Glossary
Board — The Board of Directors of the Firm.
Client — Any Applicant granted a right of access to and use of the MTF, and whose access or use has not been terminated.
Client Agreement — An agreement between MidChains and an Applicant which is made or entered into to meet the requirements of VARA's Market Conduct Rulebook, Part II - Client Agreements.
Competitive Business — Services competitive with those supplied or actively sought to be supplied by the areas of business of the Firm.
Custody Service — Safekeeping Virtual Assets for or on behalf of another Entity and acting only on verified instructions from or on behalf of such Entity.
Employee — All individuals who are employed, seconded, or appointed by the Firm (e.g. Directors, Partners, Consultants) in connection with its business.
Fiat Currency — Government issued currency that is designated as legal tender in its country of issuance through government decree, regulation, or law.
Inside Information — Has the meaning ascribed to it in the VARA Regulation VIII.B.1.
MEEG — MEEG Holdings Limited, incorporated in Abu Dhabi Global Market and the parent holding company for the MidChains group of companies.
Person — Any natural person or Entity.
PEP (Politically Exposed Person) — A natural person who is or has been entrusted with a prominent public function, including heads of state, senior government or judicial officials, ambassadors, and senior executives of state-owned corporations, but not middle ranking or more junior individuals in these categories.
Services — The provision by MidChains to access and use the MTF and/or Custody Service.
Substantial Interest — A holding of 25% or more.
Virtual Asset — A digital representation of value that may be digitally traded, transferred, or used as an exchange or payment tool, or for investment purposes, including Virtual Tokens and any digital representation of any other value as determined by VARA.
1. Introduction
The Conflicts of Interest Policy sets out the arrangements that MidChains FZE (the "Firm") has in relation to the identification, mitigation, managing, reporting, and if applicable, disclosing of potential and actual conflicts of interest.
A Conflict of Interest exists where the Firm, any person who acts for it, or any of its associates:
is likely to make a financial gain, or avoid a financial loss, at the expense of a Client;
has an interest in the outcome of a service provided to a Client or in the outcome of a transaction for a Client, which is distinct from that of the Client;
has a financial or other incentive to favour the interest of one Client over the interests of another Client;
carries on the same business as the Client; or
receives or will receive from a third party an inducement in relation to a service provided to a Client, in the form of monies, goods or services, other than the standard commission or fee for that service.
A conflict can arise involving the Firm, Employees or its Clients. More specifically, a Conflict of Interest may arise between the following parties:
the Client and the Firm;
two Clients of the Firm;
the Firm and its Employee(s);
a Client of the Firm and Employee(s) of the Firm;
different departments within the Firm.
In each case, the Firm must take steps to ensure so far as possible that such conflicts are identified and then prevented or managed in such a way that the interests of any Client are not adversely affected. The Firm's arrangements are overseen by the Compliance Department c/o the Chief Compliance Officer (CCO).
2. Sources of Conflict
2.1 Corporate Conflicts
At the corporate level, conflicts of interest may arise where an Employee of the Firm has outside interests which may conflict with their duties to Clients; duties are not appropriately segregated and allow for internal conflicts to arise; the Firm or an Employee receives substantial gifts and benefits that may influence behaviour or decision making in a way that conflicts with the interest of the Client; an Employee is holding another position such as a directorship in a company which is a Client of the Firm; or the Firm engages business on behalf of a Client with an affiliated company.
2.2 Intra-Group Conflicts
Intra-group conflicts may arise where two or more entities within the Firm's Group of Companies are involved in, or have interest in, the same transaction or circumstance, or where a Director or Employee holds another position in another MidChains entity or subsidiary.
2.3 Individual Conflicts
At the personal level, such interests may arise in relation to an individual's outside business interests, benefits and inducements, and personal account transactions.
2.4 Conflicts Register
The Firm takes steps to identify significant conflicting interests that may arise from the services or activities it carries out and records them in its Conflicts of Interest Register. The Compliance Department is responsible for maintaining this register and directing the Firm in the proper management of the conflicts recorded therein.
