Framework & Policy

Conflict Management Framework

VERSION: 6.0 DATE: 8 October 2014 STATUS: Final

INDUSTRY SUPER FUND | LOW FEES | RUN ONLY TO BENEFIT MEMBERS COMMERCIAL IN CONFIDENCE

Document control Document information Document title

Conflict Management Framework (Policy)

Date last approved

28/11/2014 by the Trustee

Document saved

z:\compliance\policies\draft in progress\wip - 04 conflicts of interest management framework 2014_ls_gb.docx

Amendment History Version

Prepared By

Reviewed By

Approved

1.5

Professional Financial Solutions Pty Limited

Phillip Roberts, REI Super, Compliance Officer

Trustee Board 2/10/2003

2.0

Rei Superannuation Fund Pty Ltd

Trustee Board

15/7/2005

2.1

GPLA Group Pty Ltd, 17/10/2007

Mal Smith 12 October 2007

Trustee Board 23/11/2007

Grant Banner of G. Banner Consulting Pty Ltd (an incorporated legal practice) 11-12 October 2007 Noted by the Trustees that a review was conducted in September 2008 – no changes made).

3

4 5

5,1

6

GPLA Group Pty Ltd, 20/4/2010 & 28/5/2010 Lisa Saunders, Compliance Manager 26/7/2012 Lisa Saunders, Compliance Manager 1/11/2012

Mal Smith, REI Super 20/4/2010 Grant Banner (of as above) 21-23/4 2010 & 31/5/ 2010 Grant Banner (of as above) 1-2/8/ 2012 Grant Banner (of as above) 7/11/2012

(includes feedback from APRA) 7/11/2012 & 24/1/2012 (includes further feedback from APRA) Includes additional feedback from APRA – 30/1/2013 Includes additional feedback from APRA – 28/2/2013

Emery Feyzeny – 12/11/2012

Lisa Saunders 2/9/2013 (As per APRA’s review)

Grant Banner (of as above) 10/92013

Lisa Saunders, Compliance Manager 1/8/2014 (as per internal Audit review) Lisa Saunders, Compliance Manager 8/10/2014 – APRA comments

04 Conflicts of Interest Management Framework 2014

Trustee Board, 28/5/2010

Trustee board subject to feedback from APRA 23/11/2012

Mal Smith 28/02/2013

Governance Committee 26/9/2013 Grant Banner (of as above) 10-14/10/ 2014

Trustee Board 22/11/2013

Trustee Board 28/11/2014

Mal Smith 23/10/2014

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Contents 1.

INTRODUCTION ........................................................................................................................................................................... 4

2.

STRUCTURE OF THE CONFLICT MANAGEMENT FRAMEWORK (CMF) ......................................................................... 4 2.1.1 2.1.2

3.

CONFLICT MANAGEMENT POLICY .......................................................................................................................................... 5 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.1.7 3.1.8 3.1.9 3.1.10 3.1.11 3.1.12 3.1.13 3.1.14

4.

Conflict management obligations ................................................................................................................................................ 6 Definitions and Meanings ................................................................................................................................................................. 7 Process for identifying and monitoring conflicts .................................................................................................................... 7 What is a Conflict of Relevant Duty? ............................................................................................................................................ 8 What is a Conflict of Relevant Interest? ...................................................................................................................................... 8 How does the Trustee determine whether a duty or interest is relevant? ..................................................................... 9 Process for avoiding conflicts ......................................................................................................................................................... 9 Process for managing conflicts.................................................................................................................................................... 12 Process for appointment of new Responsible Persons ...................................................................................................... 13 Process for recording conflicts in Board minutes ........................................................................................................... 14 Process for appointment of Directors and independent directors including Chairperson ............................. 14 Process for enquiry into conflicts regarding service providers................................................................................... 15 Process for recording conflicts: .............................................................................................................................................. 15 Process for disclosure of Policy and Conflicts.................................................................................................................. 15

FUND INFORMATION FOR OTHER CONFLICTS ................................................................................................................. 16 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5

5.

This CMF includes: .............................................................................................................................................................................. 4 This CMF applies to: ............................................................................................................................................................................ 4

Investment ........................................................................................................................................................................................... 16 Transaction Processing ................................................................................................................................................................... 16 Financial Product Advice on the Fund ....................................................................................................................................... 17 Advice on other products ...............................................................................................................................................................18 Appointment of Service Providers...............................................................................................................................................18

MONITORING AND REVIEW ..................................................................................................................................................... 18 5.1.1 5.1.2 5.1.3

Compliance Monitoring ..................................................................................................................................................................18 Regular Review ...................................................................................................................................................................................18 Assessment of declared conflict ..................................................................................................................................................18

6.

PUBLIC DISCLOSURE ................................................................................................................................................................. 19

7.

TRAINING ....................................................................................................................................................................................... 19

8.

ANNEXURE A - REGISTER OF RELEVANT INTEREST ......................................................................................................... 20

9.

ANNEXURE B - REGISTER OF RELEVANT DUTY .................................................................................................................. 21

10.

APPENDIX A ............................................................................................................................................................................. 22 10.1.1 10.1.2

Key Legislation and other Guidance .................................................................................................................................... 22 Definition of terms referred to in this document ............................................................................................................ 25

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1. Introduction The conflict management framework is the totality of systems, structures, policies and controls within REI Superannuation Fund Pty Ltd (the Trustee) ABN 68 056 044 770 RSE L0000314 AFSL 240569. REI Super (the Fund) ABN 76 641 658 449 and RSE R1000412 that identify, assess, mitigate, manage and monitor all conflicts.

