Conflict of Interest

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Overview

The terms “TriCert”, “the firm”, “us”, “we”, and/or “our” refers to TriCert Investment Counsel Inc., registered as a Portfolio Manager in Ontario with the Ontario Securities Commission and having equivalent registration in Alberta, British Columbia, Manitoba, Newfoundland, New Brunswick, Nova Scotia, Prince Edward Island, Quebec, Saskatchewan, Yukon, Northwest Territories and Nunavut, and as an Investment Fund Manager with the Ontario Securities Commission.

The term “client” refers to any individual or entity that has entered into an agreement with TriCert for the provision of investment management services. This includes both current clients, who are actively receiving services, and prospective clients, who have expressed interest in TriCert’s services and are in the process of opening an account or discussing potential investment strategies.

TriCert must take reasonable steps to identify existing material conflicts of interest, and material conflicts of interest that are reasonably foreseeable:

  1. between TriCert and the client, and
  2. between each individual acting on TriCert’s behalf and the client,

and must address such conflicts in the best interest of the client. If a conflict cannot be addressed in the best interest of the client, it will be avoided.

Conflicts of interest include any circumstances where:

  • the interests of a client and those of TriCert or an individual acting on TriCert’s behalf are inconsistent or divergent,
  • TriCert or an individual acting on TriCert’s behalf may be influenced to put their interests ahead of a client’s interests, or
  • monetary or non-monetary benefits available to TriCert or an individual acting on TriCert’s behalf, or potential detriments to which they may be subject, may compromise the trust that a reasonable client has in TriCert or their Portfolio Manager.

Whether a conflict is considered material will depend on the circumstances. A conflict is likely to be considered material if it could reasonably be expected to affect:

  • the decisions of a client given the circumstances, or
  • the decisions or recommendations made on behalf of a client by TriCert or its Portfolio Managers.

Purpose of this Disclosure

This Conflicts of Interest Client Disclosure Document sets out those circumstances that TriCert has identified as material conflicts of interest that could affect a client’s interests and of which a reasonable client would expect to be informed. You will receive a copy of this document before opening an account and in a timely manner upon identification of a conflict that has not previously been disclosed.

We have included descriptions of material conflicts of interest in respect of which a reasonable person (an impartial observer) would conclude that either TriCert or its Portfolio Managers’ or other employees’ interests would, or could, conflict with the duty to act in the best interest of clients. Each description includes the nature and extent of the conflict, the conflict’s potential impact on, and risks posed to, a client, and a high-level overview of the systems and controls adopted by TriCert to address such circumstances.

Other conflicts may exist in relation to certain aspects of TriCert’s business which do not entail a risk of damage to the interests of TriCert’s clients (non-material conflicts). TriCert believes that such conflicts are appropriately managed through business processes, and accordingly, they are not reflected in this document.

Identification, Recording & Management of Conflicts of Interest

TriCert has established and implemented policies, procedures, and training to support the firm’s Conflicts of Interest Policy, which enables employees to proactively anticipate and easily identify situations where a conflict may exist or arise and set out the steps to be taken to prevent, avoid or manage those conflicts, as applicable. TriCert employees regularly undergo training on conflicts of interest and certify their compliance with TriCert’s policies and procedures on an annual basis.

TriCert’s Chief Compliance Officer (“CCO”) provides guidance to the firm and its employees on the identification and management of conflicts of interest. The CCO maintains a Conflicts of Interest Register and provides regular reports to the firm’s President and Board of Directors on conflicts of interest management, including how existing material conflicts are addressed in the best interests of the client and what material conflicts of interest could reasonably arise. The Conflicts of Interest Register includes a description of the firm’s assessment of whether or not each conflict is material, including the criteria considered in making the assessment, and is reviewed regularly to account for changes to TriCert’s business model and client base. The CCO monitors the effectiveness of internal controls as part of their ongoing monitoring responsibilities, including confirming that effective disclosure of material conflicts is provided to clients.

TriCert’s employees are responsible for identifying conflicts of interest and reporting such conflicts to the CCO, or their designate. Employees understand that where a conflict is identified as material, it must be avoided or managed in the best interests of the client and that the employee may not engage in any activity related to such conflict without the consent of the CCO.

TriCert’s goal is to address conflicts in a fair, equitable, and transparent manner consistent with the best interests of our clients and best practices in the investment management industry. The firm manages conflicts through internal controls and, where relevant, disclosure. Conflicts deemed too significant or that otherwise cannot be appropriately addressed in the best interests of clients through controls or disclosures must be avoided. Disclosures of conflicts will be made in a timely, meaningful, and prominent manner, enabling clients to assess their relevance when evaluating recommendations made by their Portfolio Manager.

