Statement of Policies

Securities regulations in Canada require all dealers and advisers to comply with certain rules in relation to conflicts of interest, particularly with respect to the disclosure of information in that regard

The purpose of this section is to inform you about how we identify and respond to conflicts of interest in order to minimize their impact.

We consider a conflict of interest to be any circumstance where the interests of different parties, such as the interests of a client and those of NBF, are inconsistent or divergent. We take reasonable steps to identify all existing material conflicts of interest, and those we would reasonably expect to arise. We then assess the level of risk associated with each conflict. We avoid any situation that would entail a serious conflict of interest or represent too high a risk for clients or market integrity. In any other situation entailing a conflict of interest, we ensure that appropriate measures are implemented to control the conflict of interest effectively.

Conflict of Interest Situations

The situations in which NBF could be in a conflict of interest, and the way in which NBF intends to respond to such conflicts, are described herein below. Where not avoided, any existing or potential material conflict of interest situations and any future material conflict of interest situations will be disclosed to you as they arise.

Related Issuer

An individual or company is considered a “related issuer” to NBF if, through the ownership of, or direction or control over voting securities or otherwise, i) this person or company is a influential securityholder of NBF; ii) NBF is a influential securityholder of that person or company, or iii) each of them is a related issuer of the same third person or company.

An issuer distributing securities is a “connected issuer” to NBF if the relationship between this issuer and NBF, a related issuer of NBF or the directors, officers or partners of NBF or a related issuers of NBF, may lead a reasonable prospective purchaser of the securities of the connected issuer to question NBF’s independence from the issuer with respect to the distribution of the securities of this issuer.

As of September 20, 2013, the following are considered our related issuers under Canadian securities legislation.

National Bank of Canada: National Bank of Canada is a bank incorporated under the Bank Act (Canada) and is a reporting issuer that holds indirectly 100% of the voting and equity shares of the Corporation.

Canadian Credit Card Trust: This trust is a trust whose administrator is National Bank of Canada and whose securities are publicly distributed. Consequently, Canadian Credit Card Trust is deemed to be a related issuer.

NBC Asset Trust: This trust is a closed-end trust whose voting units are held by National Bank of Canada. Consequently, NBC Asset Trust is deemed to be a related issuer.

NBC Capital Trust: This trust is an open-end trust whose voting units are held by National Bank of Canada. Consequently, NBC Capital Trust is deemed to be a related issuer.

Fiera Capital Corporation: Fiera Capital Corporation is a portfolio manager of which 35% of the issued and outstanding shares are indirectly held by National Bank of Canada.

Jarislowsky Fraser Funds: National Bank Securities Inc. an indirectly wholly-owned subsidiary of National Bank of Canada, is the manager of the Jarislowsky Fraser Funds.

Horizons AlphaPro Exchange Traded Funds: NBF International Holdings Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, holds voting securities of AlphaPro Management Inc., manager and trustee of these Funds.

National Bank Securities Mutual Funds (including the National Bank Funds, the Altamira Funds, the Omega Funds and the Westwood Funds): National Bank Securities Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, is the manager of all National Bank Securities Mutual Funds, namely Altamira Dividend Fund Inc. and Altafund Investment Corp., two mutual fund corporations. Fiera Capital Corporation is the portfolio manager of most of National Bank Securities Mutual Funds (with the exception of certain Omega Funds). National Bank Strategic Yield Class is a class of shares of National Bank Funds Corporation, a mutual fund corporation indirectly controlled by National Bank of Canada.

Hexavest GTAA Fund L.P. (established in Quebec under the name Fonds Hexavest AATG): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap GTAA GP Inc., which acts as general partner of this fund. Innocap Investment Management Inc. is the investment manager of Hexavest GTAA Fund L.P.

Innocap Akira Commodity Fund L.P. (established in Quebec under the name Fonds de produits de base Innocap Akira): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap ACF GP Inc. (established in Quebec under the name Commandité Innocap ACF), which acts as general partner of this fund. Innocap Investment Management Inc. is the investment manager of Innocap Akira Commodity Fund L.P.

Innocap Casgrain Bond Fund L.P. (established in Quebec under the name Fonds d'obligations Innocap Casgrain): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap CBF GP Inc. (established in Québec under the name Commandité Innocap CBF), which acts as general partner of this fund. Innocap Investment Management Inc. is the investment manager of Innocap Casgrain Bond Fund LP.