2. Structure of the Conflict Management Framework (CMF) 2.1.1 This CMF includes: a) a conflicts management policy (CMP), approved by the board of directors of the Trustee (the Board), that meets the requirements of SPS 521; b) clearly defined roles, responsibilities and resources for the oversight of conflicts management within the Trustee's business operations (refer to Fit & Proper policy); c) an up-to-date register of relevant interests (see Annexure A); d) an up-to-date register of relevant duties (see Annexure B); and e) the process that outlines how the Trustee determines a duty or an interest to be relevant for the purposes of SPS 521.

2.1.2 This CMF applies to: a) all responsible persons and other employees of the Fund; and b) also reference should be made to the list of other affected persons in the Fit and Proper Policy. In relation to identifying responsible persons within an entity that is a 'service provider' to the Trustee, APRA have stated that this will often require an assessment of their functions, the kinds of decisions they make and the impact they may have on the business operations of the Trustee. This will differ depending on the type of entity and the type of function that the service provider performs for the Trustee. The Trustee considers that any service providers that could most likely have a material impact on members' interests, could be and have been defined as 'responsible persons' under this CMF and in the Fit and Proper Policy. The Board will take all reasonable steps to ensure that all responsible persons and other employees of the Trustee clearly understand: a) the need to identify all potential conflicts; b) the circumstances that might give rise to a conflict; c) the need to avoid or disclose and manage all conflicts;1 d) the content and purpose of the Trustee’s CMF; and e) their obligations, where applicable, as a responsible person of the Trustee.

1

Even though not an express requirement in paragraph 11 of SPS 521, all responsible persons must clearly understand and practice this important aspect of the CMF.

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The Board achieves the above objectives by following these procedures for responsible persons: (1) each responsible person must provide details prior to taking up their appointment and annually and continuously thereafter all relevant duties and all relevant interests that may give rise to a potential or actual conflict (refer to annual, periodical and appointment declaration policy for 'Responsible Persons’ to enable them to understand the need to identify all potential conflicts, the circumstances that might give rise to a conflict, the need to avoid or disclose and manage all conflicts, the content and purpose of the Trustee's CMF and their obligations, where applicable, as a responsible person of the Trustee); and (2) at each Board and delegated Board committee (Committee) meeting, each

responsible person must confirm they are eligible to hold the position they hold for the purposes of that meeting and to disclose any changes in any relevant duty or interest stated in their entries in the register of relevant interests or the register of relevant duties to enable them to clearly understand the need to identify all potential or actual conflicts.

3. Conflict Management Policy This Policy documents the Trustee’s arrangements for identifying, avoiding and managing actual and potential conflicts of interests and thereby assisting to ensure that: a) the ethical nature and quality of financial services provided by the Trustee and on the Trustee’s behalf are not compromised by conflicts of interests; b) the Trustee and its representatives comply with their obligations to provide financial services efficiently, honestly and fairly2; c) the Trustee, its directors and the Trustee’s representatives and employees satisfy their statutory requirements and meet their common law fiduciary obligations to clients; d) the Trustee keeps the money and other assets of the entity separate from any money and assets respectively, that are held by the Trustee personally3; and e) where there is a conflict between the duties of the Trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the Trustee to any other person or the interests of the Trustee or an associate of the Trustee : (i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and (ii) to ensure that the duties to the beneficiaries are met despite the conflict; and (iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and (iv) to comply with the prudential standards in relation to conflicts. 4 To achieve all of these objectives, this Policy covers amongst other matters: 2

s912A(1)(a) of Corporations Act 2001.

3

S. 52 (2) (g) & s. 52 (g) (i) of SIS Act (paraphrased) (refer to Appendix A)

4

S. 52 (2) (d) of the SIS Act (refer to Appendix A)

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a) the clearly defined roles, responsibilities and resources applied by the Trustee to conflicts management; and b) the maintenance by it of up-to-date registers of relevant duties and relevant interests. Approval and commencement of this Policy first became effective from 1 January 2005 and this Policy was last updated as displayed on the front of this document as adopted and approved by the Board.

3.1.1 Conflict management obligations The following obligations underpin the development, promotion and review of conflict of interest policies and procedures. (i)

Legislation

3.1.1.1.1

Corporations Act

The Trustee is to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly. The Trustee must have in place adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in relation to activities undertaken by the licensee or a representative of the licensee in the provision of financial services as part of the financial services business of the licensee or the representative [s912A (1)(aa) of the Corporations Act 2001]. 3.1.1.1.2

General Law

The Trustee is a fiduciary and hence is obliged under the general law to at all times, among other things:    3.1.1.1.3

act in the best interests of members and beneficiaries of the Fund; act impartially between members and beneficiaries of the Fund; and act honestly and in good faith. SIS Act

This Policy is designed to satisfy Superannuation Industry Supervision Act 1993’s sub-section S. 52(2) (as noted in Appendix A to this Policy). Also, as the Trustee holds a Registrable Superannuation Entity (RSE) Licence under the SIS Act, the Trustee is required to comply with the “Fit and Proper” operating standard specified in SPS 520. 3.1.1.1.4

APRA Prudential Standard 521 and Prudential Practice Guide 521

The Australian Prudential Regulation Authority’s (APRA) Prudential Standard SPS 521 establishes requirements for the identification, avoidance and management of conflicts of duty and interest. Similarly, Prudential Practice Guide SPG 521 adds further meaning and significant detail in these areas.