The following information is intended to assist clients in understanding TriCert’s conflicts of interest, including how TriCert addresses such conflicts. For ease of reference, we have grouped the conflicts into the following categories:

Personal (employee) conflicts

  • Compensation arrangements – Portfolio Managers
  • Compensation arrangements – compliance and other supervisory employees
  • Directorships and other outside activities
  • Positions of influence
  • Gifts and entertainment
  • Portfolio Manager House accounts
  • Personal relationships with clients – authority over the financial affairs of a client
  • Personal relationships with clients – being named as beneficiary in a will
  • Personal relationships with clients – financial dealings with a client
  • Personal trading

Conflicts between clients

  • Cross trades and trading in-kind
  • Fair allocation of trades among clients

Firm conflicts

  • Compensation – fee structures
  • Compensation – deviation from standard fees
  • Compensation – sources of revenue
  • Complaints and error resolution
  • Leveraging or borrowing to invest
  • Execution services
  • Payment for research services (soft dollar arrangements)
  • Proprietary products
  • Proxy voting
  • Referral arrangements
  • TriCert Group of Companies

Personal (Employee) Conflicts

Compensation Arrangements – Portfolio Managers

It is market practice in the investment management industry for a firm to motivate its Portfolio Managers to generate revenue or grow the firm’s assets under management (“AUM”) through compensation incentives. In some instances, these incentives may serve to further align the interests of a client and their Portfolio Manager since both parties stand to benefit from the positive performance of the client’s account.

However, there is also a risk that a firm’s employee compensation and incentive structure could encourage employees to place their personal interests ahead of those of their clients. For example, Portfolio Managers may be incentivized to invest client assets in riskier products than they otherwise would.

CONTROL

TriCert does not offer employees incentives for the sale of particular products or services, client types, or types of accounts opened or maintained. TriCert provides a Client Referral Incentive Program to all staff for referrals made to TriCert Private Wealth, which is generally 50% of first-year management fees collected and paid to the employee. Portfolio Managers may also receive compensation on Portfolio Manager House Accounts, which include their own personal accounts, accounts for family members, friends, or clients who had business relationships with the Portfolio Manager prior to the Portfolio Manager becoming a representative of TriCert.

Portfolio Managers participate in an employee profit sharing program which is based on overall annual revenues earned by the firm. This means that even though TriCert Portfolio Managers do not have specific sales, revenue, or performance targets, they do benefit from higher fees charged to clients and new business generated.

To address these potential conflicts, TriCert has policies and procedures prohibiting recommendations solely for the purpose of generating revenue without any benefit to clients. TriCert Portfolio Managers are also evaluated based on non-financial criteria such as client feedback.

TriCert has put in place compliance programs to monitor Portfolio Managers and ensure recommendations are in the best interests of and suitable for their clients. Portfolio Managers will:

  • gather sufficient information through the ‘Know Your Client’ process to support a suitability determination,
  • develop appropriate investment asset mixes for each client based on the ‘Know Your Client’ information obtained, and
  • assess and approve suitable investments through TriCert’s ‘Know Your Product’ process and select investments that are suitable for each client’s circumstances.

Compliance reviews are conducted regularly to ensure Portfolio Managers are implementing the above. Any Portfolio Manager determined not to be in compliance will face appropriate consequences.

Compensation Arrangements – Compliance or Other Supervisory Employees

If compensation paid to compliance or other supervisory employees is not independent of the activity they monitor/supervise, such as compensation linked to sales targets and/or revenue generated by Portfolio Managers, there is risk that this may influence such supervisory employees to limit their review of certain Portfolio Manager activity, thereby putting their own interests ahead of the client for personal monetary gain.

CONTROL

The TriCert business model means that new clients generally come from its referring partners. This pipeline of referrals makes TriCert less dependent on external sales activity to obtain new business. As a result, compliance and other supervisory employees are not incented to limit the review and testing that is done in order to encourage sales activity.  Compliance and certain supervisory staff do not participate in the Client Referral Incentive Program.  For more information on how TriCert manages conflicts of interest arising from referral arrangements, see “Referral Arrangements” below.

Compliance and Supervisory employees participate in TriCert’s profit sharing plan.  TriCert regularly reviews the profit sharing plan for supervisory/compliance employees and the profit sharing plan generally forms a low proportion of the employee’s total compensation.

