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Conflicts of Interest Policy

1. Purpose

This policy details how InvestEngine (UK) Limited (IEUK) will identify, prevent and manage conflicts of interest in respect of its business activities.

IEUK is authorised and regulated by the Financial Conduct Authority (FCA) and, as such, will act in accordance with the Conflicts of Interest rules as defined in FCA Principle 8 and SYSC 10 of the FCA handbook, which requires IEUK to manage conflicts of interest fairly, both between itself and its clients and between two clients.

2. Responsibilities

The Board of Directors of IEUK are responsible for ensuring that its systems, controls and procedures are able to identify, manage and control or prevent any potential and actual conflicts of interest that may arise.

IEUK operates a Three Lines of Defence model whereby the business (First Line) is responsible for identifying and managing conflicts of interest, and Compliance (Second Line) provides oversight, challenge and monitoring. Independent assurance is delivered through a co‑sourced Third Line of Defence, providing periodic review of the effectiveness of the conflicts framework and reporting to senior management and the Board.

The compliance function is responsible for the logging, maintenance and on‑going oversight of conflicts of interest, including the conflicts of interest register. It is also responsible for the on‑going review and maintenance of this policy.

All staff members are responsible for notifying the compliance function of any potential, or actual, conflicts of interest.

3. Definition

A conflict of interest is a situation in which someone in a position of trust to the client, or the business, has competing professional or personal interests. Such competing interests can make it difficult for individuals to fulfil their duties to the business or its clients impartially. A conflict of interest may exist even if no unethical or improper act results from it.

Conflicts of interest arise in the course of providing a service to a client, the firm or its employees:

  • Are likely to make a financial gain or avoid a loss at the expense of the client or the business.
  • Have an interest in the outcome of the service provided which is distinct from the client’s or the firm’s interest.
  • Have a financial or other incentive to favour the interests of another client over the interests of the client.
  • Carry on the same business as the client.
  • Receive, from a person other than the client, an inducement in relation to the service provided to the client, other than the standard commission or fee for that service.

4. Identifying, managing and preventing conflicts of interest

IEUK has reviewed its business model and has identified the following potential conflicts of interest:

  • Employee Roles and Responsibilities
  • Remuneration
  • Employees and connected persons outside business interests
  • Director outside business interests
  • Inducements including Gifts and Hospitality
  • Personal account dealing
  • Customer orders
  • Handling confidential and insider information flows
  • Partnerships with product manufacturers
  • Client cash and interest retention in respect of the MPS offering

IEUK will regularly review its business model to ensure any new potential conflicts of interest are noted and managed or prevented effectively.

4.1 Employee Roles & Responsibilities

IEUK maintains a clear segregation of roles and responsibilities including separate supervision and management reporting lines for employees whose activities for the firm may lead to a conflict of interest arising. This ensures an effective control environment and helps to avoid conflicts of interest in roles wherever possible.

All employees are expected to raise potential conflicts of interest so that these can be logged on the conflict of interest register. Conflicts can be raised with the employee’s line manager, or directly with a member of the Compliance team.

4.2 Remuneration

The remuneration of staff will be assessed annually in accordance with IEUK’s Remuneration Policy and appraisal process and usually consists of a base salary and performance related variable compensation. IEUK strives to ensure our employees remain motivated whilst at the same time ensuring that this remuneration scheme does not give rise to conflict of interest situations or the possibility of inappropriate behaviour.

The remuneration committee retains oversight of remuneration and gives due consideration to whether any remuneration practices could give rise to a conflict of interest.

4.3 Employee and connected persons outside business interests

IEUK recognises that our current and future employees and their connected persons may have an interest, relationship or arrangement whereby they act as a trustee, hold power of attorney or have a Directorship that may potentially create a conflict of interest. IEUK requires its employees to declare any such interests and these will be recorded in the Conflicts of Interest register.