Innocap Fund SICAV p.l.c.: Innocap Global Investment Management Ltd, a wholly owned subsidiary of National Bank of Canada, acts as the Investment Manager of Innocap Fund SICAV p.l.c. Innocap Investment Management Inc. is held at 50% by National Bank of Canada and acts as the Investment Advisor of Innocap Global Investment Management Ltd.

Innocap Globevest Capital AG Fund L.P. (established in Quebec under the name Innocap Globevest Capital CA): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap GCAG GP Inc. (established in Quebec under the name Commandité Innocap GCAG), which acts as general partner of this fund. Innocap Investment Management Inc. is the investment manager of Innocap Globevest Capital AG Fund L.P.

Innocap Sigma Alpha GM+ Fund L.P. (established in Quebec under the name Fonds Innocap Sigma Alpha GM+): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap SAGM GP Inc. (established in Québec under the name Commandité Innocap SAGM), which acts as general partner of this fund. Innocap Investment Management Inc. is the investment manager of Innocap Sigma Alpha GM+ Fund L.P.

Innocap TOBAM Anti-Benchmark World Equity Fund L.P. (established in Quebec under the name Fonds Innocap TOBAM Actions Internationales Anti Indice de Référence): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap TAWE GP Inc. (established in Quebec under the name Commandité Innocap TAWE), which acts as general partner of this fund. Innocap Investment Management Inc. is the investment manager of Innocap TOBAM Anti-Benchmark World Equity Fund L.P.

InRIS QIF p.l.c.: Innocap Global Investment Management Ltd, a wholly owned subsidiary of National Bank of Canada acts as the Investment Manager of InRIS QIF p.l.c.. Innocap Investment Management Inc. is held at 50% by National Bank of Canada and acts as the Investment Advisor of Innocap Global Investment Management Ltd.

InRIS UCITS p.l.c.: Innocap Global Investment Management Ltd, a wholly owned subsidiary of National Bank of Canada acts as the Investment Manager of InRIS UCITS p.l.c.. Innocap Investment Management Inc. is held at 50% by National Bank of Canada and acts as the Investment Advisor of Innocap Global Investment Management Ltd.

NBCG Fund SICAV p.l.c.: Innocap Global Investment Management Ltd, a wholly owned subsidiary of National Bank of Canada acts as the Investment Manager of NBCG Fund SICAV p.l.c.. Innocap Investment Management Inc. is held at 50% by National Bank of Canada and acts as the Investment Advisor of Innocap Global Investment Management Ltd.

Meritage Portfolios: National Bank Securities Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, is the manager of the Meritage Portfolios. National Bank Trust Inc., a wholly-owned subsidiary of National Bank of Canada, is the portfolio manager of all Meritage Portfolios.

Razorbill Credit Dislocation Fund L.P. (established in Quebec under the name Razorbill Fonds Crédit Dislocation): National Bank of Canada holds 50% of voting and participating shares of Innocap Investment Management Inc. Innocap Investment Management Inc. holds 100% of voting and participating shares of Innocap CDF GP Inc. (established in Québec under the name Commandité Innocap CDF), which acts as general partner of the fund. Innocap Investment Management Inc. is the investment manager of Razorbill Credit Dislocation Fund L.P. NBC Alternative Investments Inc., a wholly owned subsidiary of National Bank of Canada, is the sub-advisor of this fund.

Renaissance Capital Manitoba Venture Fund Limited Partnership (RCMVFLP): National Bank Financial & Co. Inc., an indirectly wholly-owned subsidiary of National Bank of Canada, holds 50% of the voting shares of Renaissance Capital Inc., which is the general partner of RCMVFLP.

In the course of carrying out its business activities as securities dealer, NBF may from time to time engage in the following activities in respect of National Bank of Canada or other related issuers of NBF, and in the context of a distribution, in respect of the securities of National Bank and other connected issuers of NBF:

  • act as an underwriter or selling group member in connection with the distribution of such securities; sell such securities to or on behalf of clients of NBF;
  • purchase such securities from or on behalf of clients of NBF;
  • with the written consent of the client, exercise discretionary authority to buy or sell such securities;
  • act as an advisor in respect of such securities;
  • make recommendations in respect of such securities; and
  • offer for sale securities, goods and services which include securities, goods or services issued or provided by National Bank of Canada or another related issuer, or cooperate with National Bank of Canada or another related issuer in the joint offering for the sale or purchase of securities, goods or services.