Directorships and Other Outside Activities

TriCert Portfolio Managers and other employees may serve as directors of corporations other than TriCert (including other members of the TriCert Financial Group of Companies).

They may also have ownership interests in or hold other positions with or perform other activities for external organizations, whether paid or on a volunteer basis.

There is a risk that these arrangements may cause the employee to place their interests or the interests of the external organization ahead of the interests of TriCert or its clients.

Where a TriCert Portfolio Manager or other employee serves on a board of directors of a corporation, they will owe a fiduciary duty to that corporation, which may conflict

CONTROL

TriCert Portfolio Managers are prohibited from assuming directorships of other registered firms unless they are firms that are affiliated with the TriCert Financial Group of Companies.   Where a Portfolio Manager or other employee intends to hold a director position with an unregistered firm, or otherwise engage in an external activity that could result in a conflict of interest, that Portfolio Manager will be required to report that activity in advance of accepting a position. In many cases, depending on the nature of the activity and the position of the participant, pre-approval by TriCert may be required.

Representatives of TriCert will be subject to strict confidentiality requirements. In addition, the amount and types of compensation a TriCert Portfolio Manager or other employee can receive from, and the amount of time they can commit to, a directorship or other outside activity are limited. Where the external organization is an issuer, the Portfolio Manager or other employee involved in the activity will not participate in any discussions or decisions involving that issuer in their role with TriCert and trading in that issuer will be closely monitored by the CCO or their designate. TriCert has policies and procedures in place to ensure its clients are not excluded from suitable investment opportunities due to their Portfolio Manager’s relationship with an issuer. Where a TriCert representative will have contact with the public in the course of their activity, it must be clearly apparent what entity they are representing in the course of performing the activity.

Employees are provided with annual training with respect to TriCert policies and procedures on directorships and other external arrangements. The policy and training include guidance on the types of activities that require reporting and approval, and employees must sign an annual attestation confirming they have reviewed the policy and are in compliance. Employees are required to disclose any changes to any ongoing activity that could reasonably result in a material conflict of interest. Outside activities will be subject to ongoing monitoring by TriCert. Where a material conflict of interest caused by an outside activity cannot be resolved in the best interests of TriCert’s clients, or the activity is otherwise inconsistent with the services TriCert provides to clients, the employee will be required to resign from the outside activity.

Mr. Joel Baker, an employee, director and officer of TriCert, Mr. Krishna Beharry and Mr. Pat Downey, employees of TriCert, each own minority equity interests in Ward & Uptigrove Wealth Management Inc. 

Mr. Scot Bolton and Ms. Crystal Lauwerier, employees of TriCert, each own minority equity interests in Good Redden Klosler Wealth Management Inc.

Positions of Influence

Where a TriCert Portfolio Manager is in a position of influence, meaning a position that may give them an enhanced ability to influence another person’s financial decisions, they may have incentive to use their position to exert influence on a client or potential client who may be particularly susceptible to that influence.

Certain positions create influence because of the nature of the organization the person is representing, the perception of a need for others to gain the favour of the person in the position, and the degree of trust involved. Examples of positions of influence include a religious leader, medical caregiver, and youth mentor.

CONTROL

Where a TriCert Portfolio Manager is in a position of influence, TriCert will undertake a review to determine whether the degree of influence held by the registered individual and the confusion or susceptibility of a person subject to that influence is significant. Portfolio Managers will be prohibited from making investment decisions for, or recommendations to, anyone they may be able to influence due to their position or to the close family members of those susceptible individuals, as required by Canadian securities law.

In addition, occupying a position of influence will often be considered an outside activity that is subject to the additional controls described under “Directorships and Other Outside Activities” above.

Gifts and Entertainment

The firm or its employees may give, solicit or be offered gifts and other entertainment incentives which may influence their behaviour or induce them to act in an inappropriate or unethical manner to the detriment of clients, such as by influencing the firm or the Portfolio Manager to favour a third party or business partner over its clients or to prioritize certain clients over others.

CONTROL

TriCert has adopted a Gifts and Entertainment Policy that provides guidance to ensure that its employees do not offer, give, solicit or accept gifts or entertainment which are likely to conflict with their duties owed to clients, such as gifts of a certain type or above a certain value.  Details of all gifts and entertainment provided and received must be declared and recorded, and in some cases, pre-approved. In certain circumstances, gifts and entertainment will not be permitted to be given or received. Acceptable gift limits may vary based on the position of the employee.

