investment advisory services to its clients (“Clients”) for separately managed client accounts that invest directly in a portfolio of securities and other investments. Certain investment funds through formal sub-advisory arrangement (the “Sub-Advised Funds”) have contracted Vestcap to manage the funds’ assets on a discretionary investment advisory basis subject to each fund’s stated investment objectives, strategy and restrictions.
Vestcap is registered as a Portfolio Manager to provide discretionary portfolio management services to its Clients.
Under securities regulations, Vestcap, in each of its registrant roles, is required to identify material conflicts of interest which would be expected to arise between Vestcap (including each individual acting on its behalf) and its Clients. A conflict of interest may be considered material if a reasonable investor would expect to be informed of the nature and extent of an identified conflict of interest and the interests of the Client and Vestcap are not aligned. Conflicts of interest may also be deemed to be immaterial if the interests of the Client and Vestcap remain aligned. Vestcap will address any material conflicts of interest in the best interest of the Client and will avoid any conflict of interest that cannot be resolved in the best interest of the Client.
All Employees must immediately report any potential and realized conflicts of interest to the Chief Compliance Officer. If the Employee is a Portfolio Manager, the Portfolio Manager will be prohibited from trading on the affected accounts until controls are put in place and the conflict is addressed in the best interest of the Client.
The purpose of this Conflicts of Interest Disclosure Statement is to provide Clients with a description of such conflicts as a registrant firm with a role as advisor might encounter and the measures Vestcap has taken to prevent, avoid, and mitigate such conflicts. Vestcap will continue to assess any conflicts of interest that arise and update this Statement as necessary.
Referral Arrangements with Affiliated Managers and Third Parties
Vestcap has in place referral arrangements whereby clients are referred to third party service providers and affiliated managers for a fee, as appropriate. Details of the referral arrangement, including the fee paid to Vestcap and the nature of any existing or reasonably foreseeable conflicts of interest that may arise from such referral are disclosed to the clients being referred.
Investments in Related or Connected Issuers
A related issuer means a person or company that is influenced by, through ownership or direction and control over voting securities, another person or company. Vestcap is wholly owned by 3 Circle Holdings Inc., which also wholly-owns Highgate Group Inc. and Highgate Group USA.
A person or company is connected to another person or company if, due to its relationships with such person, a prospective purchaser of securities of the person or company might question the other person or company’s independence from the first person or company. Clients may invest in the Sub-Advised Funds for which Vestcap provides discretionary investment advisory services; as such, the Sub-Advised Funds may be ‘connected issuers’ of Vestcap. The Firm does not intend to invest in the Sub-Advised Funds for its clients.
Investments in Certain Other Issuers
If any of the partners, directors, officers, employees or agents of Vestcap (“Employees”) are also partners, directors or officers of an issuer, Vestcap will not cause an investment portfolio managed by it, including the Sub-Advised Funds, to invest in securities of such issuers without the prior written consent of the Clients to do so after disclosure of that fact has been made in the discretionary investment management agreement. A conflict of interest can arise when an Employee includes the securities of these issuers in a Client portfolio for their own interests, including certain monetary or non-monetary benefits which may compromise the trust a Client has in Vestcap. If the Client would like to proceed with the investment after disclosure has been made, Vestcap will take appropriate steps to minimize the potential conflict, and the Employee who is also a partner, director or officer of an issuer will not be permitted to be involved in the management or decision making for the affected account(s).
Principal Transactions and Cross-Trading Securities
Under Canadian regulations, Vestcap is subject to certain restrictions from engaging in principal transactions with or on behalf of its Clients and from cross trading securities between Client accounts. In particular, without exemptive relief from regulatory authorities, Vestcap will not knowingly cause any Client investment portfolio managed by it (including the Sub-Advised Funds), to purchase or sell securities from or to (i) Vestcap, (ii) any directors, officers or associates of Vestcap, or (iii) any investment funds managed by them (including the Sub-Advised Funds).
