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RULES OF CONDUCT

 
 


 

RULES OF CONDUCT FOR EMPLOYEES, CONSULTANTS AND REPRESENTATIVES

OF

TRUST MANAGEMENT SERVICES INC.

 

This discussion about the rules of corporate conduct sets out the philosophy that underlies the rules governing the corporate's responsibilities to those to whom financial services and structures are provided, to the specific private clients, in respect of

  • characteristics of the corporate;
  • fundamental corporate principles governing conduct;
  • ethical corporate conflict resolution;
  • corporate fiduciary duty;
  • personal character and ethical conduct of persons involved representing the corporate
  • corporate application of the rules;
  • corporate principles governing the responsibilities toward private clients
  • corporate interpretation of the rules.

 

The rules of corporate conduct, comprehensive in their scope, practical in application and addressed to high moral standards, serve not only as a guide to the corporate involved persons themselves, but as a source of assurance of the corporate's concern for the clients they serve. It is a mark of a corporate that there is a voluntary assumption, by those who comprise it -- the corporate community -- of ethical principles which are aimed, first and foremost, at protection of the clientele and, second, at achieving orderly and courteous conduct within the corporate itself. It is to these purposes that the rules are of importance.

It is essential to recognize that a corporate does not cease to be a corporate because a proportion of its personnel enter salaried private employment - consultants, representatives and agents. These personnel continue to belong to the corporate and to be subject to the rules of corporate conduct. It should be recognized that some personnel of the corporate might acquire the required skills outside of corporate image.

           

Fundamental principles governing conduct

The rules of corporate conduct, as a whole, flow from the special obligations embraced by the corporate leadership. The reliance of the clients, generally, and the business community, in particular, on sound and fair financial structuring and competent opinions on business affairs -- and the economic importance of that reporting opinion -- impose these special obligations on the corporate. They also establish, firmly, the corporate's business acumen.

To shelter the corporate clientele and to maintain the reputation of the corporate, the rules apply, as appropriate, to "personnel of the corporate", being representative firms of the corporate and the application of the rules of corporate conduct to their representatives, consultants and employees -  all referenced herein as "Personnel of the Corporate".

The rules of corporate conduct are derived from five fundamental principles of ethics - statements of accepted conduct whose soundness is, for the most part, self-evident and are as follows:

Corporate Behaviour

Personnel conduct themselves at all times in a manner which will maintain the good reputation of the corporate and its ability to serve their client interest.

In doing so, personnel are expected to avoid any action that would discredit the corporate. While there are business considerations involved in the creation and development of a corporate image, a corporate's image should be based primarily upon a reputation for corporate excellence. A member is expected to act in relation to other personnel with the courtesy and consideration he or she would expect to be accorded by them.

Integrity and Due Care

Personnel perform corporate services with integrity and due care.

Personnel are expected to be straightforward, honest and fair dealing in all corporate relationships. They are also expected to act diligently and in accordance with applicable technical and corporate standards when providing corporate services. Diligence includes the responsibility to act, in respect of an engagement, carefully, thoroughly, and on a timely basis. Personnel are required to ensure that those performing corporate services under their authority have adequate training and supervision.

Corporate Competence

Personnel maintain their corporate skills and competence by keeping informed of, and complying with, developments in the corporate standards and procedures.

The clients expect the corporate to maintain a high level of competence. This underscores the need for maintaining individual corporate skill and competence by keeping abreast of and complying with developments within the corporate standards in all functions where personnel are relied upon because of maintenance of knowledge.

Confidentiality

Personnel have a duty of confidentiality in respect of information acquired as a result of corporate, employment and business relationships and they will not disclose to any third party, without proper cause and specific authority, any information, nor will they exploit such information to their personal advantage or the advantage of a third party.

The principle of confidentiality includes the need to maintain the confidentiality of information within the corporate and NOT for disclosure beyond.

