Conflict of Interest Management Policy

Standard Chartered Bank Japan
  1. Purpose

    In connection with the diversification of services provided by financial institutions and the development of global financial conglomeratization, multiple interests compete or conflict with each other within a financial institution or financial group increasing the possibility of conflicts of interests.

    Under such circumstances, Standard Chartered Japan Branches (Standard Chartered Bank (the “Bank”), Standard Chartered Bank Japan Branches (the “Branch”)) is required to manage the transactions that may cause conflicts of interests in order to prevent the interests of our customers from being unjustly impaired.

    The Branch, a Foreign Bank Branch under the Banking Law (Act No. 59 of June 1, 1981), has established the Conflict of Interest Management Policy (this "Policy"), which is required in the creation of the conflict of interest management system under applicable laws and regulations.

    The Conflict of Interest Management System at the Branch is a part of the overall management system of Standard Chartered Group including the Branch and the Bank (the “Group”) and satisfies the requirements by laws and regulations in Japan as well.

  2. Types of Transactions That May Cause Conflicts of Interests; Process of Identification, Etc.

    (1) Covered Transactions

    "Transactions that may cause conflicts of interests," which are covered by this Policy, means such transactions conducted by the Branch, the Bank (except for the Branch), the Bank Agency for which the Branch serves as the affiliated bank and/or any of its Parent Financial Institutions, Etc. of the Bank (as defined in 3 below) or Subsidiary Financial Institutions, Etc. of the Bank (as defined in 3 below) that may unjustly impair the interests of our Customers (the "Covered Transactions").

    Conflicts of interests may occur (I) between the Branch, the Bank (except for the Branch), the Bank Agency for which the Branch serves as the affiliated bank and/or any of its Parent Financial Institutions, Etc. of the Bank or Subsidiary Financial Institutions, Etc. of the Bank, and their Customers, or (II) between the Customers of the Branch, the Bank (except for the Branch), the Bank Agency for which the Branch serves as the affiliated bank and/or any of its Parent Financial Institutions, Etc. of the Bank or Subsidiary Financial Institutions, Etc. of the Bank, and other Customers.

    "Customer" means, in relation to the “Banking Related Business” conducted by the Branch, the Bank (except for the Branch), the Bank Agency for which the Branch serves as the affiliated bank or any of its Subsidiary Financial Institutions, Etc. of the Branch, (I) any customer who has already established business relations, or (II) any customer who may establish business relations, both of whom exclude any customer of any Subsidiary Financial Institution, Etc. that seems to be irrelevant to the Domestic Business (which term means any business conducted by the Branch or any of its Affiliates in Japan).

    “Banking Related Business” means the “Business that Bank can engage in”. Specifically, it includes a typical banking business (deposits, lend of money, exchange transactions) (Article 10, Paragraph 1 of Banking Law), other business ancillary to banking (Article 10, Paragraph 2 of banking Law), Financial Instruments Business permitted as the Registered Financial Institution (Article 11 of banking Law) and other business permitted by other laws (Article 12 of Banking Law), etc.

    (2) Types of Transactions That May Cause Conflicts of Interests; Criteria

    The following transactions may be considered as types of "transactions that may cause conflicts of interests." However, as these types are only criteria to determine whether there is any "transaction that may cause any conflict of interests," please note that the satisfaction of any such criteria does not necessarily mean the occurrence of a "transaction that may cause a conflict of interests." Also, please note that some additions or modifications may be made in the future as may be necessary.

    • If any Customer reasonably expects that his/her own interests will be prioritized through counseling or advice (Duty-of-Loyalty Type);
    • If the Branch or any of its Affiliates may obtain any economic profit or avoid any economic loss at the expense of any Customer (Duty-of-Loyalty Type);
    • If the Branch or any of its Affiliates obtains or will obtain any incentive in the form of money, goods or services other than the usual commission fees or expenses in connection with the transactions with any person other than their Customers (Duty-of-Loyalty Type);
    • If the Branch or any of its Affiliates conducts any transaction with any Customer who should be protected by the Branch or such Affiliate (Self-Agency Type);
    • If the Branch or any of its Affiliates conducts any transaction under which the Branch or such Affiliate takes the side of the counterparty of any Customer who should be protected by the Branch or such Affiliate (Two-Side Agency Type);
    • If the Branch or any of its Affiliates conducts any transaction with the counterparty of any Customer who should be protected by the Branch or such Affiliate, which counterparty competes with such Customer (Competitive Transaction Type);
    • If the Branch or any of its Affiliates conducts any transaction through the use of non-public information on any Customer who should be protected by the Branch or such Affiliate, which transaction results in any benefit to the Branch or any such Affiliates (Information Use Type)
    • If the conditions for similar transactions may not be expected due to the involvement of the Branch or any of its Affiliates in the same transaction on multiple sides (Transaction-Internalization Type).
    • If the Branch or any of its Affiliates conducts any transaction through the use of confidential information on any Customer which is acquired on bank relationship with the Branch or any of its Affiliates, which transaction results in any benefit to the Branch or any such Affiliates, or other customer. (Information Use Type)
    • If the Branch or any of its Affiliates conducts any transaction directly with the party who is not the customer of the Branch or any of its Affiliates, without passing through the order by other bank who has bank relationship with such party. (Direct Transaction Type)
    • If the different business units in the Branch or any of its Affiliates has each separate transaction to the customer who should be protected by the Branch or such Affiliate, and one business unit has confidential information of such customer. (Information Use Type)

