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Conflict of interest transaction (COI)

            Some investment transactions may involve with parties in interest which could be fund committees, management companies and affiliates, or related companies. Such transactions are defined as conflict of interest (COI). An explanation to and a written approval from the fund committee must be attained before any COI transactions occur.
  • Proprietary trading
              - In case a management company manages its own portfolio itself, it must set up a system that would ensure the prevention of conflict of interest as well as obtain an approval from the SEC before investing.
              - In case a management company assigns other management company (ies) to manage its portfolio, it must not get involved with any investment decision.
              - Holding period for each individual asset must not be less than 1 year except for deposits, short-term financial instruments with less than 1-year term to maturity, and its own investment units holding with necessity.
              - A management company must submit an investment report to the SEC, disclose to the fund committee that it may invest in similar assets as the fund, and allow the fund committee to see the investment information.
  • Affiliated transaction
              Affiliated transaction can be performed under the following conditions:
              1. Best execution at the time
              2. Necessary and will benefit the fund
              3. At arm’s length
              4. Appropriate to the fund’s characteristic and its investment policy

              The fund committee’s approval must be attained before taking an affiliated transaction or at the time as stipulated in the contract.
  • Soft commission
              - Soft commission can be performed under the following conditions:
                 1. The benefits received must be of economic value and provide direct benefits to the fund such as research papers and reviews.
                 2. Have no intention to attain services from the aforementioned person more than necessary.
                 3. Fair allocation of the received benefits. 
                 4. Considering the fund’s investment policy.
              - Asset management companies must specify conditions and criteria for soft commission in the management contracts and send notifications in written forms to the fund committees regarding the soft commission received, provider, and reasons for the acceptance.
  • Staff dealing
              - In order to avoid potential conflicts of interest, a management company must:
                1. Efficient staff supervision system to ensure work standard as prescribe by the Association of Investment Management Company regarding the control of staff trading transactions.
                2. Specify disciplinary measures in case of violation.
                3. Compensate the provident fund for any damages occur as a result of violation.
last updated date 26/05/2553

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