Managing Conflicts of Interest in Connection with Investment Research

Managing Conflicts of Interest in Connection with Investment Research

Introduction 
This note should be read in conjunction with the BNP Paribas Group Conflicts of Interest summary. It summarises policies adopted by BNP Paribas SA or its branches or affiliates (collectively “BNP Paribas” or “BNPP”) for compliance with requirements relating to the management of conflicts of interest in connection with investment recommendations. This note applies to all independent investment research (hereafter “Research”) prepared by TEB Yatırım’s Research Department that is distributed or made available globally.

The production of investment research outside of the United Kingdom or the European Union may be subject to additional local requirements, policies and procedures. In particular, the requirements of the US, Japan, Korea, Canada and Switzerland impose additional restrictions on the activities of research analysts.

Investment Research at TEB Yatırım

The objective of the research function is to produce timely, accurate, informative, and objective research products that are fair and not misleading for our professional investor clients.  

BNPP seeks to adhere to the highest professional ethical standards in order to best serve the interests of its clients. It is of fundamental importance to BNPP that the independence and integrity of its research activities are maintained at all times, that personnel responsible for the production of Research (“Research Analysts”) should not be subject to inappropriate influences and that potential conflicts of interest (if any) are appropriately managed.  

The global policies are designed to achieve BNPP's objectives while minimising or avoiding potential legal, regulatory and reputational risk exposures, including the appearance of possible conflicts of interest.  In certain instances, BNPP has implemented policies and procedures that exceed minimum legal or regulatory requirements in order to apply what it believes are best practices in this area.   

Information Barriers  

TEB Yatırım has organised its activities on a need-to-know basis and in such a way as to regulate and restrict the flow of information between and within its different business activities. This is achieved through the maintenance of information barriers that may involve physical separation of the teams that could generate conflicts of interests, procedural separation, separate reporting lines, separation of information systems, or a combination of these. These arrangements are designed to prevent improper access to client information or other types of confidential or sensitive information. Such information barriers are also designed to enable TEB Yatırım to conduct client business without being influenced by information held within other parts of TEB Yatırım that could result in a potential conflict of interest. In particular, BNPP has established information barriers between the activities of its Research Department and all other activities.

TEB Yatırım’s information barrier crossing and information flow policies and procedures are designed to manage the flow of material non-public information (“MNPI”). All Research Department personnel must strictly observe the policies and procedures on information barriers and information flow. 

Supervision and Segregation of Research Analysts  

Research Analysts are physically separated from all other activities within BNPP, and are not directly supervised by, or report directly to investment banking or sales and trading businesses. 

Conflicts of Interest 

Research Analysts must avoid situations of actual or potential conflicts of interest, and their advice must not be influenced by the business activities of TEB Yatırım or its clients. Research Analysts must not under any circumstances accept or offer any inducement or benefits that could be seen to affect or compromise their independent judgment. BNP Paribas Group and regional policies relating to accepting and offering of gifts and entertainment in force from time to time must be strictly followed. 

TEB Yatırım’s investment banking business has no influence or control over Research Analyst compensation or evaluations and their determination. Investment banking personnel should not be involved in Research Department budget decisions.  

Research Analysts and personnel must immediately notify the senior management teams of the Research Department (“Research Management”) and the Compliance Department (“Compliance”) of the following: 
•    any personal or professional activity which could affect their independence or place them in an actual or potential conflicts of interest situation; 
•    any attempt to improperly influence their professional judgment; or 
•    any acts which could reasonably be considered as fraudulent, suspicious, dishonest, misconduct, a breach of confidentiality and/or a breach of any of TEB Yatirim’s  policies and procedures relating to research. 

Standards of Care 

Research Analysts and personnel must at all times act professionally and maintain independence, integrity and high standards of care and diligence in the performance of their duties.  

Transparency must be maintained for the fair, clear and accurate presentation of information and disclosure of conflicts of interest and other personal interests. 

Research Analysts must base their opinions on objective criteria. Any views must be clearly expressed, have a reasonable basis and must reflect the Research Analyst’s independent judgment. 

Standards of Truthfulness 

Research communications must be based on principles of fair dealing and good faith and adhere to the highest standards of truthfulness. Research Analysts must pay due regard to the interests of clients and treat them truthfully, honestly and fairly. Research Analysts must take reasonable care to ensure the suitability of Research and are required to pay due regard to the level of knowledge and skill of the persons to whom Research is sent. Research Analysts must not put their own interests, or those of TEB Yatırım, before the interests of clients.  
Research Analysts are prohibited from making any untrue statement or omitting any material fact or qualification if the omission, in the light of the context of the material presented, would cause the Research to be misleading. Any material fact should be explained in sufficient detail to ensure accuracy and completeness. Research Analysts should always act in the interests of clients.  

Integrity and Independence  

Research Analysts must ensure their own integrity and independence. Any attempt to improperly influence their professional judgment must be reported immediately to Research Management and Compliance.  All Research must accurately reflect the Research Analyst’s personal views and should not be influenced by other activities conducted by  TEB Yatırım, such as sales or trading activities and investment banking services. 

