Sionna’s Policies
1. Code of Ethics and Conduct
Sionna complies with the Code of Ethics and Standards of Professional Conduct of the CFA Institute. This code sets guidelines that promote integrity, competence, and dignity within the investment community worldwide. It can be found at www.cfainstitute.org.
Our Code of Ethics and Conduct establishes rules of conduct for Sionna’s employees. The objective of the code is to ensure fair treatment of investors in products managed by Sionna: the interests of Sionna’s clients are always placed above personal interests – by applying the highest standards of integrity and ethical business conduct.
Also, we have created a number of compliance measures and tools to help our employees perform their duties at the highest standard, including, for each employee, a complete manual of policies and procedures covering all aspects of managing client portfolios.
2. Conflicts of Interest
Under securities regulations, Sionna, in each of its registrant roles, is required to identify material conflicts of interest expected to arise between Sionna (including each individual, acting on its behalf) and its clients. Further, if a reasonable investor would expect to be informed of the nature and extent of an identified conflict of interest, Sionna must do so. The purpose of the Conflicts of Interest Disclosure Statement is to provide Sionna clients with a description of such conflicts a registrant firm with roles as advisor, investment fund manager and dealer might encounter, and the measures Sionna has taken to prevent, avoid and mitigate such conflicts.
All Employees must immediately report any potential and realized conflicts of interest to the Chief Compliance Officer. If the Employee is a Portfolio Manager, the Portfolio Manager will be prohibited from trading on the affected accounts until controls are put in place and the conflict is addressed in the best interest of the Client.
Employee Compensation Practices
All Employees are compensated with a base salary and a discretionary bonus. Although the discretionary bonus can vary, the portion of the bonus that can be attributed to any corporate sales target is limited. Sionna Employees do not receive a commission for the sale of any product.
Gifts and Business Entertainment
When Employees give or accept gifts or business entertainment of more than minimal value in connection with services provided to Clients or the Pooled Funds, there is a perceived or potential conflict of interest and Sionna must determine whether it would be reasonably expected to impair the Employee’s independence or objectivity. Sionna has established written standards, in its Gifts & Entertainment Policies & Procedures, for the provision and acceptance of gifts and business entertainment to or from persons or entities with which the Firm has an existing or potential business relationship and regularly monitors Employees’ adherence to such standards.
Outside Business Activities
Sionna has developed policies and procedures that govern Employees’ outside business activities and to which all Employees must adhere. Further, Sionna has implemented a notification and pre-approval process to restrict any outside business activity that would interfere or give the appearance of interfering with an Employee’s ability to act in the best interests of, or perform work for, Sionna and its Clients.
Personal Trading
Sionna has a Code of Ethics & Conduct that sets forth standards of business conduct intended to prevent possible conflicts of interest, diversions of corporate opportunity or appearances of impropriety and has established policies and procedures for monitoring personal trades of Employees who have access to information regarding the portfolios of Clients and the Pooled Funds. When individual portfolio managers and other personnel of Sionna invest in the same securities as Clients of Sionna, including the Pooled Funds, there is a perceived or potential conflict of interest that the portfolio manager or other personnel may benefit from opportunities at the expense of Clients and the Pooled Funds. Sionna’s personal trading requirements are covered in its Personal Trading Policy.
Sionna’s personal trading policy prohibits each of our staff from purchasing Canadian securities. Transactions in foreign equities can only be made with pre-clearance from our compliance team.
Allocating Expenses Among Funds and Within a Fund
Each Pooled Fund is responsible for paying for all routine and customary expenses relating to the Pooled Fund’s operation, including registrar and transfer agency fees and expenses, custodian fees, auditing, legal and accounting fees, communication expenses, printing and mailing expenses, all costs and expenses associated with the sale of units including private placement report fees, if any, expenses related to providing financial and other reports to Clients and convening and conducting meetings of Clients, all taxes, assessments or other governmental charges levied against the Pooled Fund, interest expenses and all brokerage and other fees relating to the purchase and sale of the assets of the Pooled Fund. In addition, each Pooled Fund is responsible for paying for expenses associated with ongoing investor relations and education relating to the Pooled Fund. The amount of these expenses will vary from time to time but will be disclosed in the financial statements of the Pooled Funds.
Sionna may in its sole discretion, elect to absorb certain on-going expenses of the Fund. Currently, Sionna pays for certain operating expenses of the Pooled Funds. These expenses include audit and legal fees, custodian and transfer agency fees, costs attributable to the issue, redemption and change of units, including the cost of the Client record-keeping system, expenses incurred in respect of preparing and distributing prospectuses, financial reports and other types of reports, statements and communications to Client fund accounting and valuation costs, and filing fees, including those incurred by Sionna. In return for Sionna paying these expenses, each Pooled Fund pays Sionna an administration fee of up to 0.10% of the respective Pooled Fund’s assets. The administration fee is subject to applicable taxes including HST.