    In addition, upon determining whether any conflict of interests has occurred, the Branch will consider comprehensively whether any impact upon the reputation of the Branch, the Bank or our group has been caused.

    This Policy will not cover any acts which are prohibited under the Banking Law or any other laws or regulations.

    (3) Specific Examples

    The following transactions and any other similar transactions may be considered as specific examples of "transactions that may cause conflicts of interests (actual or perceived)":

    • A buy side engagement from a customer regarding a third party to which the Group is a lender and the proceeds from the acquisition will repay the debt.
    • Any financing to be arranged by the Group in the form of transferable securities or a syndicated loan where the proceeds of the financing are to be used in whole or part to repay credit extended or guaranteed by the Group.
    • The Group has a controlling equity investment in a company, or a seat on the board of the company, that has other shareholders and provides banking services to that company.
    • A transaction for a customer regarding a third party in which the Group:
      • - has an investment interest, e.g. the buy-side customer, to which the Group is financial advisor, whishes to acquire a company of which the Group is an existing shareholder, or
      • - is on the other side, e.g. the customer, to which the Group is financial advisor, is selling an asset and another part of the Group is the buyer.
    • Engagement from two or more customers where there is a conflict between the interests of those customers in relation to the subject matter of the engagements, e.g. Customer A and Customer B separately engage the Group regarding the acquisition of C or Customer A engages the Group regarding the sale of assets to B and B engages the Group regarding the purchase of those assets from A.
    • An advisory engagement from a customer where the Group has information that is material to the transaction and the information was obtained as a result of banking relationship with another party, e.g. Customer A has a banking relationship with the Group and Customer B engages the Group to act as its buy side adviser regarding the acquisition of A.
    • Where the Group is providing services to an entity that is acting as agent for a third party and the Group has the ability to provide the services directly to the third party, e.g. where the Group is asked by another bank (an “Applicant Bank”) to issue a guarantee in circumstances where the Group may be in a position to offer the service direct to the Applicant Bank’s customer.
    • Two separate transactions by different business units in respect of the same entity, where one business unit has, or is perceived to have, confidential information regarding the entity, e.g. the Group is a shareholder of company A managed by Private Equity and credit protection on company A is purchased by another business unit.

    (4) Process of Identifying Transactions That May Cause Conflicts of Interests

    • All Origination and Corporate Finance business areas must seek conflict clearance for all transactions. This will extend to all transactions conducted by the following departments
      • a. Capital markets – (DCM, Syndications, Asset Backed Securitisation)
      • b. Corporate Finance – (M&A, Leverage Finance, Equity Corporate Finance, PEF, Aircraft Leasing under Structured Finance)
      • c. Principal Finance – (Private Equity, Alternative Investment)
    • Conflict Clearance is registered by the deal team leader/transaction originator through e-PDR, and the Control Room conducts a conflicts clearance check.
    • After the Control Room conducts a conflicts clearance check, the result is informed to the deal team leader/transaction originator from the Control Room.
    • Where the Control Room is unable to resolve a conflict of interest with respective Business, the conflict will be escalated to the Conflicts Committee for resolution, and the transaction status will be set as Pending until decision of the committee is made known.
    • In case of changes of transaction (changes in deal team, changes in counterparties involved and transaction details, changes in deal status, etc.), the deal team leader/transaction originator is responsible for ensuring that e-PDR is updated when there is a change to the deal and report the change through e-PDR as soon as possible.
    • If, in light of information obtained through any transaction with any Customer and the types of transactions listed in (2) above, any officer or employee of the Sales Division of the Branch (PEF excepted) deems that such transaction may constitute a transaction that may cause any conflict of interest, such officer or employee shall immediately report to Legal and Compliance in Japan, which is the Branch Conflict of Interest Management Control Division, such fact by e-mail. Then, Legal and Compliance reports such fact to the Control Room, which is the Group Conflict of Interest Management Control Division, and follow any instruction given by the latter. PEF shall register the Conflict Clearance to the e-PDR in accordance with ①② above and advise such fact to Legal and Compliance.

