Summary Policy
Conflict of Interest Management
1. Purpose
In connection with the diversification of services provided by financial institutions and the development of global financial conglomeratization, multiple interests compete or conflict with each other within a financial institution or financial group increasing the possibility of conflicts of interests.
Under such circumstances, RBS Securities Japan Limited, Tokyo Branch, ("RBSSJ") is required to manage the transactions that may cause conflicts of interests by the Financial Instruments and Exchange Act (the “Act”) so as to prevent the interests of our customers from being unjustly impaired.
RBSSJ, a Type 1 Financial Instruments Business Operator engaging in Securities-Related Business under the Act, has established the Conflict of Interest Management Policy (the "Policy"), which is required in the creation of the conflict of interest management system under applicable laws and regulations. Please see the outline of the Policy.
2. Types of Transactions That May Cause Conflicts of Interests; Process of Identification, Etc.
(1) Covered Transactions
"Transactions that may cause conflicts of interests," which are covered by the Policy, means such transactions conducted by RBSSJ or any of its Parent Financial Institutions, Etc. (as defined in 3 below) that may unjustly impair the interests of our Customers (the "Covered Transactions").
Conflicts of interests may occur (I) between RBSSJ and/or any of its Parent Financial Institutions, Etc. and their Customers, or (II) between the Customers of RBSSJ and/or any of its Parent Financial Institutions, Etc., and other Customers.
"Customer" means, in relation to the "Financial Instruments Related Business" conducted by RBSSJ, (I) any customer who has already established business relations, or (II) any customer who may establish business relations, both of whom exclude any customer that seems to be irrelevant to the Domestic Business (which term means any business conducted by RBSSJ in Japan).
"Financial Instruments Related Business" means any Financial Instruments Business and such Business Incidental to Financial Instruments Business, as provided for in Article 35, Paragraph 1 of the Financial Instruments and Exchange Act, that are conducted by RBSSJ.
(2) Types of Transactions That May Cause Conflicts of Interests; Criteria
The following transactions may be considered as types of "transactions that may cause conflicts of interests." However, as these types are only criteria to determine whether there is any "transaction that may cause any conflict of interests," please note that the satisfaction of any such criteria does not necessarily mean the occurrence of a "transaction that may cause a conflict of interests." Also, please note that some additions or modifications may be made in the future as may be necessary.
- If any Customer reasonably expects that its own interests will be prioritized through counseling or advice (Duty-of-Loyalty Type);
- If RBSSJ or any of its Parent Financial Institutions, Etc. may obtain any economic profit or avoid any economic loss at the expense of any Customer (Duty-of-Loyalty Type);
- If RBSSJ or any of its Parent Financial Institutions, Etc. obtains or will obtain any incentive in the form of money, goods or services other than the usual commission fees or expenses in connection with the transactions with any person other than the Customers (Duty-of-Loyalty Type);
- If RBSSJ or any of its Parent Financial Institutions, Etc. conducts any transaction with any Customer who should be protected by RBSSJ (Self-Agency Type);
- If RBSSJ or any of its Parent Financial Institutions, Etc. conducts any transaction under which RBSSJ or any of its Parent Financial Institutions, Etc. takes the side of the counterparty of any Customer who should be protected by RBSSJ (Two-Side Agency Type);
- If RBSSJ or any of its Parent Financial Institutions, Etc. conducts any transaction with the counterparty of any Customer who should be protected by RBSSJ, which counterparty competes with such Customer (Competitive Transaction Type);
- If RBSSJ or any of its Parent Financial Institutions, Etc. conducts any transaction through the use of non-public information on any Customer who should be protected by RBSSJ, which transaction results in any benefit to RBSSJ or any of its Parent Financial Institutions, Etc. (Information Use Type); or
- If the conditions for similar transactions may not be expected due to the involvement of Company or any of its Affiliates in the same transaction on multiple sides (Transaction-Internalization Type).
In addition, upon determining whether any conflict of interests has occurred, RBSSJ will consider whether any impact upon the reputation of RBSSJ or our group has been caused.