If a compliance assessment indicates such arrangements could give rise to a legitimate conflict of interest, IEUK will implement the necessary controls to ensure that any activities conducted do not conflict with their role working in the firm. These controls will differ depending upon the nature of the conflict.

4.4 Director Conflicts of Interest

Under the Companies Act 2006, directors of IEUK are required to avoid situations in which they have or could have an interest which conflicts, or may conflict, with the interests of the firm. This applies in particular to an interest in any property, information or opportunity. In order to comply with this, directors are required to declare any potential conflicts of interest including the nature & extent of any interests that they have in any existing or proposed transactions or proposed arrangements with the firm. These will be recorded in the Conflicts of Interest register.

4.5 Inducements including Gifts and Hospitality

IEUK has a strict policy, which specifically prohibits employees from soliciting or accepting any inducements to conduct business in a specific manner that would give rise to a detriment to a client or to favour the interests of one client over another.

The firm recognises that Gifts and Hospitality can lead to potential conflicts of interest. Employees are not permitted to accept, or give to, any person any gift or other benefit that cannot properly be regarded as justifiable in all circumstances or may give rise to the perception that in doing so, decisions may be influenced or may not be impartial. All employees are expected to act with the highest standards of integrity to avoid any allegations of conflicts of interests.

Any employee who offers or is offered any gifts or hospitality are required to report this to Compliance for recording on the Gifts and Hospitality register. Any employee who offers or is offered gifts or hospitality over an agreed limit will require approval from Compliance prior to accepting or offering gifts or hospitality. In addition, any indications of expectation of support following a gift or hospitality of any value should be reported to Compliance.

Compliance will regularly review the Gifts & Hospitality register to identify any conflicts of interest that may be occurring.

The Gifts and Hospitality Policy contains further information and the agreed value limits set.

4.6 Personal Account Dealing Procedures

Employees dealing on their own personal account may present conflicts of interests. However, due to the current nature of the products provided (liquid ETF’s), the risks associated with PA Dealing are considered lower than for firms trading individual equities. However, staff may also hold positions in individual securities or competitor platforms, and IEUK does not rely on instrument type alone to manage this risk. The PA Dealing Policy sets out requirements and restrictions that apply.

This is subject to change in the future as the IEUK grows and the risks associated with PA dealing changes.

Full details for the management and process around this can be found in the personal account dealing policy.

4.7 Customer Orders

IEUK’s Best Execution Policy requires the business to take all reasonable steps to achieve the best overall trading result for clients; to exercise consistent standards; and operate the same processes across all markets, clients and financial instruments in which it operates.

The firm aggregates all client orders and trades on a consolidated basis, segregated between managed and Execution Only mandates.

4.8 Handling confidential & inside information flows

As a platform provider that does not come into contact with price‑sensitive information, IEUK considers the risk of receiving confidential or inside information to be low. However, should any confidential or inside information (information relating to a product, company or instrument which has not been made public, and which is likely to have a significant effect on the price of that product, company or instrument) be received, compliance must be informed immediately. Appropriate arrangements will then be made, such as Chinese Walls, Insider lists or disclosures on a need‑to‑know basis. The employee must ensure that the information is not divulged to anyone else under any circumstances, and must not carry out any PA dealing or encourage anyone else to do so.

4.9 Preventing Third Party Conflicts

The general rule is that IEUK should make every effort to establish whether a conflict of interest exists prior to commencing a business relationship with a third party.

If there is a significant risk of a conflict of interest, the matter must be referred to SMF16 for consideration.

Without exception, before a business relationship is established with an external organisation, the manager responsible for the relationship will ensure that a conflict of interest check is undertaken and recorded in the Vanta risk management system.

For further details on the policies and procedures concerning 3rd party risk management please see the third party risk management policies and procedural documents.