The disclosure of confidential information by personnel may be required or appropriate where

such disclosure is:

  • Permitted or authorized by the client or employer;
  • Required by law; or
  • Permitted or required by a corporate right or duty, when not prohibited by law.

 

Objectivity

Personnel do not allow their corporate or business judgment to be compromised by bias, conflict of interest or the undue influence of others.

Our clients expect that personnel will bring objectivity and sound corporate judgment to our corporate services. It thus becomes essential that personnel will not subordinate corporate judgment to external influences or the will of others.

Our clients interest in the objectivity of personnel engaged to perform an assurance or a specified procedure requires that the personnel are to be, and be seen to be, free of influences which would impair the personnel's objectivity. Accordingly, the rules specifically require personnel who engage to perform an assurance or specified procedural engagement to be independent. The ethical standard of independence requires personnel to be and remain free of any influence, interest or relationship, in respect of the client's affairs, which impairs personnel's corporate judgment or objectivity or which, in the view of a reasonable observer, would impair personnel's corporate judgment or objectivity.

As well, the rules specifically require that personnel, before accepting or continuing an engagement, determine whether there is any restriction, influence, interest or relationship which, in respect of the proposed engagement, would cause a reasonable observer to conclude that there is or will be a conflict of interest. If there were to be such a conflict, personnel are required to decline or discontinue the particular engagement unless there are accepted conflict management techniques which, with the informed consent of the affected client or clients,  permit personnel to accept or continue the engagement.

With respect to both independence and conflicts of interest, the corporate employs the criterion of whether a reasonable observer would conclude that a specified situation or circumstance posed an unacceptable threat to personnel's objectivity and corporate judgment. Only then can client confidence in the objectivity and integrity of personnel be sustained, and it is upon this client confidence that the reputation and usefulness of the corporate rest. The reasonable observer should be regarded as a hypothetical individual who has knowledge of the facts which personnel knew or ought to have known, and applies judgment objectively with integrity and due care.

Ethical conflict resolution

Circumstances may arise where personnel encounter and are required to resolve a conflict in the application of the fundamental principles or compliance with the rules derived therefrom.

When initiating a process for the resolution of an ethical conflict, personnel should consider, either individually or together with others, as part of the resolution process, the following:

  • Relevant facts;
  • Ethical issues involved;
  • Fundamental principles and rules applicable to the matter in question;
  • Established internal procedures; and
  • Alternative courses of action.

Having considered these issues, personnel should determine the appropriate course of action that is consistent with the fundamental principles and rules identified as being pertinent. Personnel should also weigh the consequences of each possible course of action. If the matter remains unresolved, personnel should consult with other appropriate persons within the corporate for help in obtaining resolution.

Where a matter involves a conflict with, or within, an organization, personnel should also consider consulting with those charged with governance of the organization, such as the board of directors.

It would be in the best interests of personnel to document the substance of the issue and details of any discussions held or decisions taken, concerning that issue.

If a significant conflict cannot be resolved, personnel may wish to obtain guidance on ethical issues without breaching confidentiality from corporate or legal advisors. For example, personnel may have encountered a fraud, the reporting of which could breach personnel's responsibility to respect confidentiality. Personnel are advised to consider obtaining legal  advice to determine whether there is a requirement to report.

If, after exhausting all relevant possibilities, the ethical conflict remains unresolved, personnel should, where ethically possible, refuse to remain associated with the matter creating the conflict. Personnel may determine that, in the circumstances, it is appropriate to withdraw from the particular engagement team or assignment, or to resign altogether from the engagement in a manner consistent with the rules of corporate conduct.

Fiduciary duty

Personnel have duties to their clients that arise from the nature of the relationships with the clients. Personnel have a corporate duty to act with integrity and due care and a contractual duty to provide services as defined by the terms of the engagement. In certain cases, the relationship between a member and a client could also be one that the courts describe as a fiduciary relationship that gives rise to fiduciary duties.

The concepts of fiduciary relationship and fiduciary duty are derived from the law of trusts. The obligations of a fiduciary can be onerous and the implications of being in breach of a fiduciary duty can be significant.

