A：Disclosure of conflicts

• Members and Candidates must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and their employer.
• Must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively.
  • Best practice：update disclosures when the nature of a conflict of interest changes materially
• Try our best to avoid any potential and actual conflict of interest.
• If an analyst was asked to cover the company, when inherit the shares of the company in subject：
  • must disclose if continue to follow
  • Best practice：assign another analyst to follow up the company
• Disclosure to Employers
  • Mere appearance of conflict of interest may create problems.
    • Restrict personal trading, outside board membership, and related activities to prevent situations that could give the appearance of a conflict of interest.
  • If inadvertently find conflicts, must report and resolve as quickly and effectively as possible.
• Disclosure to Clients
  • Disclose：
    • corporate financing or market making relationship
    • Security holding
    • Directorship
    • Individual relationship
  • Should also disclose fee arrangements, sub-advisory arrangements or situations involving non-standard fee structures. Equally important is to disclose arrangements in which the firm benefits directly from recommendations
• Cross-Departmental Conflicts
  • 内部矛盾（研究部与投行部）
  • 外部矛盾（和上市公司之间的矛盾）
  • Broker-sponsored limited partnerships to invest venture capital.
    • Conflicts exist because not only to follow issues after IPO, but also to promote in the secondary market.
• Conflicts with Stock Ownership
  • May prohibit from owning any such securities overly burdensome（繁重的; 难以承担的; 负担沉重的）.
  • Sell-side disclose ownership in stock recommended, buy-side disclose procedures for reporting requirements for personal transactions.

• Conflicts as a Director

  • Duties owed to clients and to shareholders of the company
  • Investment personnel as a director receive the securities or options
  • Board service receiving MNI

    B：Priority of transaction

    

• Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner, which means transactions that ultimately benefit Member or Candidate.

  • Client > employer > individual（beneficial owner）
• “After 7 minutes, buy” is a violation. Must have enough time to let clients have opportunities to respond to your recommendation.
• Family accounts that are client accounts should be treated like any other firm account, should not be disadvantaged because of that relationship.
  • Disadvantage parents who are normal fee-paying clients：violate 3-B fair dealing
• Some clients in certain investment situations require investment personnel to have aligned interests. But mustn’t adversely affect client investment.

• Recommended Procedures for compliance

  • Limited participation in equity IPOs
  • Restrictions on private placement
  • Establish blackout/restricted periods
  • Should have reporting procedures for investment personnel, including：
    • disclosure of personal holdings/beneficial ownerships at least annually
    • duplication of confirmations of trades to firm and employee
    • preclearance of participation in IPOs
  • Once trading restrictions are in place, must be enforced.
  • Best method for monitoring and enforcing procedures is through reporting requirements.
  • Disclosures of policies

    C：Referral fees

• Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from, or paid to, others for the recommendation of products or services.

• Such disclosure will allow the client or employer to evaluate：
  • any partiality shown in any recommendation of services
  • the full cost of the service.
• Disclose nature of consideration.
• Recommended Procedures for compliance
  • Encourage employers to develop procedures for referral fees.
  • Firm may completely restrict such fees, if not restrict, should indicate the appropriate steps for requesting approval.
  • Employers should have investment professionals provide to the clients notification of approved referral fee programs and provide the employer reqular (at least quarterly) updates on the amount and nature of compensation received.