Conflicts of Interest Disclosure
Effective June 30, 2021, a series of rules called the Client Focused Reforms will come into force that are designed to improve and safeguard the investor experience. The changes will be implemented through amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, which is a key regulation governing some of Roadmap’ Capital Inc.’s operations. Overall, the Client Focused Reforms are focused on enhancing the relationship between Canadian portfolio managers and their clients by ensuring that registrants prioritize the best interests of their clients.
Identifying and addressing material conflicts of interest
A “conflict of interest” generally may arise where:
- the interests of different parties, such as the interests of a client and those of Roadmap or any of its employees, are inconsistent or divergent;
- Roadmap may be influenced to put its interests ahead of a client’s interests; or
- monetary or non-monetary benefits or disadvantages to Roadmap that may compromise the trust that a reasonable client has in Roadmap.
Generally, a conflict of interest is considered material if the conflict may be reasonably expected to influence either a client’s decisions or Roadmap or its representatives’ recommendations or decisions in the circumstances.
The Client Focused Reforms related to conflicts of interest require Roadmap to:
- identify existing and reasonably foreseeable material conflicts of interest between a client and Roadmap or any individual acting on Roadmap’s behalf,
- address all material conflicts of interest in the best interests of the client,
- avoid material conflicts of interest that cannot be otherwise addressed in the best interests of the client, and
- provide affected clients with disclosure of material conflicts of interest at account opening or in a timely manner if they are identified later.
While Roadmap has always maintained a Conflicts of Interest Policy and taken reasonable steps to identify existing material conflicts of interest, we feel that these new enhancements benefit all investors. We encourage all our clients to read the disclosure below to understand the nature and extent of potential material conflicts of interest, and any potential impact and risks to you.
Disclosure of material conflicts of interest
1. Consulting Services and Dealer Activities
Roadmap may receive consulting fees, in exchange for providing certain consulting services, from certain of the companies or entities in which the funds invest. The purpose of such consulting services provided to investee companies is to, among other things, help create and realize shareholder value within the investee companies. Roadmap views this as providing an overall benefit to its clients who may directly or indirectly be invested in such investee companies. However, these consulting services may create perceived conflicts in that Roadmap will charge the companies directly for the consulting services.
Any such perceived conflict will be mitigated by the fact that the consulting fees will be predetermined by contract with each investee company and will be based on the nature of services to be provided. It is further mitigated by the fact that investment decisions in respect of the funds are made independently of whether such consulting services are provided to any investee company and in accordance with applicable investment objectives and strategies.
If Roadmap does provide consulting services or acts as an agent/dealer for the purchase or sale of securities of investee companies, it will: (a) disclose this fact in writing to the purchasers of such securities; (b) seek consent from purchasers when opening a client account and as part of the subscription for the applicable Fund, and (c) comply with all applicable requirements under securities legislation.
2. Related Issuer or Connected Issuer of Roadmap
Potential conflicts may be perceived to arise when Roadmap, as a registrant under Ontario securities legislation participates in the distribution of securities of a related or connected issuer. Roadmap and any affiliates are related and/or connected issuers by virtue of having common officers, directors and/or shareholders. Roadmap ensures that disclosure about its related or connected issuers is provided for in the offering documents of the funds as well as, as applicable, in the disclosure that it gives exempt market dealer investors.
Certain inherent conflicts of interest are likely to arise as a result of Roadmap and any affiliates carrying on similar investment activities both for themselves and for other clients. Roadmap, its funds and any affiliates and such persons will not be required to refrain from any other business activity or to disgorge any profits from any such activity, and will not be required to devote all of their time and efforts to the funds and their affairs.