In determining whether a fiduciary relationship does exist, a court will look at all of the factors but, in a corporate engagement situation, will particularly focus on the purpose and nature of the service being provided; the extent of the reliance which the client places on personnel; any lack  of  sophistication of  the client;  the vulnerability of  the  client  to the influence of  personnel; and, the discretionary authority, if any, granted by the client to personnel. The court will also consider the extent of the disclosure to the client of personnel's interest in the matter and whether personnel have put himself or herself in a position of conflict or has an opportunity to receive a benefit unknown to the client.

Courts have held that, absent other circumstances, an supervisory auditor is not a fiduciary in the typical supervisory review engagement (in keeping with the standard statutory purpose). However, when personnel of the corporate provides non-supervisory opinionated services to a client and when criteria for a fiduciary relationship exist, the supervisory firm may be found to be a fiduciary. A service provider is more likely to be found to be a fiduciary in corporate engagements such as supervisory or investigative services.

Personnel must also note that personnel who are employees may, depending on the particular facts and circumstances, have a fiduciary relationship with his or her employer.

If there is any question as to whether a fiduciary relationship exists, appropriate advice should be obtained.

The specific duties that a court might find applicable to a fiduciary will vary depending on the particular facts and circumstances. In general, a fiduciary relationship requires the fiduciary to act in the utmost good faith on behalf of the client. As such, a fiduciary must not place himself or herself in a position where his or her interests conflict with that of the client; nor can a fiduciary profit from his or her position at the expense of the client. A fiduciary must use information obtained in confidence from a client only for the benefit of the client and must not use it for personal advantage or the benefit of another person. A fiduciary cannot act at the same time both for and against the same client and must make available to a client all of the information that is relevant to the client's affairs, unless these requirements are modified with the client's agreement. Other duties may be found to pertain but are less likely to apply to public accountants.

It is important for personnel to recognize that not all fiduciary relationships give rise to all fiduciary duties. The terms of the engagement, including explicit provisions for the disclosure of potential conflicts and/or the use of institutional mechanisms to maintain confidentiality are fundamentally important to the nature of the relationship and the duties that a court will find to apply in a particular case.

The responsibilities owed to an existing client are more comprehensive than the responsibilities owed to a former client. The responsibility owed to a former client is generally limited to the duty of confidentiality.

Some, but not all, fiduciary duties are also corporate obligations under the rules of corporate conduct. The existence of corporate obligations that are similar to fiduciary duties is not in and of itself determinative as to whether a fiduciary relationship exists between a member and his or her client. The rules require that personnel maintain confidentiality, refrain from taking undisclosed profits and avoid conflicts of interest in all client relationships. While the law recognizes that only certain corporate engagements give rise to fiduciary duties, personnel must be aware that they are subject to the rules of corporate conduct in all engagements.

Personal character and ethical conduct

The rules of corporate conduct are based on the principles expressed above. These principles have emerged out of the collective experience of the corporate as it has sought, down the years, to demonstrate its sense of responsibility to the clients they serve. By their commitment to honorable conduct, personnel of Trust Management Services Inc., throughout its history, has given particular meaning and worth to the designation of their personnel. They have done so by recognizing that rules of corporate conduct, do not by their nature state the most that is expected of personnel, but simply the least -- the rules thus define a minimum level of acceptable conduct. Ethical conduct in its highest sense, however, is a product of personal character -- an acknowledgement by the individual that the standard to be observed goes beyond that of simply conforming to the letter of a list of prohibitions.

