1. Introduction
2. Definitions
3. Objectives of the policy
4. Parties that can create Conflict of Interest (COI) policy situations
5. Conflicts which may arise in our company
6. Mechanisms for the identification of conflicts of interests
7. Mechanisms for the avoidance of conflicts of interests
8. Mitigations of conflicts of interest.
9. Measure for Disclosure of conflict of interests
10. Consequences of non-compliance with the Conflict of Interest (COI) policy by internal and
    external parties

1. Introduction

The Conflict of Interest (COI) policy has been put into place in order to protect the company, stakeholders, and most importantly, all customers. The policy must ensure that all transactions and business decision are made in the interest of the company and clients welfare. The policy should help employees of the company make clear minded decisions, unbiased of any personal benefits the employee might gain which include any of the following Financial, ownership or beneficial relationship. Laws are becoming more strict and this means that, rightfully so, the customer has more protection than ever. Customers pay us money and in turn expect fair service with their financial interest at heart. The COI policy is also in position to efficiently manage any conflict issues that may unfortunately arise. The purpose of this policy is to make sure that no customer will ever be negatively affected due to an employee not making the customers interest a priority. All Blue Sky Financial Services associates must follow this policy as it is required by the General Code of Conduct to the Financial Advisory and Intermediary Services Act (FAIS).

2. Definitions

These definitions are taken from the conflict of interest policy manual supplied by Moonstone compliance.
Conflict of interest: means any situation in which a provider or a representative has an actual or potential interest that may, in rendering a financial service to a client:

a) influence the objective performance of his, her or its obligations to that client; or
b) prevent a provider or representative from rendering an unbiased and fair financial service to

that client, or from acting in the interest of that client, including but not limited to –

i)  a financial interest;
ii)  an ownership interest;
iii)  any relationship with a third party

Financial interest: means any cash, cash equivalent, voucher, gift, service, advantage, benefit, discount, domestic or foreign travel, hospitality, accommodation, sponsorship, other incentive or valuable consideration, other than –

a) an ownership interest;
b) training, that is not exclusively available to a selected group of providers or representatives,

i) products and legal matters relating to those products;
ii) general financial and industry information;
iii) specialised technological systems of a third party necessary for the rendering of a
financial service; but excluding travel and accommodations associated with that
training

Ownership interest: means-

a) any equity or proprietary interest, for which fair value was paid by the owner at the time of acquisition, other than equity or an proprietary interest held as an approved nominee on behalf of another person; and
b) includes any dividend, profit share or similar benefit derived from that equity or ownership interest.

Third party: means –

a) a product supplier;
b) another provider;
c) anassociateofaproductsupplieroraprovider;
d) a distribution channel;
e) any person who in terms of an agreement or arrangement with a person referred to paragraphs (a) to (d) above provides a financial interest to a provider or its representatives.

Associate: means –

a) in relation to a natural person, means –

i) a person who is recognised in law or the tenets of religion as the spouse, life partner, or civil union partner of that person;
ii) a child of that person, including a stepchild, adopted child and a child born out of wedlock;
iii) a parent or stepparent of that person;
iv) a person in respect of which that person is recognised in law or appointed by a court
as the person legally responsible for managing the affairs of or meeting the daily care
needs of the first mentioned person
v) a person who is the spouse, life partner or civil union partner of a person referred to in
(ii), (iii) and (iv)
vi) a person who is in a commercial partnership with that person

b) in relation to a juristic person,

i) which is a company, means any subsidiary or holding company of that company, any
other subsidiary of that holding company and any other company of which that
holding company is a subsidiary.
ii) which is a closed corporation registered under the Close Corporations Act, means
any member thereof as defined in section 1 of that Act.
iii) which is not a company or a closed corporation, means another juristic person which
would have been a subsidiary or holding company of the first-mentioned juristic person:
had such first-mentioned juristic person been a company; or
in the case where that other person, too, is not a company, had both the first-mentioned juristic person and that other juristic person been a
company
iv) means any person in accordance with whose directions or instructions the board of
directors of or, in the case where such juristic person is not a company, the governing
body of such juristic person is accustomed to act.

in relation to any person,

i) means any juristic person of which the board of directors or, in the case where such juristic person is not a company, of which the governing body is accustomed to act in accordance with the directions or instructions of the person first-mentioned in this paragraph
ii) includes any trust controlled or administered by that person

Distribution channel: means –

a) any arrangement between a product supplier or any of its associates and one or more
providers or any of its associates in terms of which arrangement any support or service is
provided to the provider or providers in rendering a financial service to a client
b) any arrangement between two or more providers or any of their associates, which arrangement facilitates, supports or enhances a relationship between the provider or providers and a product supplier any arrangement between two or more product suppliers or any of their associates, which arrangement facilitates, supports or enhances a relationship
between a provider or providers and a product supplier.