4.10 Client Cash and Interest Retention

IEUK retains all interest earned on uninvested client cash held in DIY accounts. For Managed Portfolio Service (MPS) clients, IEUK does not charge a management fee on the cash element of the portfolio; instead, it retains all interest earned on that cash as its charge for managing the portfolio. In both cases clients receive no interest on uninvested cash. These arrangements give rise to a conflict of interest as IEUK derives a financial benefit from client cash holdings and could in theory be incentivised to allow cash to remain uninvested rather than ensuring it is deployed in line with client objectives, and we recognise the opportunity cost to clients.

IEUK manages this conflict through disclosure in its Terms and Conditions, client‑facing tools designed to encourage cash deployment (including AutoInvest), and email nudges and a regular Consumer Duty fair value assessment which considers whether the overall platform pricing, taking into account interest retained on client cash, delivers fair value in the round. For DIY clients, the primary offset is the absence of any platform fee. For MPS clients, the interest retained on cash is the explicit charge in lieu of a management fee on that element, as set out in the Terms and Conditions.

This conflict is recorded on the Conflicts of Interest Register and is reviewed at least annually.

4.11 Group/parent status

InvestEngine (UK) Ltd (‘IEUK’) is part of a group and provides services to its parent company, InvestEngine Holdings Ltd (‘Holdings’). This includes operating the fractional trading model, under which Holdings maintains a client account on the IEUK platform to hold residual ‘remainder’ fractional positions. This arrangement enables customers to hold fractional shares; without it, they would be restricted to trading in whole shares only.

This set‑up creates a potential conflict of interest between Holdings (as a group client) and retail clients, as well as a risk of perceived value transfer or preferential treatment. IEUK mitigates this conflict by operating an agency‑only execution model (i.e. IEUK does not trade on its own account), applying fair aggregation and allocation controls, and monitoring best execution to ensure that client orders are treated consistently and not disadvantaged. Where organisational measures alone are not sufficient to manage a conflict, IEUK will make appropriate disclosures to clients in line with SYSC requirements.

In relation to the fractional client account specifically, IEUK maintains governance and controls to ensure the arrangement remains operationally justified, appropriately documented, and does not give rise to client detriment.

5. Assessment of the degree of conflict

When assessing conflicts, InvestEngine will consider the risk posed of the potential or actual conflict from both a likelihood as well as impact perspective with regards to customer outcomes. This includes a judgement with specific regards to vulnerable customers.

The firm will consider the following matters from SYSC 10.1.4C:

whether the firm or a relevant person, or a person directly or indirectly linked by control to the firm:

  1. is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
  2. has a financial or other incentive to favour the interest of another client or group of clients over the interest of the client;
  3. carries on the same business as the client;
  4. receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service; or
  5. is substantially involved in the management or development of policies, in particular where such a person has an influence on the pricing of those policies or their distribution costs.

6. ETF Partners

IEUK partners with some ETF providers, in order to promote the provider on its platform, in return for a fee. The purpose of this is to leverage the expertise and larger resources of the ETF provider, in order to provide access to a wider range of information and resources to its clients.

The firms also work in partnership to host webinars and discussions on industry topics and produce joint financial promotional material. Such materials are subject to full compliance sign off via Adclear where the management of such conflicts are considered as part of the compliance sign off.

The full list of IEUK’s paid partnerships can be found in the Appendix 1 to this Policy.

COBS 6.1.E.7(R) states that Other than in COBS 6.1E.6 R, a platform service provider or its associates may solicit and accept payments from any firm, including a retail investment product provider, which are only for:

  1. pricing error corrections;
  2. administering corporate actions;
  3. research carried out by the platform service provider and management information; and
  4. advertising;

provided that:

  1. the services are available to firms at a price which does not vary inappropriately according to firm;
  2. the payments are reasonable and proportionate for the service; and
  3. the payments or service could not reasonably be expected to result in a channelling of business to the firm other than through the normal effect of general advertising.