3. Conflicts of Interest Management
3.1 Firm's Responsibilities
If a conflict or potential Conflict of Interest exists, the Firm will, where possible, manage that interest by:
segregating control of responsibility between Employees within the Firm;
setting out arrangements to restrict information flow between the Firm's different business activities;
setting out arrangements and controls to restrict information flow between MidChains entities and subsidiaries;
written disclosure of the conflict in its Client Agreement or in relation to a specific transaction — the disclosure must include sufficient detail to enable that Client to take an informed decision with respect to the service in the context of which the Conflict of Interest arises; or
if none of the above is likely to be effective, by declining to act for one or more of the Clients concerned.
3.2 Chief Compliance Officer's Responsibilities
The Firm's CCO oversees the management of conflicts of interest and regularly updates the Conflicts of Interest Register. The CCO reviews and approves all intra-group arrangements or conflicts and carries out the following activities: where a conflict is identified, evaluating whether the situation is manageable or unmanageable and directing the relevant department accordingly; adding new conflicts to the register and putting mitigation measures in place; reviewing the register on a yearly basis to ensure it is maintained and up to date; ensuring this Policy is implemented and maintained at all times; and informing the Board when a conflict occurs.
3.3 Board and Employee Responsibilities
Upon appointment or when joining MidChains, and periodically thereafter, all Board members and Employees are required to identify potential instances that will be considered as a Conflict of Interest; undergo induction and compliance training including training on Conflicts of Interest, personal account dealing, and information security; declare any Competitive Business undertaken outside of their duties at MidChains including external directorships and ownership in companies, other participation, paid or voluntary work, Substantial Interests in or business relationships with any Virtual Asset-related firms, and intra-group employment or assignment; declare whether they or an immediate family member/connected party are considered a PEP; and remain alert in identifying material Conflicts of Interest that may potentially arise.
4. Corporate Conflicts
4.1 Employee Accountability
Employees must remain alert to the possibility of Conflicts of Interest arising. If concerns are raised as to any activity which has the potential to result in a Conflict of Interest or which indicates any irregularity in the application of this Policy, then the activity must not be executed without first raising the matter with the CCO.
4.2 Work Related Appointments
At times, due to their role at MidChains, Employees are asked to join committees, boards, forums, etc. that are not part of the MidChains corporate environment. These appointments must be logged, approved by the CCO/MLRO, and notified to the Board. If any intra-group arrangements or employment exist, the Employee must declare the arrangement to the CCO/MLRO and notify the Board.
4.3 Senior Management and Compliance Responsibility
It is the responsibility of the CCO and Senior Management to engage and administer the implementation of all policies, procedures, and controls relating to Conflicts of Interest by ensuring that Employees are aware of their responsibility in identifying material Conflicts of Interest; raising awareness of and ensuring compliance with this Policy; ensuring that all unavoidable conflicts are managed in accordance with the policies; ensuring that any risk of damage to the interest of Clients is prevented with reasonable confidence; ensuring that Employees engaged in more than one activity where a risk of Conflict of Interest exists exercise their duties with an appropriate degree of independence and unbiased judgement; and disclosing, where appropriate, actual or potential Conflicts of Interest to Clients.
5. Conflicts of Interest Undertaking
The Firm requires Employees to disregard any other business or personal relationship, arrangement or interest which is likely to influence their performance when fulfilling their duties, unless approved by the CCO.
As a control measure, Employees are required to sign a Conflicts of Interest Undertaking and submit it to the CCO within 30 calendar days of joining the Firm.
6. Conflict Management Procedures
6.1 Procedures and Measures
Where a Director has a Conflict of Interest as defined by the statute, that Director shall not vote on that matter in the Board Meeting.
The Firm seeks to minimise Conflicts of Interest, especially from harming the best interests of its Clients, and the main preventive measure focuses on the identification of potential conflicts and adequate training. At minimum, the following are also set in place:
Segregation of duties;
Control or limit the exchange and/or use of information;
Control benefits and inducements; and
Control and disclosure on outside business interests.
6.2 Unmanageable Conflicts of Interest
If there is no appropriate measure available, the conflict is deemed to be unmanageable and must therefore be avoided. Such conflicts must still be reported. The Firm, following evaluation of the conflict, may decline to conduct business or, in the worst cases, may require resignation from the position which has placed the Employee in an unmanageable situation.