The Policy will not cover any acts other than those that constitute "transactions that may cause conflicts of interests" notwithstanding that such acts are prohibited under the Act, or any other laws or regulations.
3. Scope of the Companies Covered by Conflict of Interest Management
As stated in 2(1) above, the Covered Transactions are any transactions conducted by RBSSJ or any of its Parent Financial Institutions, Etc..
"Parent Financial Institution, Etc." means (I) such parent corporation of RBSSJ, (II) such subsidiary corporation of any Parent Corporation, Etc. of RBSSJ, (III) such Affiliated Corporation, Etc. of any parent corporation, etc. of RBSSJ, which is a Financial Instruments Business Operator, (b) a bank, (c) an insurance company, or (IV) a corporation who engages in Financial Instruments Business, banking business or insurance business in any foreign country in accordance with any foreign law or regulation.
As of February 8, 2010, the following companies hereto are the "Parent Financial Institutions, Etc. of RBSSJ.
- The Royal Bank of Scotland Group plc (UK)
- The Royal Bank of Scotland plc (UK)
- National Westminster Bank plc (UK)
- The Royal Bank of Scotland N.V. (the Netherlands)
- RBS Securities Inc. (USA)
4. Method of Managing Transactions That May Cause Conflicts of Interests
If RBSSJ identifies any transaction that may cause a conflict of interests, RBSSJ will properly secure the protection of our Customers by selecting from any of, or combining, the following methods and any other methods (the following methods are only examples, and the following measures need not be adopted):
- The method of separating the division conducting the Covered Transaction, and the division conducting the transaction with such Customer;
- The method of amending the conditions or method of the Covered Transaction or the transaction with such Customer;
- The method of discontinuing the Covered Transaction or the transaction with the Customer; and/or
- The method of properly disclosing to the Customer the possibility that the interests of such Customer may be unjustly impaired in connection with the Covered Transaction (only if such disclosure does not violate the duty of confidentiality assumed by RBSSJ, or any of its Parent Financial Institutions, Etc.).
5. Conflict of Interest Management System
(1) Establishment of the Conflict of Interest Management Control Division
Compliance Division of RBSSJ will be the Conflict of Interest Management Control Division.
The Conflict of Interest Management Control Division will be independent from the Sales Division, and will never receive any direction or order regarding the treatment of specific cases from the Sales Division.
The Conflict of Interest Management Control Division will control RBSSJ-wide management system regarding the identification of transactions that may cause conflicts of interests and the management of conflicts of interests.
(2) Duties of the Conflict of Interest Management Control Division
The Conflict of Interest Management Control Division will assume the following duties in a position independent from the Sales division.
The Conflict of Interest Management Control Division will identify any Covered Transactions, and also instruct the Sales divisions to properly manage any conflicts of interests regarding the Covered Transactions.
The Conflict of Interest Management Control Division shall immediately report to the Internal Control Supervisor any matter that has a material effect on the management of RBSSJ, or significantly impairs the interests of Customers.
The Conflict of Interest Management Control Division will verify whether the conflicts of interests have been properly managed, and, when necessary, review the procedures for conflict of interest management, or the conflict of interest system.
If the interests of our Customers may be unjustly impaired, the Conflict of Interest Management Control Division will instruct the Sales divisions to properly manage conflicts of interests, or review the Covered Transactions, when necessary.
The Conflict of Interest Management Control Division will provide training for the management of conflicts of interests based on the Policy and “the Conflict of Interest Management Rule” to any officers and employees of RBSSJ, and keep them informed about the management of transactions that may cause conflicts of interests.
(3) Record and Preservation
If any officer or employee of the Sales Division identifies any transaction that may cause any conflict of interests and selects the management method thereof, he/she will report to the Conflict of Interest Management Control Division, which records such measures, and preserve such record for five (5) years from the creation of such record.
If the Conflict of Interest Management Control Division identifies any transaction that may cause any conflict of interests and selects the management method thereof, the responsible person of the Conflict of Interest Management Control Division will record such measures, and preserve such record for five (5) years from the creation of such record.