The following abbreviations will be used

COI: Conflict of Interest
BSFS: Blue Sky Financial services

3. Objectives of the policy

a) Identify all companies and normal people who might create conflict of interest situations
b) Identify possible conflict of interest situations
c) Have effective systems in place to detect and deter all kinds of COI
d) If a COI problem comes up we need to be able to remedy in it a timely manor

4. Parties that can create COI situations

a) Directors
b) Employees
c) Lead providers
d) Insurance companies- managers, employees soliciting business
e) Family members of clients and employees/directors
f) Panel beaters

5. Conflicts which may arise in our company

• Kickbacks from panel beaters in return for referring customers when it is not necessarily the best panel beater for the specific client
  Employees sharing customer information to other third parties in order for a personal reward
• Employees sending customers to specific insurers because they feel they get better commission from some insurers than other- client deserves the correct product
• Referring business to friends or family members when it does not essentially have the clients interest at heart
• Hiring friends and family when they are not necessarily the best person for the job
• Selling customers products that they don’t need in order to make more commission

6. Mechanisms for the identification of conflicts of interests

COI problems might be contravened by employees without out them even knowing so it is important that we have systems in place which identifies COI from different angles. The duty will lie with the managers of the company in all divisions to monitor and detect any suspect activity.

Managers need to spend time doing spot checks on any possible COI that might occur. Any suspect activities need to be thoroughly investigated. Identification of conflict would be easier to spot if we were to come up with as many possible theoretical situations (as mentioned previously). This means that managers would annually update and discuss any possible conflicts that may arise.

Another mechanism would be to encourage whistleblowing from any party internal or external. Employees need to ask themselves the below questions:

a) Am I acting in the best interest of the client?
b) Are any of my recommendations to the client benefiting me as an employee personally?
c) Does the benefits employee gain from the transaction have any possible negative effects on the client’s wellbeing?
d) Are there alternative products/advice we can offer the client so that the customer has a variety which he can choose from?

7. Mechanisms for the avoidance of conflicts of interests

The first and most important mechanism would be to educate employees so that they know when they are in fact contravening the COI policy. They must be able to identify any potential conflicts which can arise from any transaction.

Employees are to sign the conflict of interest policy in order to confirm that they have read and understood then terms and conditions.

We need to advertise that we operate a transparent company and conflict of interest will not be tempted and unsavoury business practice from external parties will not be welcome Distribution channels used by the company which provide any kind of service must be aware that we are required to have a conflict of interest policy.

We will have a COI register where any possible conflicted transactions will be recorded. The gift register will also be put in the place for all employees to use and it will also be able to be viewed by anyone in the company.

Scheduled audits should be done by external companies
We need to keep records of advice and why we recommended certain products to certain clients. Our compliance officer can to recommend where we are falling short on identifying and avoiding COI.

8. Mitigations of conflicts of interest

There will be instances where COI will arise and not be able to be avoided. Employee will in these cases be able to still act in the best interest of the client. When it is not possible to act in the best interest of the client we will need to make it know to whoever the responsible manager is as well as the client himself. Once a COI conflict arises we need to see which the best way to remedy the business is. In ultimate situations where consequences can be substantial we should be able to make a call rather not to go through with a transaction. In the case that a transaction has already taken place we need to make all parties aware of COI that has happened.

If a customer has been left in a negative situation due to the recklessness or unethical practice of an employee we will need to remedy the situation. The customer will need to be refunded or compensated for damages caused by the company. We will need to make sure that the customer is in a similar or better situation than previously.

Any situation which has come up should be discussed by all directors, KI’s and compliance officers. The case will be investigated. We will need to discuss why things went wrong. What we are going to do to make sure it does not happen again. We also need to discuss how we are going to help the customer. The person responsible for misconduct will also need to be disciplined whether it is a warning or dismissal.

9. Measure for Disclosure of conflict of interests

The COI policy is an important document which says a lot about the ethics of the company. It must be known that Blue Sky Financial Services run a clean business where COI situations are frowned upon. The COI policy will be available on demand, we will also communicate its existence when signing up business agreements with 3rd parties. The COI policy will also be displayed on the website.

10. Consequences of non-compliance with the COI by internal and external parties

Where an employee is found guilty of an offence, a disciplinary hearing will take place where a minimum of a warning will be issued; serious offences could lead to a dismissal.
Where external 3rd parties are found guilty of non-compliance, a review will be conducted to decide whether we will continue business with them.