Policies & Declarations
Conflicts of Interest Policy
Flexagon Capital Solutions LLP (the “Firm”)
1. Introduction
The Firm conducts its business in accordance with FCA Principle 8, which requires the Firm to manage conflicts of interest fairly, both between the Firm and its clients and between one client and another. SYSC 10.1 requires the Firm to take all appropriate steps to identify and to prevent or manage conflicts of interest that arise in the course of providing its services, between: the Firm — including its managers, employees and appointed representatives or any person directly or indirectly linked to them by control (collectively “Staff”) — and a client of the Firm; or one client of the Firm and another client; including those caused by the receipt of inducements from third parties or by the Firm’s own remuneration and other incentive structures. The Firm’s policy is to take all appropriate steps to maintain and operate effective organisational and administrative arrangements to identify, and to prevent or manage, potential and actual conflicts of interest in the Firm’s business.
2. Conflicts Register
The Firm maintains a Conflicts Register which contains a summary of the Firm’s conflicts and the procedures in place to manage them. The Conflicts Register is regularly updated, and particularly whenever a new conflict is identified or the method for managing a conflict is altered.
3. Identifying Types of Conflicts of Interest
For the purposes of identifying the types of conflict and potential conflict that arise which may damage the interests of a client, the Firm takes into account whether the Firm or a member of Staff:
- is likely to make a financial gain, or avoid a financial loss, at the expense of the client;
- has an interest in the outcome of a service provided to the client, or of a transaction carried out on behalf of the client, which is distinct from the client’s interest in that outcome;
- has a financial or other incentive to favour the interest of one client or group of clients over the interests of another client;
- carries on the same business as the client; or
- 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.
4. Managing Conflicts
4.1 Governance
The Firm has robust governance arrangements and senior-management oversight of the business. Key business decisions are taken by the Governing Body, which understands the Firm’s obligations to manage and mitigate conflicts of interest. The Firm’s senior management are responsible for ensuring that the Firm’s systems, controls and procedures are robust and adequate to identify and manage any conflicts that may arise. Discussion of conflicts is a standing agenda item at board meetings, and senior management regularly review the processes in place for prevention and management of identified conflicts. It is the ongoing responsibility of all Staff to identify potential and actual conflicts as they arise and to notify the Compliance Officer immediately. The Compliance Officer is responsible for implementing appropriate procedures to manage and monitor those conflicts and reports directly to the Governing Body on a regular basis.
4.2 Management Reporting
The Governing Body receives, at least annually, written reports on all identified conflicts. The Compliance Officer is responsible for ensuring that the Governing Body receives such reports.
4.3 Segregation of Functions and Independence
The Firm has a clear organisational structure with well-defined, transparent and consistent lines of responsibility, and has structured its senior management to appropriately segregate duties so as to avoid conflicts wherever possible. The Firm also engages external compliance consultants to advise on its compliance programme and to undertake independent review of its regulatory obligations, including its management of conflicts and its ongoing monitoring requirements.
4.4 Information Barriers
The Firm has effective procedures to prevent or control the exchange of information between Staff engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients.
4.5 Disclosure to Clients
If the Firm’s arrangements to manage a potential conflict are not sufficient to ensure with reasonable confidence that the risk of damage to the interests of a client will be prevented, the Firm will clearly disclose to the client, before undertaking business, the general nature or sources of the conflict (or both) and the steps taken to mitigate those risks. Disclosure is treated as a measure of last resort, made in a durable medium with 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 has arisen.
4.6 Declining to Act
The Firm may decline to act for a client in cases where the Governing Body believes the conflict of interest cannot be managed in any other way.
4.7 Policies & Procedures
In addition to this Policy, the Firm has comprehensive policies and procedures designed to establish consistent controls to manage and mitigate conflicts. These cover areas such as Insider Dealing and Market Abuse, Outside Business Activities, Gifts, Inducements and Business Entertainment, Research, Product Governance, Fraudulent Practices, Money Laundering and Whistleblowing.
5. Staff Training
Upon joining the Firm, Staff receive guidance and training in respect of this Policy to ensure they are aware of its importance and of the need to report any potential or actual conflict of interest immediately to the Compliance Officer.
Statement on the Shareholder Rights Directive II
Flexagon Capital Solutions LLP (the “Firm”)
January 2022
1. Introduction
The Second Shareholder Rights Directive (“SRD”), which took effect in the UK on 10 June 2019, aims to improve shareholder engagement and increase transparency around stewardship. The Firm invests in listed equities and, as such, is required to disclose and make publicly available its policies on how it engages with other shareholders and the companies in which it invests, and how its strategies create long-term value.
2. SRD and the FRC Stewardship Code
The UK Stewardship Code (the “Code”) was established by the Financial Reporting Council in 2010. UK authorised asset managers are required under the rules of the Financial Conduct Authority to produce a statement of commitment to the Code, or to explain why it is not appropriate to their business model. Unlike the SRD, which applies to investments in listed equities globally, the Code focuses on investments in UK companies only. The Firm’s response to the Code is detailed in a separate statement, available below.
3. The Firm’s Approach
The Firm deals mainly in fixed-income instruments. It is required either to publicly disclose an Engagement Policy and an annual public statement on how that policy has been implemented, or to publicly disclose a clear and reasoned explanation of why it has chosen not to make these disclosures. The Firm has elected not to publicly disclose an Engagement Policy. This is because the Firm does not invest in listed equities as a core strategy: it may invest in listed equities from time to time, however this is not considered to be an integral component of the investment strategy.
Statement on the UK Stewardship Code
Flexagon Capital Solutions LLP (the “Firm”)
1. Introduction
This statement outlines the Firm’s position with respect to the UK Stewardship Code (the “Code”), which was published by the Financial Reporting Council (“FRC”) in July 2010 and amended in 2012 and 2020. Under Rule 2.2.3R of the FCA’s Conduct of Business Sourcebook, the Firm is required to make a public disclosure about the nature of its commitment and level of compliance with the Code or, where it does not commit to the Code, to explain its alternative investment strategy.
The Code is a voluntary code which aims to enhance the quality of engagement between asset managers and listed companies in the UK, to help improve long-term risk-adjusted returns to shareholders and the efficient exercise of governance responsibilities. It sets out good practice on engagement with investee companies and is applied on a “comply or explain” basis. The FRC recognises that not all parts of the Code will be relevant to all institutional investors and that smaller institutions may judge some of the principles and guidance to be disproportionate. It is legitimate for some asset managers not to engage with companies, depending on their investment strategy.
The Code comprises twelve Principles, summarised as follows:
Purpose and governance
- i) Purpose, strategy and governance
- ii) Governance, resources and incentives
- iii) Conflicts of interest
- iv) Promoting well-functioning markets
- v) Review and assurance
Investment approach
- vi) Client and beneficiary needs
- vii) Stewardship, investment and ESG integration
- viii) Monitoring managers and service providers
- ix) Engagement
- x) Collaboration
- xi) Escalation
Rights and responsibilities
- xii) Exercising rights and responsibilities
2. The Firm’s Position on the Code
Given the Firm’s specialist focus on fixed-income assets, the number of occasions on which the Firm will be involved in UK equity investments will be limited; therefore the Code’s relevance has limited applicability to the Firm’s investment activities. The Firm has chosen not to formally commit to the Code given the nature of its investment approach. This statement is reviewed annually and updated where necessary to reflect changes in circumstances and actual practice. Should the Firm’s position change, it will review its commitment to the Code and make appropriate disclosure at that time. For further details on any of the above information, please contact the Firm’s Compliance Officer.