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Securities regulations in Canada require all dealers and advisers to comply with certain rules in relation to conflicts of interest, particularly with respect to the disclosure of information in that regard.
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Purpose of this Document :
It is important for you to be informed about how we identify and respond to conflicts of interest in order to minimize their impact. We consider a conflict of interest to be any circumstance where the interests of different parties, such as the interests of a client and those of National Bank Direct Brokerage Inc. (hereinafter “National Bank Direct Brokerage”), are inconsistent or divergent.
We take reasonable steps to identify all existing material conflicts of interest, and those we would reasonably expect to arise. We then assess the level of risk associated with each conflict. We avoid any situation that would entail a serious conflict of interest or represent too high a risk for clients or market integrity. In any other situation entailing a conflict of interest, we ensure that appropriate measures are implemented to control the conflict of interest effectively.
The purpose of this Statement of Policies respecting conflicts of interest is to inform you of the nature and extent of conflicts of interest that may affect the services National Bank Direct Brokerage provides to you.
National Bank Direct Brokerage gives no advice nor does it make any recommendations with respect to investments. The client alone is responsible for the financial and tax repercussion of his investment decisions.
Conflict of Interest Situations
Herein below you will find details regarding situations in which National Bank Direct Brokerage may be in conflict of interest and the manner in which National Bank Direct Brokerage expects to handle the conflict.
Definitions
An individual or company is considered a “related issuer” to National Bank Direct Brokerage if, through the ownership of, or direction or control over voting securities or otherwise, i) this individual or company is a influential securityholder of National Bank Direct Brokerage or ii) National Bank Direct Brokerage is a influential securityholder of that individual or company, or iii) each of them is a related issuer of the same third party.
An issuer distributing securities is a “connected issuer” to National Bank Direct Brokerage if the relationship between this issuer and National Bank Direct Brokerage, a related issuer of National Bank Direct Brokerage or the directors, officers or partners of National Bank Direct Brokerage or a related issuers of National Bank Direct Brokerage, may lead a reasonable prospective purchaser of the securities of the connected issuer to question National Bank Direct Brokerage’s independence from the issuer with respect to the distribution of the securities of this issuer.
Relationships with Parties Related or Connected to National Bank Direct Brokerage
As of October 4, 2010, the list of related issuers of National Bank Direct Brokerage considered reporting issuers under Canadian securities legislation is as described herein below. A concise statement of the relationship between National Bank Direct Brokerage and each related issuer is also provided:
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| National Bank of Canada: National Bank of Canada is a bank incorporated under the Bank Act (Canada) and is a reporting issuer that holds indirectly 100% of the voting and equity shares of National Bank Direct Brokerage. |
Canadian Credit Card Trust: This is a trust company directed by National Bank of Canada and whose shares are traded publicly. Consequently, it is deemed to be a related issuer. |
NBC Asset Trust: This trust is a closed-end trust whose voting units are held by National Bank of Canada. Consequently, NBC Asset Trust is deemed to be a related issuer. |
NBC Capital Trust: This trust is an open-end trust whose voting units are held by National Bank of Canada. Consequently, NBC Capital Trust is deemed to be a related issuer. |
Horizons AlphaPro Exchange–Traded Funds: NBF International Holdings Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, holds voting securities of AlphaPro Management Inc., manager and trustee of these Funds. |
National Bank Securities Mutual Funds (including the National Bank Funds, the Altamira Funds and the Omega Funds): National Bank Securities Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, is the manager of all National Bank Securities Mutual Funds. Natcan Investment Management Inc., a partly owned subsidiary of National Bank of Canada, is the portfolio manager of most National Bank Securities Mutual Funds (with the exception of certain Omega Funds). National Bank Strategic Yield Class is a class of shares of National Bank Funds Corporation, a mutual fund corporation indirectly controlled by National Bank of Canada. Altamira Dividend Fund Inc. and Altafund Investment Corp. are also mutual fund corporations indirectly controlled by National Bank of Canada. |
The Natcan QSSP II Investment Fund Inc.: Natcan Investment Management Inc., a partly owned subsidiary of National Bank of Canada, is the manager of The Natcan QSSP II Investment Fund Inc. All Class B Shares, which are voting shares, are held by Natcan Investment Management Inc. |
Meritage Portfolios: National Bank Securities Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, is the manager of the Meritage Portfolios. National Bank Trust Inc., a wholly-owned subsidiary of National Bank of Canada, is the portfolio manager of all Meritage Portfolios. |
In the course of carrying out its business activities as securities dealer, National Bank Direct Brokerage may from time to time engage in the following activities in respect of National Bank or other related issuers of National Bank Direct Brokerage, and in the context of a distribution, in respect of the securities of National Bank and other connected issuers of National Bank Direct Brokerage:
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Sell such securities to or on behalf of clients of National Bank Direct Brokerage; |