Anti-Retaliation Policy 

TEB Yatırım strictly prohibits any employee (including, but not limited to, those who are engaged in investment banking activities) from directly or indirectly retaliating against or threatening to retaliate against any Research Analyst as a result of an adverse, negative, or otherwise unfavourable Research report written, or public appearance made, by the Research Analyst that may adversely affect TEB Yatırım’s present or prospective investment banking relationship with the subject company.  This prohibition does not limit Research Management’s or TEB Yatırım's ability to discipline or terminate a Research Analyst for any reason other than the writing of an unfavourable Research report or the making of an unfavourable public appearance. 

Personal Trading   

Research Analysts are prohibited from using proprietary information or MNPI for personal benefit or for the benefit of any other person.  Research Analysts are prohibited from trading or investing in the financial instruments of, or linked to, companies in their coverage industry globally, irrespective of whether or not they currently provide research coverage of the company in question. 

Research Department personnel intending to deal for the personal accounts are required to comply with BNPP Group personal account dealing policies and procedures. 

Receipt of Compensation or Business  

To ensure the integrity and independence of research, the compensation process of Research Analysts and personnel is designed to promote Research independence and quality and to eliminate pressures that might exert undue influence on research assessments. 

Research Management is responsible for determining Research Analyst compensation and conducting performance evaluations of Research Analysts.

Research Analysts are prohibited from: 
•    directly or indirectly offering favourable research, a specific rating, price target, or a specific recommendation (or offering/threatening to change research, a rating, price target, or a recommendation) as consideration or inducement for the receipt of compensation or business by  TEB Yatırım; 
•    accepting any compensation, incentive, or bonus based upon a specific investment banking services transaction from anyone at TEB Yatırım or outside of  TEB Yatırım; or 
•    directly or indirectly accepting any compensation or other benefit in return for providing a specific recommendation or view of a particular company. 

Gifts and Invitations 

Research Department personnel must comply with Teb Yatırım’s policies on gifts, invitations and other advantages. 

Personal Mandates and Outside Business Activities 

A Research Analyst is prohibited from receiving any compensation, bonus, or incentive: (i) based on specific investment banking transactions; or (ii) for providing a specific recommendation for a particular company or security.  

Research Department personnel must comply with BNPP Group policies on personal mandates and outside business activities. 

A Research Analyst may not, without the prior written consent of Research Management and Compliance, engage in any other business, be employed or compensated by any other person, or serve as an officer, director, partner or employee of another business organisation. 

Research Coverage  

In no circumstances should Research Department personnel or investment banking personnel promise coverage or favourable research. Investment banking personnel must not have any input into specific coverage decisions and may not contact Research Analysts to request coverage. Decisions regarding research coverage must be made solely by Research Management.   

Research Analysts may not provide companies with advance notice that TEB Yatırım intends to change its rating or what TEB Yatırım’s rating will be in an initiation of coverage. 

Distribution of Research 

The distribution process must ensure that Research is published to its intended client base in a way that is fair and without bias. Research Analysts must avoid giving one or more clients priority access to their Research or recommendations or any material changes to those recommendations until this information has been provided to all clients through the usual distribution channels. 

Distribution internally within TEB Yatırım must be made in a manner that will not be construed to advantage TEB Yatirim or disadvantage its clients. 

Communications with Companies 

In general, Research Analysts are free to communicate or use information obtained from a company or corporate official or other person in the ordinary conduct of their activities. To avoid inadvertently receiving MNPI that could affect their ability to continue covering a company, Research Analysts must always state at the outset of the communication that they are BNP Paribas Research Analysts, the purpose for making the communication (where the Research Analyst contacts the company) and that they are only permitted to receive publicly available information. Any discussions which appear to be heading in an inappropriate direction must be immediately terminated. 

Communications with Sales or Trading

Research Analysts are free to communicate with salespeople, traders and investors about market developments concerning specific companies or industries where a Research Analyst reasonably believes that the development was publicly disseminated.  A Research Analyst may not give salespeople, traders or investors specific non-public information, whether in writing or orally.  

During teach-ins or other communications with salespeople, Research Analysts must not distribute copies of unpublished or pending Research, or discuss pending Research or unpublished recommendations, ratings, or estimates.  

Communications with Investment Banking Personnel  

In an effort to further promote the independence and integrity of its Research Analysts, BNPP has established mechanisms to separate Research Department and investment banking Personnel. 

A Research Analyst may communicate with investment banking personnel about market or industry trends, conditions or developments with prior approval of Research Management and Compliance. 

This includes discussions regarding the strategic direction of various industry or sector segments; market, economic, or other event-driven factors impacting industries, sectors, or companies (e.g., the impact of a company’s press release on the company or industry); and other similar information. 
A Research Analyst may communicate with investment banking personnel about the merits of a proposed transaction or a potential candidate for a transaction, provided that the Research Analyst has been properly barrier crossed in accordance with relevant barrier crossing procedures. Barrier crossing requires the prior consent of Research Management and a record made by Compliance, and potentially results in restrictions on the Research Analyst’s activities until the relevant MNPI has become public or stale.

Disclosures of Interests and Certification

In accordance with applicable laws and regulations, BNPP discloses in its research reports conflicts of interest, including those of BNPP and the Research Analyst that are or may be material in the context of the relevant report.

In addition, the primary Research Analyst responsible for a research report on a specific issuer or issuers of securities is required to certify, at the time of publication, that the views expressed in the report accurately reflect his or her personal views about the subject securities or issuers, and that no part of his or her compensation was, is or will be, directly or indirectly, related to the specific views or recommendations contained therein. This certification can be found in the disclosures section of each such research report.