Conflict of Interest Management Summary Policy
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, Royal Bank of Scotland plc, Tokyo Branch (the "Branch") is required to manage the transactions that may cause conflicts of interests by Banking Act and Financial Instruments and Exchange Act (the "Act") so as to prevent the interests of our customers from being unjustly impaired.
The Branch, foreign bank under Banking Act and Registered Financial Institution under the Financial Instruments and Exchange 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 this Policy, means such transactions conducted by the Branch, Bank Agency whose principal bank is the Branch or any of its Parent Financial Institutions, Etc. (as defined in 3 below) or Subsidiary 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 the Branch, Bank Agency whose principal bank is the Branch and/or any of its Parent Financial Institutions, Etc. or Subsidiary Financial Institutions, Etc., and their Customers, or (II) between the Customers of the Branch, Bank Agency whose principal bank is the Branch and/or any of its Parent Financial Institutions, Etc. or Subsidiary Financial Institutions, Etc., and other Customers.
"Customer" means, in relation to the "Banking Related Business", "Financial Instruments Related Business" conducted by the Branch, Bank Agency whose principal bank is the Branch or any of its Subsidiary Financial Institutions, Etc., (I) any customer who has already established business relations, or (II) any customer who may establish business relations.
"Banking Related Business" means "businesses can be conducted by bank" and includes core business of a bank (Banking Act Article 10 1), ancillary business (Article 10 2), Financial Instruments and Exchange Business (Article 11) and other business under provisions of other laws (Article 12).
"Financial Instruments Related Business" means (I) any Registered Financial Institution Business and (II) such business conducted by any of the Subsidiary Financial Institutions, Etc. of such Registered Financial Institution constituting (i) Financial Instruments Business (in case the Subsidiary Financial Institution, Etc. is a Financial Instruments Business Operator), (ii) Registered Financial Institution Business (in case the Subsidiary Financial Institution, Etc. is a Registered Financial Institution), (iii) Business Incidental to Financial Instruments Business as provided for in Article 35, Paragraph 1 of the Financial Instruments and Exchange Act (in case the Subsidiary Financial Institution, Etc. is a Financial Instruments Business Operator engaging in Type 1 Financial Instruments Business or Investment Management Business).
(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 his/her own interests will be prioritized through counseling or advice (Duty-of-Loyalty Type);
- If the Branch or any of its Affiliates may obtain any economic profit or avoid any economic loss knowing it may impair interest of Customer (Duty-of-Loyalty Type);
- If the Branch or any of its Affiliates 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 their Customers (Duty-of-Loyalty Type);
- If the Branch or any of its Affiliates conducts any transaction with any Customer who should be protected by the Branch or such Affiliate (Self-Agency Type);
- If the Branch or any of its Affiliates conducts any transaction under which the Branch or such Affiliate takes the side of the counterparty of any Customer who should be protected by the Branch or such Affiliate (Two-Side Agency Type);
- If the Branch or any of its Affiliates conducts any transaction with the counterparty of any Customer who should be protected by the Branch or such Affiliate, which counterparty competes with such Customer (Competitive Transaction Type);
- If the Branch or any of its Affiliates conducts any transaction through the use of non-public information on any Customer who should be protected by the Branch or such Affiliate, which transaction results in any benefit to the Branch or any such Affiliates (Information Use Type); or
- If the conditions for similar transactions may not be expected due to the involvement of Branch 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, the Branch will consider whether any impact upon the reputation of the Branch 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 Banking Act, the Financial Instruments and Exchange 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 the Branch, Bank Agency whose principal bank is the Branch or any of its Parent Financial Institutions, Etc. or Subsidiary Financial Institutions, Etc. (the Parent Financial Institutions, Etc. and Subsidiary Financial Institutions, Etc. of the Branch are referred to as "Affiliates").
"Parent Financial Institution, Etc." means (I) such parent corporation of the Branch, (II) such subsidiary corporation of any Parent Corporation, Etc. of the Branch, such Affiliated Corporation, Etc. of any parent corporation, etc. of the Branch, or (III) such Subsidiary Corporation, Etc. or affiliated corporation, etc. of any Specific Individual Shareholder of the Branch, as is (a) a Financial Instruments Business Operator, (b) a bank, (c) an insurance company (including any foreign insurance company, etc.), (d) money lending business or its intermediary, or (h) a person who engages in Financial Instruments Business, banking business or insurance business in any foreign country in accordance with any foreign law or regulation.
"Subsidiary Financial Institution, Etc." means (I) such Subsidiary Corporation, Etc. of the Company, or (II) such Affiliated Corporation, Etc. of the Branch, as is (a) a Financial Instruments Business Operator, (b) a bank, (c) an insurance company (including any foreign insurance company, etc.), (d) money lending business, or (e) a person 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 8 February 2010, the following companies hereto are the "Parent Financial Institutions, Etc." or "Subsidiary Institutions, Etc." of the Branch.
- The Royal Bank of Scotland Group plc(UK)
- RBS Securities Japan Limited(Hong Kong)
- National Westminster Bank plc(UK)
- The Royal Bank of Scotland N.V.(the Netherlands)
4. Method of Managing Transactions That May Cause Conflicts of Interests
If the Branch identifies any transaction that may cause a conflict of interests, the Branch 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 the Branch, or any of its Parent Financial Institutions, Etc. or Subsidiary Financial Institutions, Etc.).
5. Conflict of Interest Management System
(1) Establishment of the Conflict of Interest Management Control Division
Compliance Division of the Branch 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 the Branch-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 the Branch, 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 the Branch, 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.
