Regulatory information

Policy of selection of the intermediaries

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Object
Object

this document aims to inform our clients of the selection policy for the financial intermediaries to which we entrust order execution as part of the management under mandate, such as ucits management.

it has been prepared in accordance with articles l 533-18 of the french monetary and financial code (code monétaire et financier) and 314-75-1 of the general regulations of the french financial market authority (autorité des marchés financiers, hereinafter 'AMF').


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Scope
Scope
  • Clients concerned
  • The selection policy in force at our company applies uniformly to all our clients, whether professional or otherwise. the implementation of this policy's principles differs depending on whether collective management or management under mandate is involved.

  • Financial instruments concerned
  • The selection policy in force at our company applies to all financial instruments traded by our company. dnca finance systematically entrusts its orders to an intermediary, whatever the financial instrument.


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Methods of selection and evaluation of the intermediaries
Methods of selection and evaluation of the intermediaries

Our market intermediary selection policy takes account of :

The conditions taken into account are price, cost, speed (order transmission not execution), the probability of execution and settlement (in particular the cost and security of settlement and delivery), size, type of order and any other consideration relating to order execution (such as place of execution and market effect). dnca finance has taken steps to be categorised as a professional client with all intermediaries it seeks to use such that these are required to provide it with the best execution that it itself has to guarantee for its clients.

French research (database coverage and accessibility), european research (database coverage and accessibility), analysis quality (pertinence, originality against consensus, rigour in financial analysis and monitoring of recommendations), the relationship with companies (organisation of financial presentations and face-to-face meetings with managers) and the availability of the research office (presentations on-site, frequency of contacts with the analyst).

A rating of the financial intermediaries is done at the end of each semester by assigning a score from 0 (the worst) to 5 (the best) for each of the conditions mentioned above.

  • Best execution for our customers
  • Analysis and research

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Place of order execution
Place of order execution

DNCA Finance has authorised all its intermediaries to manage the orders it originates on key regulated markets, multilateral trading facilities and systematic internalisers, in order to be able to benefit from the best implementation conditions on offer.

Special case of the selection of interest-rate financial instruments : since march 2009, dnca finance has used the services offered by BP2S Dealing Services (formely fin'ams) a bnp group company to outsource the placing of orders – that is, their trading – on all interest-rate financial instruments whenever it appeared suitable.

Special case of the management under mandate investment service : for orders relating to shares and bonds, DNCA Finance has selected the CIC, as intermediation table, authorized for the receipt / transmission of orders (approved as Establishment credit - Investment services provider by the ACPR (Prudential Control and Resolution Authority)).

Policy of management of the conflicts of interests

This document has been prepared in accordance with the french and luxemburgish applicable regulation in france and in luxembourg and aims to inform clients, unit bearer or shareholders of ucits managed by dnca finance (management company in france) and dnca finance luxembourg (management company in luxembourg), both hereafter the ”pmc” (the portfolio management company), on arrangements in place to prevent and identify conflicts of interest that could arise in its activities, that is:

  • Management under mandate (exclusively dnca finance) ;
  • Ucits management ;
  • Financial investment advice ;

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List of situations of conflicts of interest that may be found
List of situations of conflicts of interest that may be found

This document has been prepared in accordance with the french and luxemburgish applicable regulation in france and in luxembourg and aims to inform clients, unit bearer or shareholders of ucits managed by dnca finance (management company in france) and dnca finance luxembourg (management company in luxembourg), both hereafter the ”pmc” (the portfolio management company), on arrangements in place to prevent and identify conflicts of interest that could arise in its activities, that is:

  • Management under mandate (exclusively dnca finance) ;
  • Ucits management ;
  • Financial investment advice ;

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Conflict of interest prevention and detection system
Conflict of interest prevention and detection system

The PMC has listed all potential cases of conflict of interest that may be found, taking into account of its size, its organisation, its type, its importance and complexity of its activity.

Possible conflicts of interest concerning directly the financial management activity:

The late affectation of a response to an order to a client or group of clients enabling some of these to be favoured or disfavoured.

If group entities are selected, they must be chosen using the best selection procedure of the management company and in the interest of the holders/principals. The fees applied must be in line with market rates.

  • Systematic unjustified benefits granted to certain principals or UCITS vehicles in relation to the adoption of responses to orders placed on markets.
  • A stock market error resulting in the allocation of a surplus from financial instruments bought from or sold to clients instead of the error account of the company.
  • In the event of an issue, private placement, stock market flotation and so on resulting in a situation of scarcity, unequal treatment of principals and UCITS vehicles that is unjustified by an internal procedure conforming with professional good practice. Risk of seeing certain clients that are economically important for the management company or to which this is related benefit from undue advantages in relation to other clients.
  • In the event of an issue, private placement, stock market flotation and so on resulting in a situation of scarcity, the priority allocation of financial instruments concerned to staff or managers of the management company at the expense of clients.
  • Sale-purchase position switching between UCITS and UCITS and mandates: authorised but must be managed (transactions in same conditions as the market and in the sole interest of holders and/or principals).