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This Policy is required for the effective development, implementation and review of a conflicts management framework which identifies all relevant duties and relevant interests. Affected entities and persons are the trustee, its directors and all employees; auditors; actuaries and other responsible persons (Responsible Person(s)).

3.1.2 Definitions and Meanings A conflict of interest can arise from avoiding a personal loss as well as gaining a personal advantage – whether financial or otherwise. Also a conflict of interest can arise when a Responsible Person has two or more competing interests. 3.1.2.1.1

ASIC RG 181.15 provides the following meanings applicable to this Policy

“circumstances where one or all of the interests of people (clients) to whom the

Trustee (or its representatives) provide financial services are inconsistent with, or diverge from, some or all of the interests of the Trustee or its representatives. This includes actual, apparent and potential conflicts of interest.”5 Redemption and purchase requests include the:

“making of contributions, rollovers, investments choices, investment switches, full and partial withdrawals, benefit transfers, deductions for fund expenses, and deductions for insurance and taxation costs.”

3.1.3 Process for identifying and monitoring conflicts For the purposes of appropriately identifying conflicts, the Trustee acknowledges that a reference to a 'conflict' is a reference to a conflict:6  between the duties owed by the Trustee, or a Responsible Person of the Trustee, to beneficiaries and the duties owed by them to any other person;  between the interests of beneficiaries and the duties owed by the Trustee, or a responsible person of the Trustee, to any other person;  between an interest of the Trustee, an associate of the Trustee or a Responsible Person or an employee of the Trustee, and the Trustee's duties to beneficiaries; and  between an interest of the Trustee, an associate of the Trustee or a Responsible Person or an employee of the Trustee and the interests of beneficiaries. The Trustee’s processes and controls for identifying and monitoring all potential and actual conflicts are as follows 

Conflicts that arise at the Trustee and Responsible Person level

The Trustee identifies and monitors these conflicts through disclosure. As part of its Fit and Proper due diligence process the Fund requires all Responsible Persons to provide details prior to taking up their appointment, annually and continuously 5

This definition is based on the definition used by ASIC in Regulatory Guide 181, paragraph 181.15.

6

See paragraph 7 of SPS 521.

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thereafter all duties (ie, directorships and other positions held) and all relevant interests (ie, shareholdings and other relevant interests) that may give rise to a potential or actual conflict. These disclosures are updated and maintained on the register of relevant duties and the register of relevant interests (Registers) (see Annexures A and B) which are prepared by the Chief Executive Officer (the CEO) and the compliance manager and submitted to each Board and Committee meeting. Furthermore where a decision is being made that may involve a conflict, these are to be declared and the Board or relevant Committee will determine whether the individual involved is disqualified from the decision making process (refer to managing conflicts).

3.1.4 What is a Conflict of Relevant Duty? A ‘relevant duty’ refers to any duty owed by the Trustee or a Responsible Person to beneficiaries or to any other person that the Trustee may determine to be relevant because it might reasonably be considered to have the potential to have a significant impact on the Trustee's capacity or the Responsible Person's capacity to act in a manner that is consistent with the best interests of beneficiaries. An example of a relevant duty is where a Trustee or a responsible person has multiple roles and could be said to be wearing two hats. That is, they have two official roles with a competitive relationship. Conflict between a Responsible Person’s duties and responsibilities to serve the Trustee and the affected person’s personal interests may result in a conflict of interest.

3.1.5 What is a Conflict of Relevant Interest? APRA’s SPS 521 defines a relevant interest of an RSE licensee such as the Trustee, an associate of the RSE Licensee or a responsible person of the RSE Licensee as referring to: “any interest, gift, emolument or benefit, whether pecuniary or non-pecuniary, directly or indirectly held by the RSE licensee, the associate or the responsible person that the RSE licensee has determined to be material in accordance with paragraph 16 of the Standard”. For the purposes of this Policy, business gifts as a term (Business Gifts) is defined to mean both business entertainment, and gift items. The Trustee considers the giving of Business Gifts is a customary way to strengthen business relationships and, with some restrictions, is a lawful business practice. It is the Trustee’s policy that its responsible persons, directors, executive officers and employees may give and receive appropriate, lawful business gifts in connection with their Fund interface with both commercial customers and service providers, provided that all such gifts are nominal in value and not given or received with the intent or prospect of influencing the recipient’s business decision-making processes or outcomes. The Trustee records these items on the Register of relevant interests (refer Annexure A) upon which each affected person must record as soon as possible after but in any case within 28 days of the event and for each financial year before June 30, any Business Gifts received or given. 04 Conflicts of Interest Management Framework 2014

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When deciding on the appropriateness of giving or receiving Business Gifts, Responsible Persons must consider how each proposed gift compares in value to the usual gift-giving practices in the superannuation industry and how the gift might look to an outsider to that industry. These guidelines apply even when no reimbursement from the Fund is sought. If any Responsible Persons, directors, employees or an executive officer plans to give or accept any Business Gifts of more than a nominal value of $300 (AUD), the CEO must be informed immediately. If the CEO plans to give or accept any Business Gifts of more than a nominal value of $300 (AUD), they must inform the Chairperson of the Board immediately.