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Purchase such securities from or on behalf of clients of National Bank Direct Brokerage; |
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offer for sale securities, goods and services which include securities, goods or services issued or provided by National Bank of Canada or another related issuer, or cooperate with National Bank of Canada or another related issuer in the joint offering for the sale or purchase of securities, and goods or services. |
It is the policy of National Bank Direct Brokerage to comply fully with all applicable securities legislation and to make all required disclosures where acting as advisor, dealer or underwriter in respect of the securities of National Bank of Canada and other related or connected issuers of National Bank Direct Brokerage, particularly in the following situations:
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In the context of the purchase or sale of securities of a related issuer, or in the course of a distribution, in respect of securities of a connected issuer, National Bank Direct Brokerage will have to inform the client in writing of the relationship or connection between National Bank Direct Brokerage and the issuer of the securities; |
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Where National Bank Direct Brokerage purchases securities from or sells securities to a subsidiary or affiliate, the dealing will be done on the basis that the transaction price for a given security together with the brokerage commission applicable to such trade, is as good as or better than that offered by an unaffiliated third party broker in an arms-length transaction. |
As part of its business activities as investment dealer, National Bank Direct Brokerage may also be called upon to act as agent or principal at the time of buying or selling for or on behalf of its clients. In such instances, the services provided by National Bank Direct Brokerage in the normal course of business will be provided in accordance with its normal practices and procedures as well as the relevant legislation or regulations. |
Related Dealers and Advisors
National Bank Direct Brokerage affiliation with National Bank of Canada and its subsidiaries makes it necessary to put in place certain policies aimed at dealing with any potential conflicts of interest and ensuring that the best interest of National Bank Direct Brokerage’s clients are preserved.
National Bank Direct Brokerage is duly registered as an investment dealer which gives no advice nor does it make any recommendations with respect to investments. Furthermore, National Bank of Canada, of which National Bank Direct Brokerage is indirectly wholly-owned subsidiary, is also the principal shareholder of the following dealers and advisors:
NBC Alternative Investments Inc.
CABN Investments Inc.
NBF Securities (USA) Corp. - in United States only
National Bank Financial Inc.
National Bank Financial Ltd.
Innocap Investment Management Inc.
Natcan Investment Management Inc.
National Bank of Canada Financial Inc. - in United States only
NBCN Inc.
NBF International S.A. - in Switzerland only
National Bank Securities Inc.
Natcan Trust Company
National Bank Trust Inc.
Alpha ATS L.P.
PI Financial Corp.
Wellington West Capital Inc.
Wellington West Capital Markets Inc.
Wellington West Financial Services Inc.
Wellington West Total Wealth Management Inc.
National Bank Direct Brokerage is therefore related to the above-mentioned dealers and advisors. Although there may be overlaps among the directors and officers of these companies, all of these companies are operated as separate legal entities.
National Bank Direct Brokerage may obtain from or provide to the above-mentioned dealers or advisors management, administrative, referral and/or other services in connection with its ongoing business activities or the ongoing business activities of these other companies or transactions completed by it or these other companies. These relationships are subject to certain legislative and industry regulatory requirements which impose restrictions on dealing between related dealers or advisors intended to minimize the potential for conflict of interest resulting from these relationships. National Bank Direct Brokerage has also adopted internal policies and procedures which supplement these requirements, including its policies on confidentiality of information.
Other Companies Related to National Bank Direct Brokerage1
Alpha ATS L.P. (hereinafter “Alpha”) is a marketplace in Canada for the trading of securities.
National Bank Financial Inc. is a limited partner of Alpha, which is a registered dealer with the Investment Industry Regulatory Organization of Canada, and a shareholder of Alpha Trading Systems Inc. (the general partner of Alpha ATS L.P.). The ownership interest of National Bank Financial Inc. and certain other limited partners of Alpha is subject to a re-determination agreement, which provides that the ownership interest of certain limited partners (including National Bank Financial Inc.) will be adjusted on predetermined dates based on the market share of trades executed by the limited partners on Alpha.
National Bank Direct Brokerage may execute trades on your behalf on Alpha and may enter orders which are not immediately tradable into Alpha’s order book. Notwithstanding the ownership interest of National Bank Financial Inc. in Alpha or any of its rights under the re-determination agreement referred to above, National Bank Direct Brokerage is subject to a number of regulatory obligations, including the requirement to diligently pursue best price and best execution of each client order on the marketplace, obligations which override any interest of National Bank Financial Inc. in Alpha.
Conflicts of Interest of National Bank Direct Brokerage Employees
In the ordinary course of performing their duties, our officers, employees, representatives and agents could find themselves in situations where their personal interests may be in conflict with those of a client.