Best Execution and Soft Dollars
When placing orders for and on behalf of Clients’ accounts, Vestcap will select those brokers and dealers from whom they reasonably expect to obtain the best execution (after considering all transaction costs and research or other benefits). Vestcap utilizes a limited soft dollar policy, which allows for the procurement of order execution or third-party investment research services using a portion of brokerage commissions for payment, which is valuable to the investment decision-making process, and adheres to the regulations stipulated by securities regulators. A conflict of interest may be perceived if the soft dollars are used to purchase services that benefit Vestcap and not its Clients. To address this risk, the use of soft dollars to pay for goods and services other than research and order execution-related services is strictly prohibited. A copy of the best execution and soft dollar policies of Vestcap may be obtained upon request.
Fair Allocation Amongst Clients
Vestcap has adopted trading policies which are designed to ensure fair allocation of securities amongst Client accounts. Vestcap is engaged to act as an advisor by several Clients. Vestcap may aggregate orders for a number of Client accounts for the purchase of a particular security. A conflict of interest can arise when selecting which Clients’ accounts to participate in the allocation. A copy of Vestcap’s fair allocation policy is provided to new Clients before opening an account and thereafter when a significant change to the policy is made. A copy is available on request.
In general, a participating Client will receive a percentage of the executed portion of the order based upon its percentage of the entire order. This rule applies to all Clients that are participating in the execution on the same trading terms (i.e., price limits, approximate time of entry, etc.). All allocations will be made at the average execution price. The basic purpose of this process is to ensure fair treatment of all Clients and to avoid the appearance of favoritism or discrimination among Clients.
Fees of Vestcap
Vestcap typically charges its Clients a fee for its advisory services calculated as a percentage of the market value of the Client’s account. Where Vestcap appoints a sub-adviser to assist with managing Client accounts, Vestcap is responsible for payment of the sub-advisory fees so that there is no duplication of fees charged to the underlying Client.
Proxy Voting and Other Corporate Actions
Vestcap usually has discretion in voting the portfolio securities purchased on behalf of Clients, including the Sub-Advised Funds. A perceived conflict arises given the opportunity to vote securities in its own interest or agree to certain corporate actions, including for the purpose of getting or maintaining certain issuers as Clients. Vestcap has developed policies and procedures that govern review and approval of proxy voting recommendations and voting record documentation. Employees’ outside business activities and to which all Employees must adhere. Vestcap does not invest in securities of issuers for the purposes of exercising control over, or participating in management of issuers.
Personal Trading, Gifts and Business Entertainment
Vestcap has a code of ethics & conduct that sets forth standards of business conduct intended to prevent possible conflicts of interest, diversions of corporate opportunity or appearances of impropriety and has established policies and procedures for monitoring personal trades of Employees who have access to information regarding the portfolios of Clients and the Sub-Advised Funds. When individual portfolio managers and other personnel of Vestcap invest in the same securities as Clients of Vestcap, including the Sub-Advised Funds, there is a perceived or potential conflict of interest that the portfolio manager or other personnel may benefit from opportunities at the expense of Clients and the Sub-Advised Funds. Vestcap’s personal trading requirements are covered in its Personal Trading Policy.
When Employees give or accept gifts or business entertainment of more than minimal value in connection with services provided to Clients, there is a perceived or potential conflict of interest and Vestcap must determine whether it would be reasonably expected to impair the Employee’s independence or objectivity. Vestcap has established written standards, in its Gifts & Gratuities Policies & Procedures, for the provision and acceptance of gifts and business entertainment to or from persons or entities with which the Firm has an existing or potential business relationship and regularly monitors Employees’ adherence to such standards.
Outside Business Activities
Vestcap has developed policies and procedures that govern Employees’ outside business activities and to which all Employees must adhere. Further, Vestcap has implemented a notification and pre-approval process to restrict any outside business activity that would interfere or give the appearance of interfering with an Employee’s ability to act in the best interests of, or perform work for, Vestcap and its Clients.
Employee Compensation Practices
A conflict of interest can arise during the sale of Vestcap products through the potential performance-based compensation of Employees. Vestcap’s compensation practices have been developed to ensure that our Employees are not influenced to put any sales targets ahead of the best interest of the Client.
All Employees are compensated with a base salary and a discretionary bonus. Although the discretionary bonus can vary, the portion of the bonus that can be attributed to any corporate sales target is limited. Vestcap Employees do not receive a commission for the sale of any product.
Other Conflicts of Interest
From time to time, other conflicts of interest may arise. Vestcap will continue to take appropriate measures to identify and respond to such situations fairly and reasonably and in the best interest of its Clients.