However, we do not expect payments for advertising to be used to help a product provider gain access to a shortlist of funds, influence any ranking of products, or otherwise result in a channelling of business to that product provider. We recognise that allowing the above payments gives rise to the possibility of abuse so that providers may still have the potential to influence distribution. However, we have made it clear in the Handbook text that we expect any charges made to be reasonable and proportionate, reflect the service being provided and not vary inappropriately between different product providers. (From PS13/1 ‑ Payments to platform service providers and cash rebates from providers to consumers)

IEUK has identified several conflicts of interests that will arise, as a result of these partnerships. The following measures will be put in place to manage the conflicts of interests that arise:

6.1 ETFs of partners in Managed Portfolios

IEUK provides a Managed Portfolio service to clients, which are assessed regularly, with ETFs being added or removed or the weighting of a certain ETF within a portfolio being changed. There is a risk that ETF choices for Managed Portfolios may be influenced, with a bias towards the ETFs of partners, who have paid IEUK. This may occur at the expense of the best interests of clients, as better suited ETFs for portfolios may be excluded.

InvestEngine manages this risk through a robust sign off process as part of its asset allocation and investment selection policies.

This is then put through two governance forums; Investment Committee and Investment Oversight Committee. Any changes to portfolios are discussed for sign off and ratification in both forums.

Additionally, 2nd line monitoring will from time to time perform conflicts of interest reviews which would review the use of any ETF partner instruments within the MPS offering.

6.2 Limitations in fees that IEUK can receive

IEUK partners with a number of ETF providers and there is a risk that a wide disparity between the value of the fees received from each partner, could lead to a greater disparity in service received by each partner. Therefore, in order to manage this conflict, any fees received should be proportionate to the size of the arrangement with the partner. An annual review will be performed concerning fees received for ETF partner projects.

6.3 Consistency of level of service

In addition to the limitation in fees that IEUK can receive, the service that is offered to different ETF providers should be consistent throughout. Whilst there will be slight variations between what is offered to providers dependent upon the specific arrangement, it is expected that any part of a service remains commensurate with the fee and the agreed arrangements. No undue prominence should be given to any specific partners regardless of the fees paid.

6.4 Justification of partnership against PROD/PRIN

As an FCA regulated firm, IEUK is required to ensure that all Products & Services provided comply with the Product Governance rules, as well as the Principles of Business. Prior to any partnership being entered into, an assessment must be conducted to ensure the following:

The partnership will meet the needs of clients in one or more identifiable target markets;

Appropriate distribution channels will be used in selling the service from the partner to clients; and

The firm will still be adhering to the obligations outlined in the FCA Principles of Business, with specific reference to managing conflicts of interest.

When looking at the above, the Consumer Duty principle, rules and outcomes should be taken into consideration and justification must be provided as to how this partnership will deliver good outcomes for IEUK’s clients. Outputs from monitoring of this should be provided to the relevant governance forums including the Marketing Committee and the Consumer Duty Working Committee.

In addition, IEUK applies a standard set on onboarding criteria for ETFs, owned by the Investment function, when considering onboarding new assets onto the platform. A firm being a featured partner has no bearing on the likelihood of an asset being onboarded; it must meet the standard criteria set as any non‑partner asset would need to. The Investment Oversight Committee is responsible for authorising the onboarding of any outside of policy parameter assets and will bear in mind any potential conflict of interest management where these assets are manufactured by a featured partner.

6.5 No individual targeting

The purpose of the partnerships with ETF providers is to ensure that all clients get the same opportunities and access to the information and resources provided. Therefore, no individual customers are allowed to be targeted or contacted directly by IEUK or the partner.

6.6 No individual customer information

In order to assist with ensuring no individual customers are targeted, no individual customer information (including masked information) shall be passed to partners. All agreements with partners shall include a clause stating this.

6.7 Compliance oversight on financial promotions

IEUK has procedures and policies in place, so that all financial promotions including website pages are checked and approved, to ensure compliance with COBS 4. These controls will continue to apply to any promotional material created as part of these partnerships, and include ensuring that joint partnership materials are clearly advertised as such. This helps content to remain clear, fair and not misleading as well as complying with the ASA’s advertising rules.