Employees are provided with annual training on the Gifts and Entertainment Policy and must also sign an annual attestation confirming they have reviewed the policy and are in compliance.

The firm or its employees may give, solicit or be offered gifts and other entertainment incentives which may influence their behaviour or induce them to act in an inappropriate or unethical manner to the detriment of clients, such as by influencing the firm or the Portfolio Manager to favour a third party or business partner over its clients or to prioritize certain clients over others.

CONTROL

TriCert has adopted a Gifts and Entertainment Policy that provides guidance to ensure that its employees do not offer, give, solicit or accept gifts or entertainment which are likely to conflict with their duties owed to clients, such as gifts of a certain type or above a certain value.  Details of all gifts and entertainment provided and received must be declared and recorded, and in some cases, pre-approved. In certain circumstances, gifts and entertainment will not be permitted to be given or received. Acceptable gift limits may vary based on the position of the employee.

Employees are provided with annual training on the Gifts and Entertainment Policy and must also sign an annual attestation confirming they have reviewed the policy and are in compliance.

Portfolio Manager House Accounts

TriCert permits Portfolio Managers to open “Portfolio Manager House Accounts”, which include their own personal accounts, accounts for family members, friends, or clients who had business relationships with the Portfolio Manager prior to the Portfolio Manager becoming a representative of TriCert.

Portfolio Managers may be compensated differently for these House Accounts, and there is a risk that this may influence the Portfolio Manager to put their own interests or the interests of their House Account clients ahead of their clients who are not associated with House Accounts.

CONTROL

TriCert expects all employees to adhere to general ethical standards in accordance with the TriCert Code of Ethics. The Code of Ethics calls for equitable treatment of all clients regardless of personal relationships. TriCert has compliance programs in place to monitor Portfolio Managers, which are designed to ensure their recommendations are in the best interests of, and suitable for, their clients. Transactions in Portfolio Manager House Accounts will be closely reviewed against non-House Accounts to ensure Trading, ‘Know Your Client’ and ‘Know Your Product’ processes are being followed and to rule out other impropriety.

TriCert also has additional policies and procedures in place, such as our Personal Trading Policy, Fair Allocation Policy and Best Execution Policy, to manage transactions where conflicts with clients’ interests may arise. For example, where an issuer’s offering of securities is limited, or where redemption opportunities are limited, Portfolio Managers are prohibited from prioritizing trades in Portfolio Manager House Accounts over client accounts.

Personal Relationships with Clients – Authority Over the Financial Affairs of a Client

A client may request that their Portfolio Manager act in a position that gives the Portfolio Manager authority over the client’s financial affairs, including, for example, as named attorney under a power of attorney, as an executor for a client’s estate, or as a trustee of a client’s trust account.

With the power, authority and discretion given to the Portfolio Manager in such circumstances, the Portfolio Manager would be in a position to put their interests ahead of those of the client, and this could affect the decisions and recommendations made by the Portfolio Manager.

AVOID

TriCert policy prohibits Portfolio Managers from acting as a power of attorney, executor, or trustee for a client, with the exception of immediate family members (parent, spouse or common-law partner, grandparent, sibling or child).

Being named as a power of attorney, executor or trustee for an immediate family member will often be considered an outside activity that is subject to the additional controls described under “Directorships and Other Outside Activities” above. 

An annual attestation is signed by all Portfolio Managers acknowledging that they are not acting as an executor, power of attorney or trustee for a client (other than as authorized).

Personal Relationships with Clients – Being Named as a Beneficiary in a Client’s Will

Being named as a beneficiary in a client’s will would give a Portfolio Manager a personal interest in the client’s estate and may affect the decisions and recommendations made by the Portfolio Manager by influencing them to put their own interests ahead of the client’s.

AVOID

TriCert policy prohibits any Portfolio Manager from knowingly being named as a beneficiary in a client’s will, with the exception of immediate family members (parent, spouse or common-law partner, grandparent, sibling or child).

An annual attestation is signed by all registered employees acknowledging that, to the best of their knowledge, they are not named as a beneficiary in a client’s will (other than as authorized).

Personal Relationships with Clients – Financial Dealings with a Client

A client and Portfolio Manager may develop a personal relationship. In the course of that relationship, the client may offer the Portfolio Manager a benefit such as a loan, an investment opportunity, or an opportunity to purchase a personal asset from the client.  Portfolio Managers may also wish to loan money to clients to enable them to take advantage of an investment opportunity.

This personal relationship may cause the Portfolio Manager to put one client’s interests ahead of another client.