3.1.6 How does the Trustee determine whether a duty or interest is relevant? Each Responsible Person is required to disclose all duties and all interests above the thresholds or otherwise which may give rise to a conflict. The Trustee will assess the relevance of each particular duty and interest that has been disclosed when the Registers are submitted to each Board meeting by considering the nature of the duty or interest, including whether each disclosure made is a one-off occurrence or whether, as a conflict it has an ongoing, recurring or above the materiality threshold element or combination of those elements to it. The Trustee will also assess the relevance of a duty by considering the extent to which the role giving rise to the duty could influence the duties owned by the responsible person to beneficiaries. The Trustee will also consider, for example, whether a disclosed conflict of duty or interest has the potential to: i. Cause the Trustee to breach a duty owed to beneficiaries; ii. Impact the Trustee’s capacity to act honestly and fairly towards beneficiaries; iii. Cause the Trustee to provide sub-optimal benefits to members by using uncompetitive administration, insurance or investment related services; iv. Be perceived that the disclosing Responsible Person is benefiting personally from their role with the Fund at the expense of beneficiaries; or v. Be objectively reasonably considered by beneficiaries as having the potential to create a conflict of duty or interest.

3.1.7 Process for avoiding conflicts The Trustee's controls and processes for avoiding conflicts are as follows: 

The Registers are included with the agenda papers for each Board and Committee meeting. At the beginning of each Committee and Board meeting, all meeting participants confirm their eligibility to act in a manner that is consistent with the best interests of beneficiaries and secondly that any conflicts of interest are disclosed and the Registers duly noted for the Board’s review.

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

At the beginning of each Board meeting, appropriate warnings are read by the CEO and declarations in relation to eligibility and any conflicts of interest are requested be made by Directors and any other affected participants.



If a new conflict is noted on the Registers, the Board will ordinarily assess it and the treatment of it and the results of that treatment (as disclosed to it from ongoing monitoring by the CEO and compliance manager), at the beginning of the next meeting occurring after the notation, under the Agenda item – ‘Warnings and Declarations’.



One of the duties of the Trustee’s appointed internal auditor to the Fund (currently PwC) is from time to time, to analyse the Registers and take such steps as it deems appropriate [including if considered necessary, by querying any disclosure or perceived non-disclosure direct to the Responsible Person(s) concerned] in order to satisfy itself of the correctness or otherwise of those Registers. Any anomalies found will at first instance, be reported to the compliance manager but depending on the seriousness of the matter that report may be made direct to the Board.

The action the Trustee will take to avoid any conflict occurring or re-occurring will depend on the circumstances existing at the time of recognition of the conflict or potentiality of the existence of a conflict, by it. The Trustee may, for instance, decide it is necessary or prudent for the Responsible Person concerned to relinquish the relevant duty (connected to the transaction) to another person, dispose of the financial interest (connected to the transaction) or as a last resort, to cease their impacted role(s) with the Trustee and/or the Fund or other affected external entity. Listed below are some examples of potential, perceived or avoided conflicts that have been identified. (ii)

Director under actual conflict regarding other directorship held in competitor fund

If a director of REI Super is also a director of a competitor superannuation fund, the Trustee is of the view that this conflict is so acute that there is no option but to avoid the conflict by requiring the director to relinquish the other directorship to that other fund or cease their role as a director of REI Super. (iii)

Appointing Independent Director and or Chair

When the Fund is seeking candidates for appointment as an independent director or Chair of the Fund. Consideration of the selection criteria will address if candidates are also a director of a competitor superannuation fund, the Trustee is of the view that this conflict is so acute that there is no option but to avoid the conflict by advising the potential candidate to withdraw their candidacy or resign their competing external directorship. This requirement has been used with effect during the recent appointment of the Chair completed in 2014. (iv)

Receiving Monetary gifts

Responsible Person found to have received monetary gifts and/or benefits that could reasonably be perceived to be an inducement or bribe from a service provider to the Trustee. If a Responsible Person is found to have received monetary gifts and/or benefits that could reasonably be perceived to be an inducement or bribe or the like from 04 Conflicts of Interest Management Framework 2014

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a service provider to the Trustee, that person will be required to cease their role with the Trustee and the Fund. (v)

Tender process with Service Providers

When the Trustee commences a tender process in respect of a material outsourced service then the Fund is considered to be in a “blackout” period, and during such period(s) it is essential that if any contact is made with individual Responsible Persons by potential outsourced service providers, that the Chair and CEO should be notified immediately by the impacted Responsible Persons and this requirement has been used with effect during the recent implemented investment consulting tender completed in 2014. (vi)

Executives or directors of participating employers

Some directors may also be directors or executives of participating employers (Employers), of the Fund. Such positions may give rise to actual or potential conflicts of interest because they may potentially influence those directors’ decisions in matters affecting the interests of their respective Employers. These relationships are disclosed and recorded on the Conflicts Register. In such cases the individual director will take no part in deliberations in relation to that employer organisation. (vii)

Executives or directors of Real Estate Institutes or Real Estate Employers’ Federation

Some directors may also be directors or executives of Real Estate Institutes (Institutes). Such positions may give rise to actual or potential conflicts of interest because they may potentially influence those directors’ decisions in matters affecting the interests of their respective Employers. These relationships are disclosed and recorded on the Conflicts Register. In such cases, the individual director will take no part in deliberations in relation to that organisation.

