Conflicts of interest policy
BBVA ASSET MANAGEMENT, S.A., SGIIC, (hereinafter the Fund Manager or BBVA AM) is a Collective Investment Management Company duly registered in the Public Registries of the Spanish National Securities Market Commission under number 14. Its activity is subject to supervision and control from this body, whose functions include the administration, representation, management of investments and management of subscriptions and redemptions of funds and investment trusts (hereinafter “CII”) and their distribution, portfolio management and investment advisory services.
The activities conducted by BBVA AM generate the possibility that, at specific times, conflicts of interest may occur that involve an important risk of reducing the interests of one or more customers and/or CIIs. The specific conflicts of interest that may take place are:
- Between BBVA AM, including its managers, employees or any other person directly or indirectly connected to BBVA AM through a control relationship, and the CIIs it manages or the CII participants or shareholders or other BBVA AM customers.
- Between a CII and the CII's participants or stockholders and other CIIs and the participants or shareholders of this CII.
- Between the CII and/or its shareholders or participants and other BBVA AM customers.
- Between two BBVA AM customers.
With the aim of preventing and managing possible conflicts of interest, BBVA AM has drafted the present document, which summarizes the action criteria and guidelines that characterize the policy to prevent and manage conflicts of interest. The purpose of the present document is to identify the circumstances that lead or could lead to a conflict of interest that could end up harming the interests of one or more customers and to establish measures to prevent and manage them, which assures the independence of the parties who conduct activities that could lead to a conflict of interest situation. This policy will be reviewed at least once a year.
2. Scope of application
This policy will apply to all investment services provided by BBVA AM (both in the area of CII management, administration, representation and distribution and in discretionary portfolio management and advisory services) and will encompass all areas of BBVA AM and, consequently, all its employees and managers.
In the same way, it will apply to any person directly or indirectly connected to BBVA AM through a control relationship, in the meaning set out in article 42 of the Code of Commerce.
3. Identifying conflicts of interest
3.1. Types of conflict of interest
There may be a conflict of interest, if the fund manager, a competent person or a person who has a direct or indirect control relationship with the fund manager:
- can obtain a financial advantage, or avoid financial loss, at the expense of the customer or the CII or its investors;
- allocate to the result of an activity or service provided by the CII or its investors or to another customer, or a transaction executed by the CII or by another customer, an interest different than what these parties have in this result;
- has a financial incentive or of another type to favor:
- the interests of an CII, a customer or group of customers in the interests of another CII or customer,
- one investor's interests over those of another investor or group of investors in the same CII;
- perform the same activities for two CIIs or for another customer,
- receive or going to receive from a party that is not the CII or its investors or the customer, as applicable, an incentive, by way of money, goods or services, different than the normal fee or rate established for this service.
3.2. Identification of other situations liable to cause conflict of interest
The previous list is not comprehensive and, therefore, different situations than those set out that cause conflicts of interest may take place in the future of the business. In such cases, employees who detect any situation in the course of performing their jobs that could end up affecting their objectivity or professional independence must notify their immediate manager as soon as it is detected and prior to providing the investment service or activity in question, so that this manager can assess the situation and adopt, as applicable, the measures he or she deems suitable. The control areas will also identify and assess the appearance of possible conflicts of interest on an ongoing base and notify senior management pursuant to applicable regulations.
4. Prevention measures and management of conflicts of interest
BBVA AM has policies and procedures to suitably manage the conflicts of interest that determine the actions of BBVA AM employees in these situations, their monitoring and reports to management, based on these general principles:
- The interest of the CII, its shareholders and participants and customers will always take priority over BBVA AM, its managers, employees or any other party directly or indirectly connected to BBVA AM through a control relationship. Thus, the related operations that could be executed by or for the CII or by or for the pertinent customer related to these parties or companies are done in the best interests of the CII or customers and at market prices.
- If some conflict of interest occurs that can not be suitably managed, the situation that caused it will be avoided or disclosed to the CII, its shareholders or participants and/or the customers, so that the opportune decision can be made.
- Financial instruments are selected after their aptitude and suitability to the CIIs' investment policy or the contract signed with the customer is analyzed, as applicable, and their different risks, which shall be supervised continuously during the investment period.
- The voting rights granted by certain instruments are exercised to the exclusive benefit of the CII and its shareholders or participants. For other types of customers, the terms in the contracts signed with them will be applicable, acting in all cases to the exclusive benefit of the customer.
- In the selection of third-party funds, the instrument types will always be selected with the most economical conditions for access by the CIIs and/or customers. The fees received for contracting these funds is paid to the CIIs, as described in their legal documentation and/or in trust agreements adopted, in benefit of their customers. For customers, the terms of the contracts signed with them will be applicable.
- The process of preallocation and contracting of transactions will be executed in a formalized and controlled framework, with a separation of the functions of participating parties, respecting the interests of each group of customers and avoiding situations of discrimination.
- Brokers are selected according to objective and independent criteria.
- There is functional, hierarchical and physical separation between management, execution, administration, risk and control functions within BBVA AM.
- The remuneration policy for employees who make decisions about relevant risks, including senior management, control functions and all those parties in the same salary range, are consistent with the risk profiles predetermined for every CII/customer and promote solid risk controls at BBVA AM.
- There is functional, hierarchical and physical separation at BBVA AM of other companies in the BBVA Group, existing information barriers that prevent or control the exchange of information.
- BBVA AM employees are subject to a Code of Conduct in the scope of financial markets, which regulates receiving personal incentives in the decision-making process. Among other topics, the code regulates personal operations of managers and employees.
- It separately supervises the competent parties whose main function consists of providing services or conducting collective portfolio management activities on behalf of customers or investors whose interests may come into conflict or that represent different interests, including those of the fund management trust, which can also cause conflicts.
- It adopts measures to prevent or restrict the possibility of someone unduly influencing the way in which a competent person performs their collective portfolio management activities.
- It implements measures to prevent or control the simultaneous or consecutive participation of a competent person in separate collective portfolio management activities, when such participation can affect the correct management of any conflict of interests, and will adopt the opportune measures.
BBVA AM continuously reviews its policies and procedures. If a conflict of interest is identified that is not specifically considered, the fund manager will adapt its policies and procedures to guarantee its proper management.
5. Disclosure of Conflicts of Interest
When the measures taken by BBVA AM not are enough to prevent, with reasonably sufficient guarantees, the risks of reducing the interests of the CII, its investors or other customers, the area responsible for providing the service or activity will notify BBVA senior management as soon as possible, so that it can make the decisions or actions needed to act in the best interest of customers.
When the measures adopted to manage a specific conflict of interest are not enough to guarantee, with reasonable certainty, that the risks will be prevented that could harm customers' interests, BBVA AM will impartially, clearly and not misleading notify the customer of the general nature or origin of the conflict of interest before acting on the customer's behalf, so they can make a decision about the investment fully aware of its cause.