Other products in which Roadmap and any affiliates thereof may be involved with, either in the capacity of manager, portfolio manager, investment advisor, investor or otherwise, may, from time to time, share administrative offices and utilize common services, facilities, investment research and management as those used by the Roadmap funds. Roadmap and any affiliates and such other persons may also determine, from time to time, that some investment opportunities are appropriate for certain investment management clients and not others, including the Roadmap funds, due to differing objectives, strategies, time horizons, liquidity needs or availability, tax consequences and assessments of general market conditions and of individual securities. It may also occasionally be necessary to allocate limited investment opportunities among the Roadmap funds and others on a basis deemed appropriate by Roadmap, which may mean that Roadmap or other accounts managed by any of them achieve profits that a Roadmap fund does not or avoid losses that a Roadmap fund suffers.
Roadmap and any affiliates and their respective principals, partners, directors, officers, consultants and employees, as the case may be, may buy and sell securities or other investments for their own accounts and may have actual or potential conflicts of interest with respect to investments made by Roadmap. Roadmap or other entities that it or any of its affiliates manages or advises may take a position in securities of Roadmap funds, the private companies or other entities that the Manager or any of its affiliates manages or advises. As a result of differing trading and investment strategies or constraints, positions may be taken by directors, officers, consultants and employees of Roadmap that are the same, different or made at a different time and at different valuations than positions taken for the Roadmap funds.
3. Board Positions on Investee Companies
Roadmap may assume positions, either directly or through nominees, on the boards of directors of investee companies. Roadmap will provide a list of the boards that it directors, officers or principals currently sits on upon request.
If Roadmap does assume a position on the board of directors of an investee company, it will: (a) disclose this fact in writing to the purchasers of such securities and/or the relationship disclosure document; and (b) comply with all applicable requirements under securities legislation.
4. Personal Trading, Gifts and Business Entertainment
Personal Trading: Employees involved in the investment process may become privy to material non-public information. Employees who possess material non-public information that could affect the value of an investment are prohibited from acting or causing others to act on the information. As of January 1, 2018, Roadmap’s mandate on a go-forward basis is to invest exclusively in securities of private companies. Employees are free to trade in securities of private companies and are not required to complete any additional reporting or public disclosure requirements when trading in securities of public companies. All Roadmap employees must comply with applicable securities laws and Roadmap’s Code of Ethics for Personal Trading when trading in securities of public companies.
Gifts and Business Entertainment: While it is recognized that conducting business involves some modest exchange of gifts and business-related entertainment, the value of such gifts and entertainment must not impair the independence or objectivity of the recipient. Gifts and entertainment associated with Roadmap related business can neither be received nor given by an employee if such gifts or entertainment are considered to be excessive or extravagant.
5. Outside Business Activities
Employees are expected to devote their full time and attention during regular business hours to their duties at Roadmap. Employees shall not undertake, except as authorized, any independent practice in competition with Roadmap that could result in compensation or other benefit, or which may create any appearance of impropriety or prove a source of embarrassment to Roadmap.
In the performance of their duties, employees shall not be influenced by, accept instructions from or receive remuneration from any government, entity or person external to Roadmap except under the terms of a secondment appointment, or as otherwise specifically authorized.
The foregoing does not prevent an employee from devoting his or her free time to a not-for-profit, charitable or other social organization.
While other circumstances may also be expected from time to time, the foregoing has no application where the employee is authorized to hold a directorship or other position in an outside entity as part of his or her official duties with Roadmap.
In the event that an employee wishes to engage in an outside business activity (i.e. serving as a director, officer, employee, consultant or contractor for any other enterprise) such activity must be pre-approved in writing by the Chief Compliance Officer. When considering whether to approve an outside business activity, the Chief Compliance Officer will consider, among other things, whether such activity raises potential conflicts of interest for Roadmap or its clients.
6. Referral Arrangements
Roadmap may engage in certain referral arrangements between it and affiliated advisors because of expanded product opportunities available through another service provider. Referral arrangements can create a conflict whereby Roadmap is incentivized to recommend a service provider’s services. However, before making any such referral, Roadmap works to ensure that any such referrals are suitable for the client. All referral arrangements are designed in such a manner as not to result in additional fees to the client and are clearly disclosed before or at the time the referred services are provided. The compensation for such referrals is consistent with Roadmap’s internal compensation structures.