Best Execution and Soft Dollars
When placing orders for and on behalf of clients’ accounts, Sionna will select those brokers and dealers from whom they reasonably expect to obtain the best execution (after considering all transaction costs and research or other benefits).
Sionna uses a limited soft dollar policy, allowing for the procurement of third-party investment research using a portion of brokerage commissions for payment – which is valuable to the investment decision-making process and adheres to the regulations stipulated by securities regulators. A copy of Sionna’s best execution and soft dollar policies may be obtained upon request.
Fees of Sionna
Sionna typically charges its Clients a fee for its advisory services calculated as a percentage of the market value of the Client’s account. Where Sionna appoints a sub-adviser to assist with managing Client accounts, Sionna is responsible for payment of the sub-advisory fees so that there is no duplication of fees charged to the underlying Client.
Institutional Trade Matching
Sionna confirms that we establish, maintain and enforce policies and procedures designed to achieve matching in accordance with National Instrument 24-101.
Investments in Related or Connected Issuers
A related issuer means a person or company that is influenced by, through ownership or direction and control over voting securities, another person or company. Sionna is an independent firm and is not influenced by any other person or company.
A person or company is connected to another person or company if, due to its relationships with such person, a prospective purchaser of securities of the person or company might question the other person or company’s independence from the first person or company. Clients may invest in the Pooled Funds for which Sionna serves as manager; as such, the Pooled Funds may be ‘connected issuers’ of Sionna. Prior to making a recommendation to invest in a Pooled Fund, Sionna will ensure that the Pooled Fund is a suitable investment for the Client’s discretionary investment management account. Sionna will disclose its relationship or connection to such Pooled Fund or other connected issuer to the Client and receive the Client’s written consent to the investment.
Investments in Other Issuers
If any of the partners, directors, officers, employees or agents of Sionna (“Employees”) are also partners, directors or officers of an issuer, Sionna will not cause an investment portfolio managed by it, including the Pooled Funds, to invest in securities of such issuers without the prior written consent of the Clients to do so after disclosure of that fact has been made in the discretionary investment management agreement. A conflict of interest can arise when an Employee includes the securities of these issuers in a Client portfolio for their own interests, including certain monetary or non-monetary benefits which may compromise the trust a Client has in Sionna. If the Client would like to proceed with the investment after disclosure has been made, Sionna will take appropriate steps to minimize the potential conflict, and the Employee who is also a partner, director or officer of an issuer will not be permitted to be involved in the management or decision making for the affected account(s).
The Pooled Funds are strictly prohibited from investing in any issuer in which any officer, director or substantial shareholder of Sionna owns a significant interest in that issuer (i.e., 10% or more outstanding shares).
Marketing, Promotion and Sale of Sionna Pooled Funds
Sionna’s services as advisor and dealer are integrated and generally not separable from each other when it acts as dealer on the trade in the Pooled Funds. In such circumstances, Sionna does not receive any separate compensation for acting as a dealer on the trade. Sionna’s interest is in the fees paid to it by the Client or the Pooled Fund for its management and advisory services. Sionna may from time to time solicit orders from Canadian Clients for and trade in the Pooled Funds. Sionna does not receive any commission or similar selling compensation for acting as a dealer on such trades for the Pooled Funds. Sionna does not search for or recommend investment funds which are not sponsored or managed by Sionna.
The Firm has a strategic alliance with Brandes Investment Partners & Co., who operates under the trade name Bridgehouse Asset Managers, for the provision of portfolio advisory services to mutual funds. By virtue of the agreement, the Firm is entitled to a share of the profit/loss from the operation of the Brandes-Sionna mutual funds in addition to investment management fees.
Sionna markets, promotes and offers to its Clients the investment advisory services of sub-advisors. It does so by appointing Lorica Investment Counsel Inc. as a sub-advisor to the Sionna Canadian Balanced Model (and may do so to its other Canadian Clients) for the purpose of benefitting from their specialized expertise of fixed income securities.
Power of Attorney
An Employee is not permitted to act as a Power of Attorney (POA) for any Client of Sionna.
Pricing and Account Errors
Sionna may have a potential conflict of interest when determining when, and how, to deal with a pricing error or other type of unitholder account error, due to the time, processing cost and reimbursement of investors involved. Sionna uses third party service providers to calculate net asset values of the Pooled Funds and to record unitholder transactions. Sionna’s Error Policy establishes standards for the correction of discrepancies in the calculation of net asset value in a consistent manner across the Pooled Funds and in accordance with industry guidelines.
Principal Transactions and Cross-Trading Securities
Under Canadian regulations, Sionna is subject to certain restrictions from engaging in principal transactions with or on behalf of its Clients and from cross trading securities between Client accounts. In particular, without exemptive relief from regulatory authorities, Sionna will not knowingly cause any Client investment portfolio managed by it (including the Pooled Funds), to purchase or sell securities from or to (i) Sionna, (ii) any directors, officers or associates of Sionna, or (iii) any investment funds managed by them (including the Pooled Funds).