7. Controls to Mitigate Conflicts
7.1 Compliance Training
Employees will have adequate training and access to additional training where necessary. The Firm maintains access to role-appropriate training, conducts internal audits regularly in accordance with audit cycles, implements the Conflicts of Interest Policy, information barriers and segregation of duties, and physical segregation and access controls.
7.2 Segregation of Duties
The Firm's organisational structure provides adequate segregation of duties between Custody and the functions in charge of supporting, verifying and monitoring transactions (e.g. finance, compliance, and internal and external audit). Trading related activity is carried out as a separate function, namely Trading Operations. Any Employee performing Trading Operations would not be directly involved in or ultimately responsible for:
Custody of Client money/assets;
Daily balancing of activity;
Billing and cash transfers;
Reconciliation;
Transfer of Fiat Currency payments;
Transfer and allocation of Virtual Assets; or
Client reporting.
The Firm's management ensures that, where practicable, policy formulation, supervisory and internal review functions, including compliance and internal audit, are effectively segregated to ensure the effectiveness of supervisory and internal controls.
7.3 Exchange of Information
The Firm has placed measures to ensure a degree of independence and to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of conflict, by establishing information barriers. The Head of Finance is authorised only with limited access to information on the Platform and any other relevant back-office system where market information or Platform sensitive information is available.
7.4 Information Barriers and Crossing
The Firm has in place adequate information barriers between its departments, establishing clear lines of responsibility to avoid the flow of information held by an Employee while carrying out part of their responsibilities being shared or used by another Employee. Physical barriers are in place to restrict the flow of information between Employees. Access is limited in relation to information, documentation and/or communication which may be restricted between certain Employees during the course of carrying out their duties.
8. Personal Account Transactions
The conditions upon which Employees may undertake personal account transactions are set out in the Firm's internal policy and are designed to ensure that personal account transactions do not conflict with the duties of MidChains to any Client. These conditions are in addition to the requirement for Employees to comply with applicable laws and regulations concerning insider dealing and market misconduct.
9. Outside Business Interests
Outside Business Interests refers to any Competitive Business undertaken outside the duties at MidChains.
The Firm takes reasonable steps to ensure that Employees' Outside Business Interests are disclosed upon joining the Firm and periodically thereafter. The Firm reserves the right to require Employees and their Associates to discontinue or otherwise divest themselves of any Competitive Business that creates a significant conflict with any duty owed by the individual to the Firm or its Clients.
For the purpose of this requirement, the term "Associate" means the Employee's spouse, child, siblings, parents, dependent relative or any other person whose business or domestic relationship with the Employee might reasonably be expected to give rise to a community of interest which may involve a Conflict of Interest in dealings with third parties.
Employees are required to disclose their Outside Business Interests upon joining the Firm and promptly thereafter if such an interest arises, by sending to Compliance an Outside Business Interests Declaration, and annually thereafter within one month of the Firm's financial year end by completing an Annual Declaration of Outside Business Interests.
The Compliance Department maintains a Register of Outside Business Interests, which is reviewed for interests that may need to be managed under the Firm's conflict management procedures.
10. Intra-Group Interests
An intra-group conflict of interest may exist when a Director or Employee holds two or more positions in another MEEG entity or subsidiary.
The Firm takes reasonable steps to ensure that intra-group conflicts are managed and reviewed periodically. Any intra-group conflict should not cause any disruption to any service or any disadvantage to Clients. Any Director or Employee holding another position under MEEG must act independently of any other intra-group interest. All transactions completed by an Employee with an intra-group conflict of interest must be reviewed by the Line Manager in a timely manner, and any situation that may have caused a disadvantage to the business or Clients must be escalated.
11. Record Keeping and Retention
The Firm will maintain all records in relation to any actual or potential conflicts for 10 years.
The Firm will regularly monitor and where required update the services carried out by the Firm where there may be a risk of a Conflict of Interest that may damage the interests of one or more Clients. Any Conflict of Interest shall be reported to the CCO, who will input the information into the conflict register and report to the Board.