Possible conflicts of interest regarding proprietary transactions

  • Proprietary transactions of the management company competing with those performed for clients, prejudicing these due to price changes caused by these transactions, to not respecting the priority of the holder's interest and to the use of inside information for personal purposes (insider trading).
  • Proprietary transactions performed by the management company staff competing with those performed for clients, prejudicing these due to price changes caused by these transactions, to not respecting the priority of the holder's interest and to the use of inside information for personal purposes (insider trading).

Possible management independence conflicts of interest

  • Segregation of tasks and functions within the management company to ensure the independence of management from sales, control functions and so on and to guarantee the confidentiality of transactions.
  • Management should not be influenced by the investment in UCITS vehicles and securities of the management company or group, the securities must be chosen using the same selection conditions as the other securities in the portfolio.
  • When the group is unable to place all its securities on the primary market, a procedure must be introduced to ensure that the securities are by default placed with the group UCITS.
  • Soft commissions / benefits in kind: limits and monitoring for employees and the management company.
  • Independence in implementing the voting policy, even when concerning group securities.
  • Subscription by the portfolio manager to units or shares in the UCITS vehicles he or she manages: authorised but must be managed. Specific monitoring if the manager has a significant proportion of the portfolio assets, in order to ensure management independence, compliance with management objectives and equal treatment of holders.

Possible conflicts of interest regarding management company remuneration

  • Incentives for managers to implement a large turnover rate in the portfolios that is unjustified by economic and financial considerations and is solely in the aim of transaction fees ;
  • Rash risk-taking in investments or divestments solely in the aim of seeking a significant increase in the variable management fees ;
  • An approach consisting of systematically using or abusing UCITS vehicles in the management of mandates that are subject to a management fee retrocession agreement with the management companies concerned ;
  • An approach consisting of systematically using or abusing UCITS vehicles in the management of mandates of which the subscription fees subject to retrocession to the management company significantly exceed the market average. ;
  • Independence from distributors: the management company may be required to apply large subscription/redemption fees and/or management fee rates aiming to remunerate the distributor but that are not in the interests of the end customer ;

Possible conflicts of interest regarding the independence of the management company from principal shareholder Natixis Investment Managers:

  • Organisational independence :

Procedures introduced to safeguard the independence of the management company from the group regarding the choice :

  • of service providers
  • of the distributor / distribution network
  • of the broker(s)
  • of the custodian and/or registrar
  • of the valuation agent
  • of the financial management assignees
  • Competition between management companies within the same group must be possible: without constraints on products marketed, fees and so on.

Possible conflicts of interest concerning the independence of the management company from third parties.

  • Prohibition on providing remunerated management services to companies of which the securities are held in portfolio or of which the acquisition is planned, unless this activity is performed on behalf of the management company.
  • Attempts for family or favourable relationships of sensitive staff with the list of intermediaries and service providers.
  • Remuneration method for staff and in particular managers, taking account of income generated by the operations performed on behalf of clients, an incentive that may give rise to behaviour prejudicing the clients, for example undue turnover in the portfolios.
  • Association under the same hierarchical structure of persons performing different tasks, in particular in market or advisory activities for issuers (structurers and managers, traders and managers and so on), a situation liable to give rise to conflicts of interest and decision-making of the management portfolio company that is contrary to the interests of its clients.
  • Unmonitored information exchanges between people performing activities carrying the risk of a conflict of interest.
  • Controls on having and circulating inside information for persons with responsibilities at various group entities.
  • Independence of managers and portfolio managers regarding the portfolio investments (monitoring of list of mandates they could have at the portfolio management companies).
  • Investment in unlisted financial instruments, including :

    holding a significant share in the equity of the issuer concerned.

    • a distributor of the UCITS vehicles of the portfolio management company
    • a client
    • the portfolio management company on its own behalf
    • a manager or employee of the portfolio management company
    • a company related to the portfolio management company
  • As part of an agreement with a registrar, a policy aiming to keep excessive unremunerated amounts of cash in the mandates and UCITS vehicles, excluding equity saving plans.

Given the above list of conflicts of interest, the PMC, partly with its functional organisation via a genuine segregation of tasks and partly with the introduction of internal procedures in all its areas of activity, has already established a system able to limit risks of conflicts of interest significantly.

However, failures of the prevention system could result in one of the above situations arising. The PMC must be able to manage it in the clients' best interests.


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Conflict of interest management
Conflict of interest management

In the event of detecting a proven situation of a conflict of interest, the PMC may :

  • Reject the operation causing the conflict ;
  • Accept the operation and the situation of conflict of interest and implement the measures to manage the conflict in the best interest of the clients ;
  • Inform the client in the event of a conflict that can not be processed in the two preceding provisions.

Conflicts of interest shall be managed under the control of Conformity Supervisor, who shall enter all situations having generated a conflict of interest in a register.

Intermediation costs

Report on intermediation expenses for the year 2014


Pursuant to article 314-82 of the AMF general regulations
Conditions under which the portfolio management company has made use, for the previous financial year, of services for investment decision-making assistance and order execution :

In 2014 the collective-management and management by mandate services made use of financial intermediaries who provided execution and investment decision-making assistance services, under the conditions defined in the 'financial intermediaries selection policy'.

