LEGAL NOTICE
Prevention and Management of Conflicts of Interest
Regulatory References:
Directive 2006/73/EC
Article 22
Article 23
AMF General Regulation
Article 321-46 to 321-52
Pursuant to regulatory requirements, ARCHIMED has set up “a procedure for the prevention and management of conflicts of interest” to ensure their identification, prevention and handling in order to avoid damaging the interests of clients and the image of the company.
DEFINITION
Conflict of interest is defined as a situation that involves having to choose:
between the interests of the management company and the persons concerned on the one hand, and the interests of the client on the other;
between the interest of one client and the interests of another one;
Article 321-47 of the AMF General Regulation defines potential situations of conflict of interest as the situations where the management company or a person related thereto:
is likely to make a financial gain or avoid a financial loss at the client’s expense;
has an interest in the outcome of a service provided to the client or a transaction carried out on behalf of the latter which is different from the client’s interest in the outcome;
is inclined, for financial or other reasons to favour the interests of another client or group of clients over the interests of the client to whom the service is provided;
practises the same professional activity as the client;
receives or will receive from a person other than the client, a benefit in relation to a service provided to the client in any form whatsoever, other than the commission or fees normally charged for this service.
1. Scope of application
The procedure covers all real, potential or apparent conflicts of interest resulting from activities performed in a professional capacity by any natural or legal person directly or indirectly linked to ARCHIMED by a controlling relationship.
Activities concerned
ARCHIMED performs the following activities in accordance with the approval issued by the AMF:
1) AIF management under the terms of Directive No. 2011/61/EU (AIFMD)
The following activities are also performed as ancillary activities:
Investment advice
Persons concerned within the management company (Article 321-31 (II) of the AMF General Regulation)
2) ARCHIMED senior managers and shareholders,
3) Financial managers,
4) ARCHIMED operating partners,
5) ARCHIMED employees
6) external service providers to whom essential functions are delegated: outsourcing [compliance and internal control, delegation of administrative management and accounting of funds, etc.]
2. Prevention of conflicts of interest framework
a. Policy on the prevention and management of conflicts of interest and disclosure to clients and unit holders
ARCHIMED has adopted a policy on prevention and management of conflicts of interest which is subject to regular updating (see appendix 1).
i. Policy on the prevention and management of potential conflicts of interest
The policy is updated on an ad hoc basis by the Head of Compliance and Internal Control (when changes occur in the organisation, the scope of activity, etc.). A review is carried out and formalised at least annually by the Compliance and Internal Control Officer or his delegatee.
Once amended, the policy is sent to senior management for approval prior to the dissemination within ArchiMed.
ii. Disclosure clients and unit holders
The policy on prevention and management of conflicts of interest is available at the company’s registered office and will be produced to any client or unit holders upon request.
b. Mapping of potential conflicts of interest related to ARCHIMED’s activities
As a portfolio management company, ARCHIMED must take all reasonable steps to prevent conflicts of interest from harming the interests of its clients.
To this end, ARCHIMED has identified potential conflicts of interest, both general and specific, given the structure in place and activities performed.
ARCHIMED has developed a mapping of different situations that may be or be perceived as conflicts of interest.
The primary potential conflicts of interest include:
Holding an interest in a company in which “a person linked to ARCHIMED” is already a shareholder;
Holding an interest in a company in which “a person linked to ARCHIMED” wishes to become a shareholder;
Holding an interest in a company, client or supplier of a company linked to a “person related to ARCHIMED”;
Holding an interest in a company that can be considered a potential target for acquisition by a company linked to linked persons(1)
File allocation rules
Co-investment rules
NOTE: a person linked to ARCHIMED can be a member of staff (employee or agent) of ARCHIMED, a shareholder of ARCHIMED or investor in a fund managed by ARCHIMED.
Each conflict of interest situation will require the implementation of a prevention mechanism and 1 and 2nd level controls.
ARCHIMED has implemented a mapping of potential conflicts of interest (see attached document) which lists the completeness of the situations identified and managed.
This document is updated by the Head of Compliance and Internal Control when a new potential situation arises (changes in the scope of the activity, recruitment or new partnerships, new target client, etc.).
A complete review of the situation is carried out and formalised at least annually by the Head of Compliance and Internal Control.
Based on the updates performed, if any, the Head of Compliance and Internal Control assisted by its delegatee, modifies the operational procedures as needed.
Once updated, the mapping of potential conflicts of interest is presented to all of the General Management for their information.
When conflicts of interest arise, the mapping of potential conflicts of interest is updated.
The inventory of potential situations of conflict of interest categorises instances of conflict under the following headings:
1) Financial management (placing orders, investment selection),
2) Direct and indirect remuneration,
3) Structure and procedures,
4) Proprietary trading and personal transactions,
5) Unfairness in the treatment between clients and holders,
6) Related companies,
7) Selection of intermediaries,
8) Selection of providers,
9) Relationships with distributors and issuers
10) Relationships with Operating partners and Strategic Partners
11) Relationships with MedTalents
Given the activity carried out by ARCHIMED as of today, some situations are not applicable, and the company has therefore not established operational procedures governing such situations.