It is the policy of NBF to comply fully with all applicable securities legislation and to make all required disclosures where acting as advisor, dealer or underwriter in respect of the securities of National Bank of Canada and other related or connected issuers of NBF, particularly in the following situations:

  • before advising in respect of the purchase or sale of securities of a related issuer, or in the course of a distribution, in respect of securities of a connected issuer, informing the client either orally or in writing of the relationship or connection between the dealer or the advisor and the issuer of the securities;
  • before exercising discretionary authority in respect of the securities of a related issuer or of a connected issuer, and, in the provinces of Alberta, Ontario and Newfoundland, once each twelve months thereafter, providing the client with its current Statement of Policies, and, if necessary, obtain specific and informed written consent of the client to the exercise of the discretionary authority; and
  • where NBF purchases securities from or sells securities to a subsidiary or affiliate, the dealing will be done on the basis that the transaction price for a given security together with the brokerage commission applicable to such trade, is as good as or better than that offered by an unaffiliated third party broker in an arms-length transaction.

In addition, NBF ensures that any dealings in securities of related or connected issuers take the clients’ investment objectives into account.

As part of its business activities as investment dealer, NBF may also be called upon to act as agent or principal at the time of buying or selling for or on behalf of its clients. In such instances, the services provided by NBF in the normal course of business will be provided in accordance with its normal practices and procedures as well as the relevant legislation or regulations.

Related Dealers and Advisors

NBF’s affiliation with National Bank of Canada and its subsidiaries makes it necessary to put in place certain policies aimed at dealing with any potential conflicts of interest and ensuring that the best interest of NBF’s clients are preserved.

NBF is duly registered as an investment dealer. Furthermore, National Bank of Canada, of which NBF is indirectly wholly-owned subsidiary, is also the principal shareholder of the following dealers and advisors:

NBC Alternative Investments Inc.

CABN Investments Inc.

National Bank Direct Brokerage Inc.

NBF Securities (USA) Corp. - in United States only

Innocap Investment Management Inc.

Innocap Global Investment Management Ltd. - in Malta only

National Bank of Canada Financial Inc. - in United States only

NBCN Inc.

National Bank Securities Inc.

Natcan Trust Company

National Bank Trust Inc.

Fiera Capital Corporation

Fiera Sceptre Funds Inc.

Maple Futures Corp.

Maple Securities Canada Limited

Maple Securities U.S.A. Inc. - in United States only

Maple Securities (U.K.) Limited - in United Kingdom only

PI Financial Corp.

PI Financial (US) Corp. - in United States only

NBF is therefore related to the above-mentioned dealers and advisors. Although there may be overlaps among the directors and officers of these companies, all of these companies are operated as separate legal entities.

NBF may obtain from or provide to the above-mentioned related dealers or advisors, management, administrative, clients referral and/or other services in connection with its ongoing business activities or the ongoing business activities of these other companies or transactions completed by it or these other companies. These relationships are subject to certain legislative and industry regulatory requirements which impose restrictions on dealing between related dealers or advisors intended to minimize the potential for conflict of interest resulting from these relationships. NBF has also adopted internal policies and procedures which supplement these requirements, including its policies on confidentiality of information.

Other company related to NBF

Alpha Trading Systems Limited Partnership (also known in this document as Alpha LP) owns Alpha Exchange Inc., which is a stock exchange in Canada for the trading of securities.

The general partner of Alpha LP is Alpha Trading Systems Inc., and its limited partner is TMX Group Limited (formerly Maple Group Acquisition Corporation).

National Bank Financial & Co. Inc., an affiliate of NBF, owns or controls an equity interest in TMX Group Limited in excess of 5% of the issued and outstanding equity securities thereof and has a nominee director serving on the board.

NBF may execute transactions on your behalf on Alpha Exchange Inc. and may enter orders into Alpha Exchange Inc.’s order book which cannot be immediately completed.

NBF is subject to a number of regulatory obligations, including the requirement to diligently pursue the best price and best execution of each client order on the marketplace. These obligations override any direct or indirect interest NBF has in the above mentioned companies.