(viii)

Financial interests in participating Employers

Responsible Persons may also hold shares, share options or other financial interests in participating Employers. Such interests may give rise to actual, potential or perceived conflicts of interest because they may influence Board decisions in matters affecting the interests of those Employers. (ix)

Financial Interests of directors or employees and family

Directors or employees and their family may have financial interests in the form of shares, options, investments, partnerships or other financial interests in entities used by the Trustee. Directors, Responsible Persons or employees and their families may also have financial interests in other outsourced service providers used or entities invested in by the Trustee in the form of directorships, management/advisory roles or positions on board committees of such entities. Such interests may give rise to actual, potential or perceived conflicts of interests because they may influence an affected director’s decision to use services of or invest in an entity in which they, their employees and/or their families hold an interest. 04 Conflicts of Interest Management Framework 2014

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(x)

Non-Financial Interests of directors or employees and family

Directors or employees and their family members may also have non-financial interests/relationships with other companies/service providers used by the Trustee in the form of non-remunerated or indirectly remunerated relationships (eg travel reimbursements, hospitality and the like). These may also influence decision making in respect of those entities/service providers. (xi)

Fund Membership

Directors and/or Responsible Persons may have a personal interest in the Fund through their membership of the Fund. In this regard, this Policy recognises that all of the Board, with the exception of the Independent Director and the Chairperson who is also an Independent Director, are member elected directors. Such personal interests, if inadequately handled, may give rise to actual conflicts of interest because they may unduly influence Board decisions relating to matters affecting the benefit design of the Fund. This Policy also recognises that membership of the Fund by member elected directors and other Responsible Persons can in fact create an alignment of interests which may actively assist them in proactively seeking to act in the best interests of all beneficiaries.

3.1.8 Process for managing conflicts The Trustee's controls and processes for managing conflicts are described below. As soon as the Board and/or Committee becomes aware of a potential conflict in relation to a Responsible Person, the Board and/or Committee will make a decision as to whether the potential conflict affects the Responsible Person's capacity to make a decision in the best interests of beneficiaries. Should the Board and/or Committee be of the view that the potential conflict affects the Responsible Person's capacity to make a decision in the best interests of beneficiaries; the Board and/or Committee is required to take necessary action to manage any potential conflict that is on-going in accordance with the Trustee’s requirement to give priority to the duties to and interests of beneficiaries under sections 52(2)(d) and 52A(2)(d) of the SIS Act. The action(s) the Trustee will take to manage any potential conflict will depend on the circumstances existing at the time of recognition. The Board or Committee members may decide which one of the following actions should be taken: 1) The Responsible Person is excluded from the relevant part of the meeting; 2) The Responsible Person remains at the relevant part of the meeting but abstains from voting on any relevant agenda item(s); or 3) No action is taken because the conflict is considered insignificant and the Board or Committee is satisfied that the conflict of interest or duty should not disqualify the Responsible Person from attending or voting in respect of the affected agenda item(s).

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It should be noted that non-attendance at a meeting by a Responsible Person without disclosure of a potential conflict does not address or remove the conflict and all conflicts should be diligently recorded when recognised despite any non-attendance

(xii)

Business Gifts given

Pre-approval must be obtained by any employee from the CEO and by any Director from the Chairperson before that employee or Director may give any gift valued in excess of $300 (AUD). No exceptions are acceptable. (xiii)

Business Gifts and hospitality received

Receipt of inducements, bribes or kickbacks by a director, employee or executive officer is absolutely prohibited. Other Business Gifts (valued in excess of $300 AUD) received by the Trustee its director’s, employees and executive officers from organisations, service providers or clients are to be recorded in a relevant conflict of interest register created and conducted for that purpose. The Conflicts Register for the prior calendar year is to be reviewed by the CEO and Chairperson of the Board by 31 January each year. Where a Director, Responsible Person, employee or executive officer is uncertain whether a particular gift exceeds the valuation threshold the details should be forwarded to the CEO and/or Chairperson for review. Business Gifts include meals, invitations to sporting or cultural events, theatre tickets, bottles of wine/spirits, hampers or other goods or services of any nature. Meals provided to a recipient primarily as a ‘thank you’ for allocating business to the provider or where they are intended by the provider to influence the recipient to prefer the provider’s services, are to be recorded. Meals accompanying working meetings where both parties are on an equal footing or there is no objective inference to be drawn that a favourable position will accrue to the provider as a result of the meeting, need not be recorded.

3.1.9 Process for appointment of new Responsible Persons Prior to being appointed or being re-appointed, all directors, Responsible Persons and employees of the Fund must declare all commercial and non-commercial interests held by them and their families that give rise to actual, potential, or perceived conflicts of interests. This declaration must be:   

in a form approved by the Trustee from time to time; tabled at the Board meeting immediately following the appointment of the prospective director, Responsible Person or employee; and kept for 10 years from the date of appointment or re-appointment of the director or Responsible Person or employee.

The Board must give proper consideration to any disclosed conflict prior to the appointment or re-appointment of the director, Responsible Person or employee in order to be satisfied that the disclosed conflict will not significantly affect the person’s discharge of their duties. 04 Conflicts of Interest Management Framework 2014

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3.1.10 Process for recording conflicts in Board minutes Prior to commencing each Board meeting and each Committee meeting where directors and any other members assess that matters of material importance likely to give rise to a conflict are to be discussed, all directors and all meeting participants are required to declare: 

whether they are aware of any actual, potential, or perceived conflicts of interest; and any Business Gifts or other hospitality which they have received that could be objectively seen to influence their decision.



The Trustee may seek further information from a director or employee or other member about actual or potential conflicts of interest of that person in order to comply with the Trustee’s obligations under SIS to maintain compliance with the conditions attaching to its RSE Licence. The Board’s directors are in any case, in all matters before them, required to comply with section 195(2) of the Corporations Act, an applicable extract from which is as follows: “195(2) CA Participation with approval of other directors The director may be present and vote if directors who do not have a material personal interest in the matter have passed a resolution that: (a) (b)

identifies the director, the nature and extent of the director’s interest in the matter and its relation to the affairs of the company; and states that those directors are satisfied that the interest should not disqualify the director from voting or being present.”