AVOID

TriCert policy prohibits Portfolio Managers from entering into personal financial dealings with clients. 

Employees are provided with annual training with respect to the policy and must also sign an annual attestation confirming they have reviewed the policy and will comply with it.

Personal Trading

Portfolio Managers may make personal investments in the securities or funds that they manage (referred to as the “TriCert Funds”) as part of their portfolio management duties.

This may influence a Portfolio Manager to take advantage of their knowledge of client trading, or other knowledge gained as an employee of the firm for personal gain, potentially to the detriment of their clients and the integrity of the markets.

CONTROL

TriCert has adopted a Personal Trading Policy, which requires pre-clearance and reporting for registered employees, and anyone considered an access person prior to placing personal trades. In addition, where a personal trading account holds or intends to purchase the same securities as a client portfolio or a TriCert Fund, personal trades must not be approved until all client and TriCert Fund trade orders have been sent for execution. In addition, blackout periods may be triggered in appropriate circumstances. All employees are strictly prohibited from using any material non-public information for their own benefit or in a manner that is detrimental to clients.

Employees subject to the Personal Trading Policy must periodically attest to their compliance with and understanding of TriCert’s Personal Trading Policy. For all non-exempt accounts, account statements for each employee subject to the Personal Trading Policy, including for any external accounts over which they have control, are reviewed, ensuring only approved trades have been executed.

Conflicts Between Clients

Cross Trades and Trading In-Kind

From time to time, securities sold on behalf of one client may be suitable for purchase by another client.  TriCert may execute the transaction via a trading counterparty (a “cross trade”), which means that other clients are not given the opportunity to purchase the securities in question.

Cross trades may also be conducted between TriCert Funds. In other circumstances, it may be desirable for a TriCert Fund to acquire securities from or issue securities to a client directly, such as where a client wishes to exchange the securities in their account(s) for securities of a TriCert Fund.

Cross trades and in-kind transactions involving the TriCert Funds may incent TriCert and its Portfolio Managers to put their interests ahead of client interests, such as by accepting unsuitable securities into a TriCert Fund to increase the size of the fund’s assets, unfairly valuing the securities involved in the transaction, or timing the trade in a way that is detrimental to the client.

CONTROL

Cross trades are subject to internal policies and procedures and require approval from TriCert’s Chief Investment Officer (“CIO”).

Further, cross trades will only be undertaken by TriCert as permitted under applicable law (or exemptive relief therefrom) and client restrictions, and where the trade is in the best interests of both the purchaser and seller. To further manage potential sources of conflicts, TriCert does not receive fees or commissions when making these trades.

Cross trades and in-kind transactions involving the TriCert Funds must be consistent with the investment objectives of the funds. Such trades will be subject to the review of TriCert’s CIO and their standing instructions. CIO approval will depend on fair valuation, among other things. Cross trades and in-kind transactions involving the TriCert Funds and a client account will be subject to the consent of affected clients (which may consist of advanced consent in the case of managed accounts).

Fair Allocation of Trades Among Clients

TriCert may place an order that cannot be fully filled. Such circumstances will require the allocation of the portion of orders filled among its clients, including allocation to individual client accounts and to the TriCert Funds, which are held by many clients.

This may create a conflict between clients’ accounts where certain clients could benefit more than others from certain investment opportunities.

CONTROL

TriCert’s fair allocation policy directs that any orders that are not fully filled are distributed to client accounts and the TriCert Funds on a pro-rata basis so that all clients are treated equitably. Client accounts and TriCert Funds for which an investment is deemed suitable will not be excluded from an order because of an expected shortage of supply.

TriCert Portfolio Managers are not involved in the allocation of client orders post-trade, meaning that if there are not enough securities available to fill all orders placed on behalf of individual clients and the TriCert Funds, personal trades and Portfolio Manager House Accounts will not be included in the pro-rated allocation. All allocations of partially filled orders are reviewed and approved by TriCert’s CIO.

Firm Conflicts

Compensation – Fee Structures

TriCert offers a variety of portfolio and investment types with varying fee structures.  There is a risk that Portfolio Managers may recommend a portfolio type or investment to a client based on fees charged in order to increase the revenue earned rather than based on what is in the client’s best interests. There is also a risk that clients will be allowed to continue to hold assets in a fee-based account despite a level of account activity or investment profile that suggests a different kind of account may be more suitable.

Since TriCert is compensated based on the value of the assets in a client’s account, it may have an incentive to inappropriately increase or maintain the value on which fees are calculated.