TMX Group Limited

National Bank Financial & Co. Inc. one of our affiliates owns or controls an equity interest in TMX Group Limited in excess of 5% of the issued and outstanding equity securities thereof and has a nominee director serving on the board. In addition, NBF is an indirect wholly-owned subsidiary of National Bank of Canada. From time to time, National Bank of Canada may enter into lending or financial arragements with companies that are the subject of NBF research reports or that are recommended. At the present date, National Bank of Canada, is a lender to TMX Group Limited under its credit facilities. As such, NBF may be considered to have an economic interest in TMX Group Limited. No person or company is required to obtain products or services from TMX Group Limited or its affiliates as a condition of doing business with TMX Group Limited or its affiliates.

Fiera Capital Corporation

NBF retains many portfolio management firms to act as sub-advisors for the range of discretionary managed investment products and services we offer.

The fees you pay for these products and services are determined by agreement between you and your investment advisor when you participate in one of our discretionary management programs. These fees provide compensation paid to us and your investment advisor, as well as the sub-advisor providing the investment selection for your product or service. The total compensation to be received by us and your investment advisor is, in part, influenced by the amount of compensation payable to the sub-advisor.

Fiera Capital Corporation (“Fiera”) is one of the sub-advisors we retain. Our parent bank, National Bank of Canada (the “Bank”), is a significant shareholder in Fiera and Fiera has agreed to provide its investment management services to us on favourable terms. As a result, the fees paid to Fiera by us for its sub-advisory services are generally lower than those charged by other arm’s length portfolio managers. In addition, the Bank agreed to compensate Fiera in certain circumstances if the overall value of the assets it manages for the Bank and its affiliates fall below specified levels, however the Bank and its affiliates, including NBF, have no obligation to have any minimum value of assets managed by Fiera.

As a result, we may be seen to have an economic incentive to offer investment products and services managed by Fiera. In addition, your investment advisor has an economic incentive to recommend investment products and services for which Fiera is a sub-advisor over products and services offered by to you over other sub-advisors because the compensation to be received by your advisor will generally be higher.

If you would like further details on the fees payable to alternative sub-advisors for the investment products and services you are considering, please request that from your Investment Advisor.

Under applicable regulatory requirements your Investment Advisor must always ensure that the products or services that are recommended to you are suitable given your investment objectives and risk profile.

Conflicts of Interest of NBF and its Employees

In the ordinary course of performing their duties, our directors, officers, employees, representatives and agents may find themselves in situations where their personal interests may be in conflict with those of a client.

NBF has equipped itself with a Code of Professional Conduct, a Compliance Manual and internal policies dealing with the situations related to its activities. Among other things, they reiterate that NBF employees must never favour their own interests to the detriment of their responsibilities toward NBF’s clientele and NBF itself. Those documents set forth the basic principles by which its employees’ conduct is guided, particularly including the following:

Confidential information: It is prohibited to use confidential information acquired in the course of one’s duties, or exploit a situation for the purpose of obtaining an advantage of any kind;

Gifts, entertainment and compensation: It is prohibited to accept gifts, entertainment or compensation that could influence decisions to be taken in the course of performing one’s duties. In carrying out their duties, and to avoid any conflicts of interest situations, NBF employees may not receive any other form of compensation than that paid by NBF without the prior approval of NBF.

Other business activities: It is prohibited for NBF employees to engage in activities that could interfere with or enter into conflict with their duties. NBF has a policy respecting its employees’ other business activities. The policy is intended to detect and, where applicable, supervise, disclose or prohibit any conflicts of interest. Employees wishing to act as directors of officers of a public or private company must declare their intentions and be duly authorized by NBF.

Client priority rule: The interests of clients must always be given priority over those of NBF and its employees. For this reason and to avoid conflicts of interest, between two orders for the same security at the same price (or a better price), the order coming from a client is always executed prior to the one from NBF or one of its employees.

Referrals: On occasion, clients may be referred by third parties to NBF for the purpose of obtaining the products and services offered by NBF. NBF may also refer clients to third parties. When such referrals involve a referral commission, they must comply with the existing regulations and be subject to the required disclosures to clients so referred. Such disclosures allow the clients concerned to make an informed decision with respect to the referral and to assess any potential conflicts of interest.

Advisory and research activities: For a fee, NBF offers corporate financing, research and investment advisory services. To avoid certain conflicts of interest and protect the confidentiality of privileged information, procedures and policies are established and the NBF departments involved in such functions are physically isolated from all NBF trading activities.

Underwriting and market maker activities: In the normal course of its functions, NBF may act in other capacities such as underwriter and market maker. In such cases, NBF is duty bound to abide by the applicable legislation and regulations in effect.