National Bank Direct Brokerage has equipped itself with a Code of Professional Conduct, a Compliance Manual and internal policies dealing with the situations related to its activities. Among other things, they reiterate that National Bank Direct Brokerage employees must never favour their own interests to the detriment of their responsibilities toward National Bank Direct Brokerage’s clientele and National Bank Direct Brokerage itself. Those documents set forth the basic principles by which its employees’ conduct is guided, particularly including the following:
a) Confidential information: It is prohibited to use confidential information acquired in the course of one’s duties, or exploit a situation for the purpose of obtaining an advantage of any kind;
b) Gifts, entertainment and compensation: It is prohibited to accept gifts, entertainment or compensation that could influence decisions to be taken in the course of performing one’s duties. In carrying out their duties, and to avoid any conflicts of interest situations, National Bank Direct Brokerage employees may not receive any other form of compensation than that paid by National Bank Direct Brokerage without the prior written approval of National Bank Direct Brokerage. In addition, National Bank Direct Brokerage ensures that its practices for compensating its representatives are not inconsistent with their obligations to its clients.
c) Other business activities: It is prohibited for National Bank Direct Brokerage employees to engage in activities that could interfere with or enter into conflict with their duties. National Bank Direct Brokerage has a policy respecting its employees’ other business activities. The policy is intended to detect and, where applicable, supervise, disclose or prohibit any conflicts of interest. Furthermore, employees wishing to act as directors of officers of a public or private company must declare their intentions and be duly authorized by National Bank Direct Brokerage. National Bank Direct Brokerage will not permit any of its employees to engage in activities outside the scope of their duties, including, but not limited to, serving as a director of a company or other entity, without first ensuring that such activities do not compromise the interests of National Bank Direct Brokerage’s clients.
d) Client priority rule: The interests of clients must always be given priority over those of National Bank Direct Brokerage and its employees. For this reason and to avoid conflicts of interest, between two orders for the same security at the same price (or a better price), the order coming from a client is always executed prior to the one from National Bank Direct Brokerage or one of its employees.
e) Policy respecting errors: A policy has been established to supervise trading errors made by employees. Employees may not correct their own errors and must forward them to their immediate supervisor to be analyzed and handled; and
f) Referrals: On occasion, clients may be referred by third parties to National Bank Direct Brokerage for the purpose of obtaining the products and services offered by National Bank Direct Brokerage. When such referrals involve a referral commission, they must comply with the existing regulations and be subject to the required disclosures to clients so referred. Such disclosures allow the clients concerned to make an informed decision with respect to the referral and to assess any potential conflicts of interest.
Other conflicts of interest
From time to time, other potential or actual conflicts of interest may arise. National Bank Direct Brokerage undertakes to continue taking the necessary steps to identify and respond to such situations fairly and reasonably, in keeping with the standard of care to which it is subject in its relationships with its clients. This Statement of Policies respecting conflicts of interest of National Bank Direct Brokerage will be updated should there be any evolution with respect to material conflicts of interest.
Head Office of National Bank Direct Brokerage
Pursuant to the regulations in effect, National Bank Direct Brokerage must notify you of the following:
a) Its head office is located in the province of Quebec.
b) It is a non-resident company in the other provinces and territories of Canada.
Herein below you will find the names and addresses of the National Bank Direct Brokerage agents in the provinces outside Quebec where it engages in business activities and where it does not have business locations:
ALBERTA
Lawson Lundell, LLP
C/O Kenneth B. Flowers
205 - 5th Ave. S.W.
Suite 3700
Bow Valley Square 2
Calgary (AB) T2P 2V7
NOVA SCOTIA
Stewart McKelvey Stirling Scales
C/O Candace L. Thomas
900 - 1959 Upper Water St.
Halifax (NS) B3J 2X2
ONTARIO
National Bank Financial
C/O Brian Davis
3200 - 130 King Street West
Toronto (ON) M5X 1J9
BRITISH COLUMBIA
Lawson Lundell, LLP
C/O John T. C. Christian
1600 Cathedral Place
925 West Georgia Street
Vancouver (BC) V6C 3L1
PRINCE EDWARD ISLAND
Stewart McKelvey Stirling Scales
C/O James Travers
65 Grafton Street
Charlottetown, PEI, C1A 8B9
NEW BRUNSWICK
Stewart McKelvey Stirling Scales
C/O Paul W. Smith
1000, Brunswick House
44 Chipman Hill
Saint John (NB) E2L 2A9
SASKATCHEWAN
McDougall Gauley LLP
C/O Robert N. Millar
1500 - 1881 Scarth Street
Regina (SK) S4P 4K9
MANITOBA
Thompson Dorfman Sweatman LLP
C/O Leilani J. Kagan
2200 - 201 Portage Avenue
Winnipeg (MB) R3B 3L3
1 Holding directly or indirectly more than 10% of any class or series of voting securities of these entities.
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© NATIONAL BANK OF CANADA. All rights reserved 2008.