CONTROL

TriCert does not offer employees incentives for the sale of particular products or services, regardless of the amount of fees generated by products sold. However, TriCert Portfolio Managers participate in an employee profit sharing program which is based on overall annual revenues earned by the firm. This means that even though TriCert Portfolio Managers do not have specific sales, revenue or performance targets, they may still benefit from fees charged to clients. See above under “Compensation Arrangements – Portfolio Managers” for more information on the controls in place to prevent TriCert Portfolio Managers from unduly prioritizing revenue generation.

TriCert’s clients will receive clear disclosure of the types of fees charged for the services they will receive prior to paying any such fees. TriCert evaluates whether the fee-based account model continues to be in the best interests of each client on an ongoing basis and will provide access to lower-fee solutions where appropriate. TriCert has controls in place to confirm that the services clients receive are consistent with the fees being charged, including by strictly prohibiting any trading that is designed to give a false or misleading appearance of trading activity that is creating benefits for clients but is not actually in their best interests. TriCert also has policies and procedures in place to ensure any proprietary products in your account are fairly valued.

Compensation – Deviation from Standard Fees

In certain circumstances, TriCert will allow clients to negotiate fees and deviate from our standard fee schedule. This may result in clients paying different fees for the same or substantially similar products or services. TriCert may be incentivized to prevent clients from negotiating lower fees, which may be contrary to a client’s best interests.

CONTROL

TriCert will only deviate from its standard fee schedule where it would not be a breach of its duty to treat clients fairly, honestly, and in good faith. TriCert has measurable criteria to determine when it would be prepared to charge fees that differ from the standard fee schedule. New clients will be given notice of those circumstances and the opportunity to negotiate fees if those criteria are met. All deviations from the standard fee schedule will be subject to Compliance and/or supervisory review.

Whether a client will be able to negotiate a lower fee than what is set out in the standard fee schedule will depend on the client’s circumstances and investments. Criteria that will be taken into account include, but is not limited to, the value of the assets in the client’s account, the types of products managed on the client’s behalf, the degree of customization of the client’s portfolio, and the level of service that the client will receive. A client that negotiated their fees may pay less than a client that did not, even though both clients invest in similar products and receive similar services.

The length of a client’s relationship with TriCert may also be taken into account when determining the fees charged to that client. Legacy clients who agreed to a fee rate prior to a change in the standard fee schedule may be allowed to switch to the new rate, or continue to pay fees at the old rate, depending on whether the change to their existing fees would benefit them.

Compensation – Sources of Revenue

Compensation for services offered by portfolio management firms can come from a number of different sources, and this may influence the firm to put its own interests ahead of the client for monetary gain. It is an inherent conflict of interest for a registrant such as your Portfolio Manager to receive third-party compensation in certain circumstances.

AVOID

TriCert informs clients of how it is compensated.  TriCert derives income from a fee charged to each client as a percentage of the value of the assets in a client’s account. No other commission or compensation is earned, including from third parties. We do not receive commissions on trades made on clients’ behalf from brokerages, nor do we receive payment from securities issuers or other third parties based on products offered or sold.

Complaints and Error Resolution

Where an error occurs (for example, a trading or pricing error), there is potential for TriCert to benefit to the detriment of the client, as TriCert may stand to avoid a loss or make a gain from the error at the client’s expense. Similarly, when responding to a client complaint, TriCert or a Portfolio Manager may choose to resolve the complaint in a manner that benefits TriCert or the Portfolio Manager to the detriment of the client.

CONTROL

Although TriCert has procedures and controls in place that are designed to avoid errors to the extent possible, any investment management firm or other organization with operational processes will inevitably encounter errors at some point. TriCert has procedures in place to ensure that errors are investigated and remediated in the best interests of the client.  When correcting any error, the client is returned to the same or better position they would have been in had the error not occurred.

TriCert also has policies and procedures in place to ensure all client complaints are handled fairly and equitably. All client written complaints are reported to TriCert’s Compliance Department, investigated, and findings and resolutions are reported to the client. The complainant client can further escalate the complaint if they are not satisfied with TriCert ‘s proposed resolution. Most complaints are ultimately referable to the Ombudsman for Banking and Investment Services (www.obsi.ca), which serves as a free and independent dispute resolution service.

Execution Services

TriCert may have pre-existing relationships with third-party dealers that execute trades. TriCert may be offered incentives to use certain brokers over others when executing orders, such as discounted future services, thus putting the firm’s interests ahead of a client’s best interests.