All decisions on resolutions placed before directors must be minuted and the relevant minutes must by law, be kept for at least 10 years.

3.1.11 Process for appointment of Directors and independent directors including Chairperson The governing rules of the Fund allow for the appointment of independent directors and an independent Chairperson (who is also an independent director) to the Board. Those positions are currently both filled by two persons. The benefit of those positions is (amongst other things) an inherent attempt by the Board to reduce any perceived bias in the structure and operation of both the Board and the Fund. The Board believes this has been a successful approach and intends, at the date of approval of this policy, to continue it indefinitely. As noted previously each director will be provided prior to being appointed as a director, a copy of this CMF so that they are aware of the Trustee's controls and processes for identifying, assessing, mitigating, managing and monitoring all conflicts. Each newly incoming director will also have to complete a Responsible Person Declaration.

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3.1.12 Process for enquiry into conflicts regarding service providers The Trustee's processes for undertaking regular and thorough enquiry to identify all conflicts arising from the Trustee's relationship or the relationship of a Responsible Person with an existing or prospective service provider or adviser are as follows a) When each Responsible Person completes their Responsible Person Declaration they must ensure that all relevant duties and interests in respect of their relationship (if any) or the Trustee's relationship (if any) with existing or prospective service providers or advisers are disclosed. b) When completing a Responsible Person Declaration each Responsible Person must include the details of the duty by making an assessment of their functions and the kinds of decisions they make in both roles and the impact these decisions may have on the business operations of both entities. Similarly, each Responsible Person must include details of the interest including the source and description of the interest.

3.1.13 Process for recording conflicts: 3.1.13.1.1 Registers of relevant duties and relevant interests The Trustee has established two Registers which are used for recording any conflicts of relevant duties and relevant interests respectively declared by the Trustee’s directors, responsible persons or employees of the Trustee, including any declared by them in respect of their families. The Registers are in such form as is approved by the Trustee from time to time. The CEO and compliance manager are jointly responsible for maintaining the Registers. The details of a particular conflict entered in the Registers are kept for at least 10 years from the date of entry. To the extent that material conflicts are not already disclosed in the Trustee’s Financial Services Guide and/or the Fund’s Product Disclosure Statement, the Trustee will disclose material conflicts of any director or executive officer in the Trustee’s annual report to members.

3.1.14 Process for disclosure of Policy and Conflicts In respect of specific conflicts identified, where the Trustee forms a view that a conflict is material, the details of the conflict are fully disclosed to all members. To the extent that material conflicts are not already disclosed in the Fund’s Product Disclosure Statements and the Trustee’s Financial Services Guide in accordance with the applicable legal requirements, the Trustee will disclose them on a regular basis in the Trustee’s annual report to members.

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Each director, Responsible Person, employee or executive officer is responsible for identifying conflicts (actual or potential) and must notify the CEO or compliance manager of such actual or potential conflicts. This should be done even if the director, Responsible Person, employee or executive officer thinks the conflict is common, minor or insignificant. In the event that the CEO has an actual or potential conflict they must notify the compliance manager and/or Chairperson of the Board. Conflicts are evaluated and where appropriate, referred to the CEO and/or the Chairperson of the Board and are recorded in the Registers.

4. Fund information for other conflicts 4.1.1 Investment Investment strategies should be determined based on objective standards found in trust law and the specific covenants included in section 52 of the Superannuation Industry (Supervision) Act 1993. Both trust law and the relevant covenants require the Trustee amongst a range of things but as a paramount requirement, when considering investments and the investment process, to assess what is in the best interests of beneficiaries. Potentially, a conflict with this obligation could arise where the Trustee or its respective officers/employees have an interest in the products that are offered as underlying investments. This may encourage focusing on issues other than those in the best interests of beneficiaries. Unless otherwise approved by the Trustee, the selection of investment managers must follow the process set out in the Trustee’s Policy for the appointment and removal of service providers . In addition:  

the Compliance and Audit Committee or the CEO will provide copies of the Registers to the Trustee Board on a quarterly basis; and any material or significant conflict disclosed will be considered and assessed by the Trustee prior to proceeding with any affected investment decision.

In considering whether to approve an investment in relation to which there is a material or significant potential or perceived conflict, the Trustee will assess the nature of the conflict and determine whether or not to: 

proceed with the investment;



obtain advice from an independent adviser in relation to the investment;



proceed with the investment and acknowledge/recognise the conflict;

these records are kept for at least 10 years.

4.1.2 Transaction Processing The Fund’s invested assets are maintained on a unitised basis and the Trustee, after taking appropriate advice, determines the unit price for each of the approved investment options it offers. This gives rise to a potential or perceived conflict if for instance the Trustee were to 04 Conflicts of Interest Management Framework 2014

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allow some members to purchase and redeem interests in the menu of funds from which unit prices are derived, at a particular day’s price, based on information that comes to light only after trading in a particular fund for that day has closed. Put another way, if allowed, it would permit exiting members or members making switches between investment options to time their decisions to exploit price movements to their advantage, potentially (unless immunised by other means at the Trustee’s disposal) at the expense of other beneficiaries. Details of redemption and purchase requests are documented in the business rules of the Fund and are clearly disclosed in all offer documents. Accounting and treasury functions are properly segregated and the processes monitored on a regular basis through compliance procedures externally at service provider level via their internal compliance procedures/internal audit. Finally, external checks and balances exist at all levels via external audit.