These include conflicts of interest in the placing of orders in listed securities, the selection of intermediaries, etc.
c. Measures for regulating potential conflicts of interest
The company has developed operational systems and procedures to regulate potential conflicts identified in the mapping.
i. File allocation rules
To date, the company manages several Funds (list available at C:\Users\sandrine.laporte\Archimed\01_Shared_Corporate Documents\9. Compliance\Process\COMPLIANCE MANUAL EN\DATABASE). Since ARCHIMED manages two (or more) funds during the investment period, the Management Company applies the rules for the allocation of files specified in the regulations of the Funds it manages (see the details mentioned in the investment selection procedure as well as in the dedicates sections of the bylaws of the Funds and shall respect the best practices in this area described in the France Invest Code of Ethics. ARCHIMED may also draft an internal charter to regulate potential conflicts of interest between managed funds (cf Appendix 4).
The management company manages a deal flow (flow of files presenting the investment opportunities), hereinafter the “Deal flow“.
To avoid potential conflicts of interest, the following measures are implemented and subject to regular monitoring by the Compliance and Internal Control Officer:
Senior Managers may not, individually and collectively, directly or indirectly through any investment vehicle (or holding) whatsoever, execute an investment of any kind in a company of which they have become aware through the ARCHIMED Deal Flow,
by way of exception, Senior Managers may execute a personal investment transaction or a transaction through an investment vehicle (or holding) that they control in a company of which they became aware through the ARCHIMED Deal Flow provided that these Senior Managers within ARCHIMED have formally declined this opportunity on behalf of the Management Company, where the latter have found that the stage of development of the target company does not meet the mandate and the investment strategy of the Fund managed.
ii. Co-investment rules.
The management company will apply the co-investments rules laid down in the regulations of the Funds under the company’s management and in the corresponding procedure.
The mechanism is supplemented for each fund under the company’s management by a table of co-investments executed with third parties or with certain underwriters of the fund, this table is updated after each investment.
iii. Checklist of prevention and management of conflicts of interest encountered in the acquisition of holdings
For each investment, the team in charge of the investment file completes a “conflict of interest checklist” ensuring, before pursuing the due diligences, the absence of any conflict of interest, and formalise this first control level.
In some situations, often situations involving a particularly critical conflict of interest, ARCHIMED will not execute (or will withdraw from) the transaction, or one of the transactions, creating the conflict of interest.
ARCHIMED has identified the following specific situations:
1) Holding an interest in a direct competitor with one of the companies to which an Operating Partner or shareholder of ARCHIMED belongs.
2) Holding an interest in a direct competitor of a company which is already managed by a Fund advised by ARCHIMED.
These situations are listed in the prevention checklist which, if a potential situation is identified, enables the Compliance and Internal Control Officer to issue an opinion (see appendix 3).
3. Framework for managing conflict of interest
a. Conflict of Interest Committee
ARCHIMED has set up a Conflict of Interest Committee (COI) whose purpose is to arbitrate any conflict situations relating to the rules for allocating files among the Managed Funds.
This committee is composed of the President of ARCHIMED, as well as CFO and two members of each line of Managed Funds.
Decisions are taken by a simple majority of the members present or represented. In case of a tie, the President has the casting vote.
b. Escalation of conflicts of interest
A situation of conflict of interest may be detected by the Compliance and Internal Control Officer during an inspection (inspection of proprietary transactions by staff), by a member of the Front Office or Middle Office teams or any other ARCHIMED employee.
Once an employee has concerns on the existence or possibility of a real, potential or apparent conflict of interest (regardless of the type: client/client, employee/client; entity/client) s/he immediately notifies the Compliance and Internal Control Officer.
Notification to the Head of Compliance and Internal Control is made by any means (email, internal memo, etc.) and must specify the requisite information to understand the potential or actual conflict:
the service concerned;
the date of establishment of the conflict;
the proven or potential nature of the conflict;
a description of the conflict;
clients/holders affected by the conflict;
the type of possible impact.
The Head of Compliance and Internal Control, with the assistance of his delegatee, if necessary, handles any escalation of conflicts of interest. He analyses the nature, causes and consequences of the conflict of interest identified and takes appropriate measures to limit the immediate effects.
When the conflict of interest is already identified in the inventory appended to this procedure, the Head of Compliance and Internal Control applies the mechanism provided for and enters this information into the register of known conflicts.
b. The conflicts of interest register
ARCHIMED maintains a register recording the types of investment or related services, or other activities performed by it or on its behalf in which a conflict of interest exists entailing a material risk of harm to the interests of one or more clients (see appendix 2). This register is maintained by the management company’s Head of Compliance and Internal Control.
This register indicates whether the persons concerned should be notified, based on the seriousness of the conflict identified.
The information appearing the register and the documents supporting the existence or absence of the conflict must be kept for at least 5 years.
c. Measures for resolving conflicts of interest
The Compliance and Internal Control Officer implements corrective actions to prevent or limit the occurrence of the identified conflict of interest, including amending or adopting the requisite procedures and strengthening controls if such actions are possible.
To this end, ARCHIMED manages conflicts of interest in order to prevent any violation of its obligations with regard to subscribers and applicable laws and regulations.
In response to a conflict of interest, ARCHIMED can:
refuse to act,
accept the conflict of interest but prevent any significant abuse of this situation and protect the subscriber, or
disclose the conflict of interest or obtain a waiver or the appropriate consent of the subscriber.
d. Notifying the clients and holders concerned
When the measures adopted by the Compliance and Internal Control Officer are not sufficient to ensure, with reasonable certainty, that the risk of damaging the interests of clients will be prevented, the company clearly informs clients before acting on their behalf, of the general nature or the source of these conflicts of interest.
The information provided to the persons concerned will be in the form of a letter in which ARCHIMED will specify:
1) the nature of the conflict,
2) persons/entities concerned,
3) potential financial impacts,
4) the measures implemented to resolve it.
A copy of the letter will be kept in the conflicts of interest register.