AVOID

With the exception of debt purchases, TriCert does not place trades on behalf of its clients.  All equity orders are processed through the correspondent broker where the client account is held (the custodian). TriCert’s Best Execution Policy requires TriCert to obtain the most advantageous execution terms for its clients that are reasonably available under the circumstances. No compensation or incentives are received from any broker.

Payment for Research Services (Soft Dollar Arrangements)

Brokerages that are used to execute client trades pay commissions on those trades to the firm that places the order.  In soft dollar arrangements, firms are allowed to use a portion of those commissions to pay for investment research services offered by the brokerages, rather than paying separately for the research.

This may affect the decisions of a firm to use certain brokers over others when executing orders, prioritizing the firm’s interests ahead of a client’s best interests.

AVOID

With the exception of debt purchases, TriCert does not place trades on behalf of its clients>These are completed by the client’s custodian.  When research services are required, fees are negotiated based on the use of the research and are independent of any other arrangement between TriCert and the brokerage. 

Leveraging or Borrowing to Invest

Leveraged strategies involve a client taking out loans or leveraging equity in existing investments to increase their wealth.  Such loans must be repaid regardless of the performance of the investments they are used to making, and subject clients to significant risk. Assisting or encouraging a client to borrow can create a conflict of interest as it increases the AUM, which is advantageous to the firm and the Portfolio Manager and may create an incentive for the Portfolio Manager to place the interests of a client to whom money has been loaned ahead of the interests of other clients.

AVOID

TriCert does not lend money, extend credit, or provide margin to its clients, and its employees are prohibited from doing so. It is also against our firm policy to recommend to clients that they use borrowed money to finance any part of a purchase of a security. If, however, a client chooses to do so, the Portfolio Manager must provide a detailed disclosure of the risks associated with this investment strategy. Where a Portfolio Manager becomes newly aware of a client using external leverage, the Portfolio Manager will reassess the suitability of a client’s investments while taking the use of leverage into account.

Proprietary Products

TriCert manufactures, manages, recommends and invests client assets in its own investment funds. The TriCert Funds are issuers that are related or connected to TriCert because TriCert is the manager of the TriCert Funds, TriCert exercises control of the voting securities of the TriCert Funds, and TriCert has a business relationship with the TriCert Funds that, in connection with a distribution of securities of the TriCert Funds, may lead a reasonable prospective purchaser to question if TriCert and the TriCert Funds are independent of each other.

TriCert acts as manager, trustee, and Portfolio Manager to the TriCert Funds. TriCert may be in a material conflict of interest position when it recommends proprietary products because TriCert could benefit more from trading in TriCert funds than in third-party products, such as by increasing the management fees and/or performance fees it is entitled to receive. Depending on a client’s investment profile, which considers criteria such as goals, stage of life, and level of assets, certain clients may, at times only, hold securities of the TriCert Funds in their account(s) with TriCert.

TriCert or an agent acting on TriCert’s behalf will determine the value of the TriCert Funds and allocate fund expenses between TriCert and the funds. Expenses may be allocated in a manner that affects clients differently and favours related parties of the TriCert Funds, including TriCert itself. Any expenses borne by a TriCert Fund will negatively impact investors in that fund.

TriCert may be influenced to put its own monetary interests ahead of the clients’ interests when making investment recommendations and decisions, valuation and fee decisions, and expense allocations involving the TriCert Funds.

CONTROL

TriCert will only recommend or purchase securities of the TriCert Funds for clients for which they are determined to be suitable. Any such client will receive clear and detailed disclosure about the TriCert Funds. TriCert uses the same product review and selection criteria for the TriCert Funds as the non-proprietary products it offers and subjects the TriCert Funds to rigorous ongoing performance monitoring. Portfolio Managers will not receive additional benefits (monetary or non-monetary) that could influence them to select TriCert Funds on your behalf over more suitable, non-proprietary products. If your assets are invested in the TriCert Funds, TriCert will ensure that there is no duplication of fees charged to you for the same services, such as where a TriCert Fund invests in another TriCert Fund in a “fund-of-fund” structure. Investors in the TriCert funds will be provided with disclosure of the fees and charges paid by the TriCert Funds, including to TriCert, resulting in accurate disclosure of the total cost of an investment in a TriCert Fund. All fees and expenses charged to TriCert’s Funds will be reported in the funds’ financial statements, which will be audited by an independent external auditor on an annual basis.

If you do not wish to hold the TriCert Funds in your account(s), you can have that restriction added to your Investment Policy Statement.

