Marshall Wace

Summary of Conflicts of Interest Policy

Introduction

Marshall Wace (“MW”) conducts its business according to the principle that it must manage conflicts of interest fairly, both between itself and its clients and between one client and another.

As a provider of financial services, MW frequently faces actual and potential conflicts of interest. MW’s policy is to take all reasonable steps to maintain and operate effective organisational and administrative arrangements to identify and manage relevant conflicts, including those that may arise in the exercise of its governance responsibilities when acting in a stewardship capacity.

MW’s senior management are responsible for ensuring that its systems, controls and procedures are adequate to identify and manage conflicts of interest. As such, they have established a Conflicts of Interest Committee to oversee the fulfilment of this responsibility. MW’s Compliance function assists in the identification and monitoring of actual and potential conflicts of interest.

MW has implemented specific procedures that address the identification and management of actual and potential conflicts of interest that may arise in the course of its business.

Objective

MW is required to take all reasonable steps to identify and adequately manage conflicts of interest entailing a material risk of damage to a client’s interest. This policy specifies the requirement for MW to have in place appropriate procedures and measures in order to identify and manage any such material conflicts of interest.

Scope

For the purposes of this document this policy applies to those conflicts of interest that may give rise to a material risk of damage to the interests of a client. Conflicts of interest may arise between MW (either MW or its partners or staff personally or collectively) and a client or between two or more clients of MW in the context of the provision of services by MW to those clients.

Identifying conflicts of interest

In identifying conflicts of interest, MW considers all of the circumstances and takes into account, inter alia, whether it:

  • is likely to make a financial gain, or avoid a financial loss, at the expense of a 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 a client or group of clients over the interests of another client or group of clients; and/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 fee or compensation for that service. 

Managing conflicts of interest

Should a conflict of interest arise, it is MW’s policy that it should be managed promptly and fairly. The main categories of conflicts of interest it faces are:

  • in the way it manages clients’ investments; 
  • in relationships with actual and potential investors;
  • potentially differing financial interests between itself and clients;
  • internal organisational and operational matters. 

Rather than seeking to prohibit all activities that might give rise to a conflict of interest, this policy provides for the following approach:

  • manage the conflict in the best interests of the client(s);
  • disclose the general nature and/or the sources of conflicts with the interests of the client where the arrangements to manage such conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a client will be prevented (note: MW does not consider that disclosure alone is normally an appropriate course of action);
  • prohibit the activity if a conflict cannot be effectively managed and disclosure would not be appropriate. 

The key goals of the policy are to ensure that there is adequate management of the conflicts that may arise when the interests of MW and its employees and those of its clients and investors differ or the interests of particular clients differ.

Register

MW maintains and regularly updates a record of the types of services it carries out in which conflicts of interest entailing a material risk of damage to the interests of one or more clients have arisen or may arise. The register also records the means by which the conflict of interest has been managed (including through disclosure or prohibition as appropriate).

Examples of the potential conflicts of interest that could arise when exercising corporate governance responsibilities, and the way(s) that any such conflicts are managed, include occasions where:

MW may act on behalf of one or more funds and may possess inside information as a result of its engagement with a company. Consequently, MW will be restricted in the relevant securities so that it cannot trade in them on behalf of any fund it manages (until it no longer possesses inside information). MW generally seeks to avoid coming into possession of inside information.
Positions held by funds managed by MW may differ, and there could be occasions when one or more funds is long and other funds are short of the same company’s shares, and there may consequently be a conflict between the interests of these funds. Any such cases are escalated to the firm’s Chief Operations Officer and Global Head of Legal and Compliance on a case-by-case basis for their decision, with an overriding objective of seeking to act in the best interests of the firm’s clients.
A partner or employee of MW may have a role at a company (such as a directorship) or may be an investor in it in his personal capacity, and could seek to influence the engagement process to his personal benefit rather than for the benefit of the funds managed by MW. Partners and staff are obliged to provide MW with their exclusive service and may only enter into an external arrangement with MW’s permission. MW retains a record of all directorships and outside interests of partners and staff. Partners and staff may only enter into personal transactions in securities with the prior consent of the Compliance function and details of all personal holdings are provided to it. MW has appointed an external firm to provide proxy voting advice and any proposed departure from the advice provided will be reviewed.