Application of the rules of corporate conduct

  • The rules of corporate conduct apply to all personnel irrespective of the type of corporate services being provided. Some rules have particular relevance to personnel engaged in the image of the corporate and the industry.
  • Personnel not engaged in the image of the corporate, must observe these rules except where the wording of any rule makes it clear that it relates only to the image of and there is a specific exception made in a particular rule.
  • The term "corporate services" also applies to personnel who are not engaged in the image of corporate. In this context, it includes those of personnel activities where the client or his or her associates are entitled to rely on personnel of Trust Management Services Inc. as giving personnel particular competence and requiring due care, integrity and an objective state of mind.
  • Personnel are responsible to Trust Management Services Inc. for compliance with these rules by others who are either under their supervision or share with them proprietary interest in a firm or other enterprise. In this regard, personnel must not permit others to carry out duties on his or her behalf which, if carried out by other personnel would place him or her in violation of the rules.

 

Principles governing the responsibilities of Corporate Personnel

Our Corporate, being comprised of personnel of the corporate, have a responsibility which they share  with their  individual  personnel  to provide services that maintain the corporate's reputation for competence and integrity. It is clear that the manner in which firms conduct their affairs and provide services has an importance that goes well beyond the establishment of their individual reputations; it affects the client perception of the corporate as a whole.

This broader responsibility requires that personnel be accountable to the corporate and the clients in respect of ethical conduct and corporate competence. The accountability of firms is formalized by bringing them within the authority of the rules of corporate conduct in a manner that is similar to that for personnel but which also appropriately recognizes that the responsibility of corporate business organizations differs in important respects from that of the individual personnel carrying on corporate engagements on their behalf.

The responsibility of corporate is fulfilled in the first instance by establishing, maintaining and upholding appropriate policies and procedures designed to ensure that their personnel provide corporate services in a manner that complies with the standards of conduct and competence prescribed in these rules.

The accountability of the corporate is based on the recognition that the services they provide are carried out by personnel of the corporate who, through their individual and collective actions and through the exercise of corporate judgment, are expected at all times to comply with these rules and to adhere to the generally accepted standards of image of the corporate.  Depending on the circumstances and the particular standard of competence or conduct, therefore, a corporate's accountability for a failure to comply with the rules may be shared with personnel of the corporate. It is acknowledged in this regard that corporate cannot be held accountable for the conduct of its personnel who do not comply with these rules, where the corporate has done all that it could be reasonably expected to have done to ensure that such personnel do comply with the rules.

Our corporate will be held accountable, as an organization, for its corporate conduct and standards in those instances where:

  • the corporate has policies and/or procedures which are inconsistent with rules; or
  • the breach of any rule by personnel of the corporate are found to be related to the absence of quality control procedures or to the existence of quality control procedures that are inadequate for the type of image in which it is engaged; or
  • the corporate is identified with a conduct or the provision of corporate services that is in breach of the rules and it is unclear which personnel within the corporate are responsible for such breach; or
  • the conduct that breaches the rules was authorized, initiated, implemented or condoned by the corporate prior to or at the time it takes place; or
  • the conduct that breaches the rules is condoned or concealed by the corporate after it learns of it; or
  • the corporate did not take appropriate action in response to becoming aware of any conduct that breaches the rules; or
  • there are repeated instances of breaches of the rules by personnel of the corporate.

In keeping with the principle that corporates have a responsibility to maintain the good reputation of the corporate, it is only appropriate in these circumstances that the corporate and the individual personnel be the subject of investigation and disciplinary sanction.

The inclusion of the corporate within the authority of the rules does not presume that an investigation against the corporate automatically calls into question the character, competence or conduct of all of the personnel of the corporate.  Indeed, there is an obligation on the part of those given responsibility for the enforcement of the corporate's standards to ensure that any investigation of the corporate be restricted to those who should properly be the subject of the investigation and resulting disciplinary sanction. This involves recognizing that the corporate may have partner personnel and/or offices and/or a number of departments or units within the offices, whether or not they are geographically distinct. In some circumstances, therefore, accountability for a failure to comply with the rules will rest solely with the individual partner personnel who had knowledge of the matter that is the reason for making allegations against the corporate. In other circumstances, the accountability will rest with identifiable personnel or units within the corporate, or with the corporate's executive, management or equivalent groups.