4.1.3 Financial Product Advice on the Fund The Fund is marketed via the Trustee’s employees and representatives and this can give rise to conflicts because those employees and representatives have a duty to give suitable advice but their remuneration may be linked to the Fund’s performance through bonuses, commissions or other benefits. This may affect the quality of the employee’s or representative’s advice by influencing them to:  

recommend the Fund above other funds; recommend frequent changes to investment strategy

resulting in greater fees for the Trustee/Fund with a possible ancillary benefit to the employee and/or the representative. No commissions, remuneration or other benefits are paid from the Fund to any person or entity licensed to provide personal financial advice where that advice is linked to either of the possible recommendations noted above. Employees and representatives providing general financial product advice must take reasonable steps to ensure that their opinion/recommendation relating to the Fund or it’s features is based on reasonable grounds and, to the extent applicable, is in the best interests of members generally. Employees providing general financial product advice are given or required to undertake regular training to ensure that they understand their legal requirements that advice must be appropriate to the needs of the client – in this regard, they are instructed to note that members’ interests are paramount. Regular reviews of general financial product advice provided by or on behalf of the Trustee are undertaken by the Trustee's outsourced provider of personal financial product advice and this accords with the spirit of the Trustee's RG 146 and RG 164 compliant, Training and Employment policies. These reviews are understood by the Trustee, to be kept for at least seven years by that provider.

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4.1.4 Advice on other products The Trustee does not provide personal financial product advice or advice on other products, and hence there is no potential conflict in this area.

4.1.5 Appointment of Service Providers Unless otherwise approved by the Board, appointment of all service providers is subject to the selection process set out in the Trustee’s ‘Outsourcing Policy and Procedures, incorporating procedures for appointing external service providers’.

5. Monitoring and review 5.1.1 Compliance Monitoring Compliance with this Policy will be monitored by the Trustee through the Compliance and Audit Committee. Any material non-compliance will be treated as a breach and will be assessed and reported using the existing breach and incident processes.

5.1.2 Regular Review This Policy will be reviewed annually by the Trustee to ensure that the arrangements continue to be adequate for identifying, assessing and managing conflicts of interests. The results will be reviewed by the Compliance and Audit Committee and tabled at the relevant Board meeting. The Trustee will ensure that the appropriateness, effectiveness and adequacy of its CMF are subject to a comprehensive review by operationally independent, appropriately trained and competent persons at least every three years.

5.1.3 Assessment of declared conflict Where a conflict of interest is declared, the declaring person must disclose all relevant information about the conflict of interest in such manner and form as is determined by the Board. The details of any declared conflicts must be recorded in the Board or affected Committee minutes and in the appropriate Register. The minutes documenting the conflict must be kept for 10 years. Where a conflict of interest is declared, the Board or relevant Committee members must assess the conflict to determine its materiality and significance to the agenda item in question and decide which of the following actions should be taken: 

the relevant person absenting himself or herself from the relevant part of the meeting;

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

the relevant person remaining at the relevant part of the meeting but abstaining from voting on that agenda item;



such other actions as the Board or Committee determines including barring all information in respect of the agenda item from being or becoming available to the affected responsible person thereby promoting effective ‘Chinese walls’; or



no action to be taken because the conflict is considered insignificant and the Board or Committee is satisfied that the interest should not disqualify the relevant person from voting or from those persons being present and receiving any or further information in respect of that agenda item.

6. Public Disclosure This CMP is to be made available on the Fund’s publically accessible website at all times. This CMP is to be accompanied by current versions of each of the Registers. Each of the Registers should be updated on the website quarterly with the CMP updated as often as it is reviewed. The publically accessible Registers are to contain all benefits received in the current and last financial year.

7. Training Directors and other Responsible Persons plus employees are subject to both induction training and ongoing training designed to ensure that they clearly understand their obligations to identify and manage or avoid all potential, perceived and actual conflicts and to abide by this CMF.

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8. Annexure A - Register of Relevant Interest DATE

S ERVICE P ROVIDER /O RGANISATION

RELEVANT INTEREST REGISTER EMPLOYEE/DIRECTOR REGISTER (INSERT NAME) E NTERTAINMENT ($ AND EXPLANATION )

Signed _________________________________________ Name __________________________________________ Date ___________________________________________

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O THER P AYMENTS ($ AND EXPLANATIONS )

9. Annexure B - Register of Relevant Duty Period _______________ to _______________

D ATE

D IRECTOR / O FFICER

D ETAILS OF C ONFLICT

A CTION R EQUIRED

Signed _________________________________________ Name __________________________________________ Date ___________________________________________

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R ESOLUTION / O UTCOME /B OARD M INUTE R EFERENCE

10. Appendix A 10.1.1 Key Legislation and other Guidance In the Board's view the most instructive aspects of the legislation to this Policy can be found in sub-section 52(2) and 52A of the Superannuation Industry (Supervision) Act 1993 which are currently as follows:     

Corporations Act 2001 Superannuation Industry (Supervision) Act 1993 APRA Prudential Standard SPS 521 Conflicts of Interest APRA Prudential Practice Guide SPG 521 Conflicts of Interest ASIC Regulatory Guide 181