There is an additional risk of certain partners getting more prominence and exposure than others, which could push clients to invest in ETFs, which may not necessarily be appropriate for their circumstances or in their best interests. In order to manage this additional risk, the marketing function provides outcome monitoring data to the marketing committee and to the board regarding the impacts of featured partner marketing. This includes 'heat maps' which help to analyse whether undue prominence is given to an ETF partner in terms of website placing, or whether marketing campaigns drive a large increase in trading to partner products.

Compliance will also perform 2nd line monitoring over these materials.

For further information on financial promotions please see the financial promotions policy.

7. Recording conflicts of interest

All conflicts of interest that arise, or may arise, are recorded on the Conflicts of Interest Register in a timely manner. The register will include the way IEUK prevents and manages the conflicts and the person responsible.

All new conflicts added to the register will be raised to the SMF16 in a timely manner. Depending on the inherent risk of the conflict, or whether an actual conflict has arisen, the SMF16 will decide whether it is appropriate to notify the Risk Committee, Executive committee or Board of Directors as applicable. This also applies to the archiving of any conflicts of interest that are no longer applicable to the business.

The Conflicts of Interest Register will be provided to the Board of Directors for review at least annually.

Staff are reminded of their obligations of notifying compliance of any conflicts of interest, as well as a reminder of compliance with this policy, on 6 monthly basis. As well as new conflicts, staff are expected to provide information if there are changes in the conflict profile ‑ ie becoming a majority shareholder as opposed to a previous minor position, or a change in governance position.

8. Declining to act and disclosures of conflict

8.1 Declining to Act

Where IEUK considers that it is not able to manage a prospective conflict of interest in any other way, it must decline to take on activities that would lead to such a conflict arising.

8.2 Disclosures of Conflicts

As per SYSC 10.1.8, If arrangements made by a firm regarding its conflict of interest management are found to be not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a client will be prevented, the firm must clearly disclose the following to the client before undertaking business for the client:

  1. the general nature or sources of conflicts of interest, or both; and
  2. the steps taken to mitigate those risks.

(2) The disclosure must:

  1. be made in a durable medium;
  2. clearly state that the organisational and administrative arrangements established by the firm to prevent or manage that conflict are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented;
  3. include specific description of the conflicts of interest that arise in the provision of services, taking into account the nature of the client to whom the disclosure is being made;
  4. explain the risks to the client that arise as a result of the conflicts of interest; and
  5. include sufficient detail, taking into account the nature of the client, to enable that client to take an informed decision with respect to the service in the context of which the conflict of interest arises.

9. Breaches of Conflicts of Interest Policy

Any breaches of the Conflicts of Interest rules will be recorded on the Risk Event register in conjunction with the Regulatory Breach/Rule Breach policy. Where a breach has resulted in client detriment, IEUK will assess whether client remediation is required and will take appropriate action in line with its Client Remediation Policy. Significant breaches will be escalated to the Compliance Director and, where required under SUP 15, notified to the FCA without undue delay. All breaches will be subject to root cause analysis to determine whether updates to policy, controls or training are required.

10. Escalation

The Escalation, Error, Incident and Rule Breach Policy and Procedure details how InvestEngine will deal with errors and rule breaches. IEUK is authorised and regulated by the Financial Conduct Authority (FCA) and, as such, will act in accordance with the rules regarding breaches as outlined in SUP 15 and other sections of the FCA Handbook. These will take precedence over the requirements of this policy.

Any issues, breaches, or deficiencies identified in the application of the controls outlined in this document must be escalated promptly to the Compliance Director or a designated member of the Compliance function. This includes, but is not limited to, material conflicts of interest or any circumstances where staff are unable to remain compliant within this policy.

11. Monitoring and review of Policy

Compliance will monitor the firm’s conflict of interests throughout the year via the compliance monitoring programme. This policy will be reviewed regularly, at least annually, and amended where necessary in the event of changing circumstances or regulations.