Policy respecting the allocation of securities: NBF has a policy respecting the supervision of the allocation of securities among its clients in the event there is an insufficient quantity of such securities to meet the demand. The policy is intended to ensure equitable distribution of such securities among NBF’s clients.

Use of brokerage commissions: Specific requirements apply to NBF relative to any securities transactions wherein NBF charges brokerage fees and which are carried out for an investment fund, a managed account under discretionary management or any other account or portfolio with regard to which an advisor exercises discretionary power respecting investments on behalf of third party beneficiaries. Such requirements are intended to see to it that the fees assumed by the client are proportionate to the services received by the client.

Private placements and personal investments: NBF employees wishing to participate in a private placement, as a buyer or promoter, are subject to an NBF authorization and verification procedure to avoid or supervise any possible conflict of interest situations resulting from such transactions. NBF employees’ personal investments are also subject to NBF policies and supervision.

Discretionary management: NBF offers discretionary management services to its clients. In certain instances, the securities making up the portfolios under management may also be held by some NBF employees, officers or directors or may come from related or connected issuers of NBF. The discretionary management services offered by NBF must comply with the applicable legislation and regulations.

Compensation: We are compensated for the business we do with our clients. The level of compensation varies depending on the product and the type of remuneration. Here are some examples of how compensation could lead to a conflict of interest and how we avoid such conflicts:

  • Compensation from issuers: Issuers of securities or other related parties may compensate us based on the sale of their securities to our clients. An example is trailing commissions we receive for selling mutual funds. Securities regulations require issuers to include details in their offering documents about such arrangements and the compensation involved.
  • Currency and interest rates: On occasion, we may be compensated indirectly. For example, in a foreign currency exchange, we may receive compensation based on the difference between the price our clients pay for the currency and the price we pay for the same currency. We could also be compensated based on the difference between the interest rate we receive on invested funds and the interest rate actually paid to our clients.
  • Marketplaces: We may receive compensation based on which marketplace we use to carry out our clients’ transactions. Regulations control the conditions under which we carry out our client transactions. Elsewhere in this document, you’ll find all the relevant information about any marketplace in which we or a related entity has an interest.
  • Over-the-counter securities: We may receive compensation for the purchase or sale of some over-the-counter securities. These are investments that are traded outside of the formal exchanges. We mark up the final price clients pay when they buy these securities and mark down the final price clients receive when they sell these securities.
  • Compensation for Investment Advisors: Investment Advisors qualify for different types of incentives, such as trips or bonuses, when the revenue they generate crosses a certain threshold. We prohibit Investment Advisors from making recommendations solely for the purpose of generating revenue without any benefit to the client. We have a comprehensive supervision program to monitor Investment Advisors and to ensure that any recommendations they make are suitable given the client’s financial situation, investment objectives and risk tolerance.
  • Fee-based accounts: Investment Advisors must always ensure that clients are using the compensation method most suitable to their needs.

Proxy Voting: Your Investment Advisor may ask whether you intend to vote on a specific matter or question relating to the securities you hold. Your investment advisor may even ask you to vote in a specific way. In some cases, the issuer or another party pays us or your Investment Advisor to ask for your vote or proxy in their favour. We always ask our Investment Advisors to disclose any compensation they or we receive in these cases. Our policy is that any recommendation the Investment Advisor makes must be suitable for the client.

Transaction between two clients: In some circumstances, we may have one client who wants to buy a security through us and another client who wants to sell the same security through us. Our policy is to ensure that we make such transactions at fair market value. Neither we nor our Investment Advisors are authorized to favour one client over another. Regulations and our policies require Investment Advisors to make only suitable investment recommendations to clients.

Margin accounts / investment loans: A margin account or an investment loan generates debit interest as well as additional fees or commissions when we invest the amount borrowed. This benefits the Investment Advisor, as well as us or one of our related companies that makes the loan. Any investment recommendation the Investment Advisor makes must be suitable for the clients.

Other conflicts of interest

From time to time, other potential or actual conflicts of interest may arise. NBF undertakes to continue taking the necessary steps to identify and respond to such situations fairly and reasonably, in keeping with the standard of care to which it is subject to in its relationships with its clients. This Statement of Policies respecting conflicts of interest of NBF will be updated should there be any evolution with respect to material conflicts of interest.