Sub-Section 52(2) of the SIS Act The covenants referred to in subsection (1) include the following covenants by each trustee of the entity: a. to act honestly in all matters concerning the entity; b. to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent Superannuation Trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments; c. to perform the trustee’s duties and exercise the trustee’s powers in the best interests of the beneficiaries; d. where there is a conflict between the duties of the trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the trustee to any other person or the interests of the trustee or an associate of the trustee: (i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and (ii) to ensure that the duties to the beneficiaries are met despite the conflict; and (iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and (iv) to comply with the prudential standards in relation to conflicts; (e) to act fairly in dealing with classes of beneficiaries within the entity; (f) to act fairly in dealing with beneficiaries within a class; (g) to keep the money and other assets of the entity separate from any money and assets, respectively: (i) that are held by the trustee personally; or (ii) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the entity; (h) not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee’s functions and powers; (i) if there are any reserves of the entity—to formulate, review regularly and give effect to a strategy for their prudential management, consistent with the entity’s investment strategies and its capacity to discharge its liabilities (whether actual or contingent) as and when they fall due; (j) to allow a beneficiary of the entity access to any prescribed information or any prescribed documents.” 04 Conflicts of Interest Management Framework 2014

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(xiv)

Sub-Section 52A of the SIS Act:

Covenants relating to directors to be included in governing rules—registrable superannuation entities Governing rules taken to contain covenants (1) If the governing rules of a registrable superannuation entity of which a trustee is a body corporate do not contain covenants to the effect of the covenants set out in subsection (2), those governing rules are taken to contain covenants to that effect. The covenants (2) The covenants referred to in subsection (1) are the following covenants by each director of a corporate trustee of the entity: (a) to act honestly in all matters concerning the entity; (b) to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation entity director would exercise in relation to an entity where he or she is a director of the trustee of the entity and that trustee makes investments on behalf of the entity’s beneficiaries; (c) to perform the director’s duties and exercise the director’s powers as director of the corporate trustee in the best interests of the beneficiaries; (d) where there is a conflict between the duties of the director to the beneficiaries, or the interests of the beneficiaries, and the duties of the director to any other person or the interests of the director, the corporate trustee or an associate of the director or corporate trustee: (i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and (ii) to ensure that the duties to the beneficiaries are met despite the conflict; and (iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and (iv) to comply with the prudential standards in relation to conflicts (e) not to enter into any contract, or do anything else, that would: (i) prevent the director from, or hinder the director in, properly performing or exercising the director’s functions and powers as director of the corporate trustee; or (ii) prevent the corporate trustee from, or hinder the corporate trustee in, properly performing or exercising the corporate trustee’s functions and powers as trustee of the entity; (f) to exercise a reasonable degree of care and diligence for the purposes of ensuring that the corporate trustee carries out the covenants referred to in section 52. Obligations to beneficiaries override obligations under certain other Acts (3)

The obligations of the director under paragraph (2)(d) override any conflicting obligations the director has under: (a) Part 2D.1 of the Corporations Act 2001; or (b) Subdivision A of Division 3 of Part 2-2 of the Public Governance.

Performance and Accountability Act 2013 (which deals with general duties of officials) or any rules made for the purposes of that Subdivision. Director not prevented from engaging or authorising persons to act on behalf of the trustee 04 Conflicts of Interest Management Framework 2014

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(4)

A covenant referred to in paragraph (2)(e) does not prevent the director from engaging or authorising persons to do acts or things on behalf of the trustee.

Using reasonable care and diligence to ensure compliance by corporate trustee (5)

The reference in paragraph (2)(f) to a reasonable degree of care and diligence is a reference to the degree of care and diligence that a superannuation entity director would exercise in the circumstances of the corporate trustee.

Covenants operate as if director party to the governing rules (6)

A covenant referred to in subsection (2) operates as if the director were a party to the governing rules.

Also note that sub-sections 29VN and 29VO of the SIS Act both provide further obligations for the Trustee and separately for the Board’s directors as the Trustee is licensed to provide a MySuper product. Copies of these sub-sections may be obtained from the Secretariat upon request.

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10.1.2 Definition of terms referred to in this document Executive Officer The SIS Act defines the term “executive officer” to mean “a person, by whatever name called and whether or not a director of the body, who is concerned, or takes part, in the management” of the Trustee. AFS Responsible Manager The term “AFS Responsible Manager” means a Responsible Manager (as defined in ASIC Regulatory Guide 105) nominated in respect of the Trustee’s Australian Financial Services (AFS) Licence. Any person who was previously nominated as a “Responsible Officer” for the purposes of ASIC Regulatory Guide 164 is now taken to be a ‘Responsible Manager’. Beneficiaries ‘For the purpose of this document, ‘beneficiaries’ has the same meaning as is contained in Prudential Standard SPS 510. That is that ’a reference to ‘beneficiaries’ is a reference to beneficiaries of an RSE within the RSE licensee’s business operation’. Responsible persons A responsible person of an RSE licensee is: (a) a director of the RSE licensee; (b) a senior manager of the RSE licensee; (c) an approved auditor who is appointed to conduct any audit of an RSE for which the RSE licensee is trustee, or of any connected entity of the RSE licensee; (d) if the RSE licensee appoints an actuary to perform an actuarial function under the SIS Act, the Superannuation Industry (Supervision) Regulations 1994, the Prudential Standards or the Financial Sector (Collection of Data) Act 2001, the actuary so appointed (the actuary); (e) a secretary of the RSE licensee; and (f) a person who performs activities for a connected entity of the RSE licensee where those activities could materially affect the whole, or a substantial part, of the RSE licensee’s business operations, or its financial standing, either directly or indirectly. Superannuation Trustee A superannuation trustee is defined by sub-section 52(3) of the SIS Act as a person whose profession, business or employment is or includes acting as a trustee of a superannuation entity and investing money on behalf of the beneficiaries of the superannuation entity.

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