Proprietary Products
Sionna exclusively offers proprietary products to its Clients for investment. Sionna will ensure that the products that are offered to the Client are suitable for the Client through our Know Your Client process before allowing a Client to invest. Sionna does not offer non-proprietary products for investment and therefore will not consider the larger market of non-proprietary products or whether those non-proprietary products would be better, worse, or equal in meeting the Client’s investment needs and objectives when determining the appropriate investment for a discretionary investment management account.
Referral Arrangements with Affiliated Managers and Third Parties
Sionna has no referral arrangements with other parties and does not pay or receive referral fees.
3. Fairness Policy
Sionna Investment Managers Inc. (“Sionna”) engages primarily in managing the investment portfolios of publicly offered mutual funds, separate managed funds, pooled funds and institutional segregated accounts (“Clients”) through discretionary authority granted under management agreements with its Clients and pursuant to the provisions of applicable securities legislation.
In the allocation of investment opportunities among its Clients, Sionna’s policy is to ensure that it deals fairly, honestly and in good faith with its Clients. Securities transactions are allocated among Clients in a manner that is equitable to each and on a pro rata basis in accordance with the amount being purchased or sold by each.
As a result of Sionna’s policy respecting the allocation of investment opportunities among Client accounts, if a particular investment opportunity is considered appropriate for two or more Client accounts, a block trade may be conducted on behalf of all such Client accounts. If the block trade is completed, or only partially completed, in different lots, having different purchase or sale prices and commissions, each participating account will receive its pro rata share of the securities purchased, or the proceeds of the securities sold, as the case may be, and will pay its pro rata share of the weighted average of the purchase prices or share the proceeds of the sale on a pro rata basis at the weighted average of the sale prices and commissions paid.
If, for any reason, an investment opportunity cannot be allocated pro rata among all participating Client accounts, every effort will be made to address any trading inequities at the next opportunity so that every account, large or small, will, over time, receive equitable treatment in the allocation of investment opportunities. Account size and the amount of cash in the account, are examples of situations that may impact the ability of the client to participate economically in a trade.
4. Privacy Policy
Any member of Sionna staff may have access to a Client’s confidential information, including the fact that an entity or individual is, in fact, a Client. Sionna has an obligation to keep such information private and to ensure that any third party (custodian, consultant, sub-advisor, etc.) who may have access to that information is bound by a Confidentiality Agreement that protects each Client’s privacy.
Sionna has developed a Privacy Policy to provide Clients with an assurance that Sionna takes their right to privacy seriously and advises them of their options should their confidential information become public without consent. Sionna’s Privacy Policy is available upon request.
5. Proxy Voting
Public companies call on holders of their securities to vote on a wide range of matters relating to those companies. In most cases, these matters are proposed by management; however, shareholders also make proposals. Some of Sionna’s clients prefer to exercise their own votes as shareholders. Where our clients have requested that we do so, Sionna takes responsibility to vote on all matters that have a bearing on company value as part of its fiduciary duty to our clients.
Sionna’s uses a principle-based approach to voting proxies and has developed the following internal proxy voting guidelines:
- Proxies will be voted in a manner that seeks to enhance long-term shareholder value
- Proxies will be voted in a manner consistent with leading corporate governance practices
Sionna uses the services of Glass Lewis & Co. to assist in voting proxies. Glass Lewis keeps Sionna informed of shareholder meeting dates, forwards proxy materials, translates proxy materials printed in a foreign language, provides research on proxy proposals and voting recommendations, and votes proxies in accordance with Sionna’s instructions. Sionna considers the recommendations of Glass Lewis on proxy issues and will usually, but not always, vote in accordance with such recommendations. Sionna is ultimately responsible for all proxy voting decisions.
In addition to the Glass Lewis guidelines, we have reviewed proxy-voting guidelines from many other sources including the Pension Investment Association of Canada Corporate Governance Standards, the Portfolio Management Association of Canada - Principles of Corporate Governance, and the Canadian Coalition for Good Governance. We have used these sources as a guide to the current and emerging corporate governance issues, and the standards adopted to deal with them. Our guidelines have been adapted for effective application by Sionna and we believe that they are in line with current best practices.
Sionna’s proxy voting guidelines are not rigid policy positions. Our portfolio managers consider each matter on a case-by-case basis and may vote in a manner different from that contemplated by the Glass Lewis recommendation or our general voting guidelines where we believe it is appropriate in the circumstances. Sionna is committed to resolving all conflicts in the best interests of Clients. Where a conflict of interest arises in a proxy voting matter, Sionna will generally vote in accordance with Sionna’s proxy voting guidelines and Glass Lewis recommendations for the issue in question. Additionally, Sionna will ensure that any proxy voting matter that could present a conflict of interest is brought to the attention of the Co-Chief Investment Officers and the Chief Compliance Officer, who will document the matter and consult with outside counsel regarding the appropriate resolution.