TriCert periodically reviews comparable (non-proprietary) products across multiple criteria to ensure that the quality of the TriCert Funds is competitive with alternatives in the market. TriCert has also entered into agreements and developed standard procedures for valuing its proprietary products (including periodic review and audit by qualified, independent third parties), and for allocating expenses. Investors in the funds will be regularly updated on performance and trades in securities of the TriCert Funds and fee calculations will not be carried out using a stale-dated value of the funds. Implementation of the procedures described in this section remains subject to compliance review on an ongoing basis to ensure effectiveness and appropriateness, and the relevant policies will be made available for review by investors.

TriCert structures the TriCert Funds according to its QSect investment principles in a manner designed to align with clients’ interests. The TriCert Funds are intended to allow TriCert and its clients to realize tax benefits, diversification, dedicated management and other efficiencies that would otherwise not be available. For more information on how the TriCert Funds fit into our business model and strategy, visit www.tricert.ca or ask your Portfolio Manager.

TriCert does not invest client assets in related or connected issuers other than the TriCert Funds.

Proxy Voting

In some instances, TriCert is provided with discretionary authority to vote on the securities of companies held by a client or in the TriCert Funds, on the client’s behalf in corporate actions involving such companies.  TriCert may have the opportunity to vote for the securities in a manner that promotes its own interests over those of the client.

CONTROL

TriCert maintains a Proxy Voting Policy and associated procedures that are designed to ensure that proxies are voted on in the best interests of the client. Voting recommendations are made by the Portfolio Manager and submitted to the CIO for review and approval prior to filing.

Referral Arrangements

TriCert may pay a referral fee to certain firms that refer clients to TriCert for investment management services.  These firms may have an ownership interest in TriCert.  Referral fees are generally a conflict for the entity that receives the fee because they may create incentive to refer clients solely for the purpose of receiving the fee. Where the referring firm has an ownership interest in TriCert, it may be influenced by its incentive to generate business for TriCert, thus increasing the value of that interest.

DISCLOSURE

The portfolio management services TriCert offers to its clients are provided through the integration of the services of two separate companies, your chartered accountant’s firm or their related wealth management entity and TriCert. TriCert is part of the TriCert Financial Group of Companies, which also includes TriCert Insurance Agency and TriCert Private Wealth, and your Chartered Professional Accountants’ firm has an indirect ownership interest in the TriCert Financial Group of Companies.   TriCert discloses the details of its ownership structure and business model to clients, as well as the role of referrals in its overall strategy.

TriCert derives income from fees charged to each client as a percentage of AUM. No other commission or compensation is earned by TriCert.  At account opening, TriCert informs clients of any fees and compensation paid by TriCert to the referral parties, which, in the case of a referred client, will be a portion of any fees they pay to TriCert.

TriCert is under no obligation to accept a referred client and will only do so where TriCert’s investment management services are deemed suitable for the client, and the referral is deemed to be in the client’s best interests. TriCert’s suitability analysis is the same whether a potential client was referred to TriCert or not. Regular compliance reviews will ensure that all clients of TriCert are treated fairly, regardless of their referral status. All investment management activities performed for a referred client will be performed by TriCert and its Portfolio Managers and not by the referring entity. Referral arrangements to which TriCert is a party are reviewed by the CCO from time to time.

TriCert Financial Group of Companies

TriCert, together with TriCert Insurance Agency, TriCert Private Wealth and our TriCert partner Chartered Professional Accounting (CPA) firms and their related wealth entities, is part of the TriCert Financial Group of Companies. There is potential for client confusion regarding the services offered by TriCert.

DISCLOSURE

Clients will receive a detailed disclosure explaining the various products and services available from the various members of the TriCert Financial Group of Companies. The disclosure will make it clear that receiving services from TriCert is not dependent on being or becoming a client of any other affiliated company (for example, no tied selling).

More information about the TriCert Financial Group of Companies can be obtained by visiting www.tricert.ca or by contacting TriCert.

The information in this document is intended to assist you in understanding and assessing material potential and actual conflicts of interest, including the nature of such conflicts, the potential impact the conflict could have on you and the risk that the conflict could pose to you, as well as how we address the conflict to minimize its impact and risks to you and our other clients. Ultimately, we seek to resolve all material conflicts of interest in your best interests. This is an overview of a complex subject. If you ever have any questions or concerns, whether they involve conflicts of interest or other matters, you should never hesitate to say so and ask your TriCert Portfolio Manager for an explanation and/or further information.