Intermediation fees applied to UCITS are published in the annual accounts which are certified by independent auditors and are available on our website. Annual accounts are also available on request from our registered office.

Distribution key established between :
  • The intermediation expenses relating to the receipt and transmission service and to the order-execution service ;
  • The intermediation expenses relating to services for investment decision-making assistance and order execution.

At the end of fiscal 2014, the breakdown between the execution service and the investment decision-making assistance service is estimated at 36/64 for equity intermediation, and at 53/47 for intermediation on fixed-income products. This analysis concerned 20 equity brokers and 20 fixed-income product brokers. This breakdown is a summary of the evaluation sheets completed for each financial intermediary by the managers, management assistants and the head of the middle office.

It should be pointed out that the above results are those of the intermediation which DNCA FINANCE uses in connection with its collective management business. Regarding the management-by-mandate investment service, DNCA FINANCE uses mainly the order receipt and transmission service offered by the account-keeper that is the custodian of the managed accounts.

Percentage found for the previous financial year, compared with all the intermediation expenses and the fees referred to in b of 1° of Article 314-79 paid to third parties within the framework of shared commission agreements mentioned in Article 314-81.

As of 31 December 2014, two commission-sharing agreements have been validated and one of these agreements is active. In 2014, an amount equivalent to approximately 5% of total brokerage fees paid was available as soft commissions for one or several third parties.

Measures implemented to prevent or deal with potential conflicts of interest in the choice of service providers.

The activity involving financial intermediaries, regardless of the service provided, is subject to periodic review by a financial intermediaries selection and monitoring committee.

Politics ESG
Policy for taking into consideration criteria concerning compliance with environmental, social and governance objectives
In application of article D533-16-1 of the French monetary and financial code (CMF)

As a reminder, DNCA FINANCE is obliged to act solely in the interests of investors. In this respect, DNCA FINANCE takes into consideration all environmental, social and governance criteria that meet the objectives set (strategy, objective, portfolio composition) while growing its clients' assets.

As such, the various investment policies applied to the funds currently managed by DNCA FINANCE (either directly or by delegating management) do not simultaneously and automatically take into account the three ESG (environmental, social and governance) criteria forming part of a Socially Responsible Investment (SRI) approach.

Given investors' growing interest in Socially Responsible Investment, DNCA Finance outsources on a regular basis the analysis of its two largest funds to an external service provider specialised in this area each year. All stocks held in these funds' portfolios are rated based on these three criteria and an overall SRI score is attributed to investments. Until now, this score has been communicated directly to investors who expressed an interest in this assessment of the ESG quality of the funds' management.

At least one European country in which our funds are distributed has adopted a national law prohibiting the financial sector, and hence portfolio management companies, from doing business with companies involved in the manufacture of anti-personnel mines and cluster bombs. In our view, this ethical provision respects ESG criteria. The portfolio managers of the funds concerned systematically obtain and analyse the annual reports of companies that may be involved in any activities that do not respect these provisions. DNCAs policy is to not invest into any shares or bonds issued by these companies.

Complaints management policy

 DNCA FINANCE has established and maintains an operational procedure for the processing of claims made by its clients in respect of all management and investment services performed by DNCA FINANCE and its subsidiaries, namely:

It being specified that 'a complaint means a statement of dissatisfaction by a client towards the professional. A request for information, opinion, clarification, service or provision is not a complaint. ' (AMF Instruction no. 2012-07 of 13 July 2012)

  • Collective investment management,
  • Investment management on behalf of third parties,
  • Financial investment advice,
  • Assistance with the execution of investments,
  • Arbitration/Broker Service.

 

The claim is understood to be a statement that accompanies the client's discontent with the professional. A request for information, advice, clarification, service or service is not a claim. (AMF instruction no. 2012-07 of 13 July 2012, as amended).

Clients (professional or non professional) may lodge any complaints, free of charge, either with their usual point of contact (within the company or within a delegatee of the company) or directly with the Head of Compliance and Internal Control (RCCI) of the company by writing to the company's registered office (19 Place Vendôme, 75001 Paris, France).

After receipt at the registered office of the company, the portfolio management company has ten days to acknowledge receipt and two months to respond to any claim.

In France, clients who are not satisfied with the follow up to their claim through internal mediation from DNCA Finance, have a possible remedy, apart from the usual legal remedies:

  • For disputes relating to a financial instrument, investment service or, more generally, a matter falling within the scope of the AMF's competence: The AMF Ombudsman, whom they may refer by post (Ombudsman of the Autorité des Marchés Financiers, 17 place de la Bourse, 75082 PARIS CEDEX 02, France) or by a mediation request form available on the AMF website http://www.amf france.org
  • For services related to the insurance brokerage service of DNCA Courtage: The Assurance Media, by post (Assurance Media, TSA 50110, 75441 Paris Cedex 09) or via their website: https://www.mediationassurance.org/Saisir+le+mediateur

 

Last update : 09/06/2020