    However, if it is necessary to make any judgment that may have an impact on the reputation of the Branch, the Bank or the Group or any other material judgment, the case will be escalated to the Group Reputational Risk Committee and we must follow the decision of the Group Reputational Risk Committee.

    Existence or non-existence of “Transactions that may cause conflicts of interests” at the Branch shall be reported to CORC. CORC consists of the following members.

    CEO Japan, Head of IC & FI, Head of Financial Markets, Head of Transaction Banking, Head of Project & Export Finance, Country Chief Risk Officer, Financial Controller, CIO, Head of Legal & Compliance, Manager of Property, Head of Human Resources

  3. Scope of the Companies Covered by Conflict of Interest Management

    As stated in 2 (1) above, the Covered Transactions are any transactions conducted by the Branch, the Bank Agency for which the Branch serves as the affiliated bank or any of its Parent Financial Institutions, Etc. of the Branch or Subsidiary Financial Institutions, Etc. of the Branch (the bank Agency for which the Branch serves as the affiliated bank, the Parent Financial Institutions, Etc. and Subsidiary Financial Institutions, Etc. of the Bank are referred to as "Affiliates").

    "Parent Financial Institution, Etc." means (I) such parent corporation of the Branch, (II) such subsidiary corporation of any Parent Corporation, Etc. of the Branch and such Affiliated Corporation, etc. of the Branch, or (III) such Subsidiary Corporation, Etc. or affiliated corporation, etc. of any Specific Individual Shareholder of the Branch, as is (a) a Financial Instruments Business Operator, (b) a bank, (c) Long Term Credit Bank, (d) a cooperative financial institution, (e) The Shoko Chukin Bank, Ltd., (f) an insurance company (including any foreign insurance company, etc.), (g) a person who engages in money lending or the intermediary of money lending/borrowing as business, (h) a mutual loan company, (i) a securities finance company, etc., or (j) a person who engages in Financial Instruments Business, banking business or insurance business in any foreign country in accordance with any foreign law or regulation.

    "Subsidiary Financial Institution, Etc." means (I) such Subsidiary Corporation, Etc. of the Branch, or (II) such Affiliated Corporation, Etc. of the Branch, as is (a) a Financial Instruments Business Operator, (b) a bank, (c) Long term Credit Bank, (d) a cooperative financial institution, (e) The Shoko Chukin Bank, Ltd., (f) an insurance company (including any foreign insurance company, etc.), (g) a person who engages in money lending or the intermediary of money lending/borrowing as business, (h) a mutual loan company, (i) a securities finance company, etc., or (j) a person who engages in Financial Instruments Business, banking business or insurance business in any foreign country in accordance with any foreign law or regulation.

    As of October 1, 2016, the companies listed in the Exhibit hereto are the "Parent Financial Institutions, Etc." or "Subsidiary Financial Institutions, Etc." of the Branch.

  4. Method of Managing Transactions That May Cause Conflicts of Interests

    If the Group including the Branch and the Bank identifies any transaction that may cause a conflict of interests, the Group will properly secure the protection of our Customers by selecting from any of, or combining, the following methods and any other methods (the following methods are only examples, and the following measures need not be adopted):

    • The method of separating the division conducting the Covered Transaction, and the division conducting the transaction with such Customer;
    • The method of amending the conditions or method of the Covered Transaction or the transaction with such Customer;
    • The method of discontinuing the Covered Transaction or the transaction with the Customer; and/or
    • The method of properly disclosing to the Customer the possibility that the interests of such Customer may be unjustly impaired in connection with the Covered Transaction.
  5. Method of Managing Transactions That May Cause Conflicts of Interests

    (1) Establishment of the Conflict of Interest Management Control Division

    The Control Room of the Bank will be the Group Conflict of Interest Management Control Division, and the Control Room will overall manage its Group conflict of interest. The Head of the Control Room will serve as chief of such division.

    Legal & Compliance of the Branch will be the Branch Conflict of Interest Management Control Division, and Legal & Compliance of the Branch will support in Japan the Control Room. The Head of Legal & Compliance of the Branch will serve as chief of such division.

    The Group Conflict of Interest Management Control Division and the Branch Conflict of Interest Management Control Division will be independent from the Sales Division, and will never receive any direction or order regarding the treatment of specific cases from the Sales Division.

    The Group Conflict of Interest Management Control Division will control the company-wide management system regarding the identification of transactions that may cause conflicts of interests and the management of conflicts of interests.

    (2) Duties of the Group Conflict of Interest Management Control Division and the Branch Conflict of Interest Management Control Division (the “Conflict of Interest Management Control Division, etc.”)

    The Conflict of Interest Management Control Division, etc. will assume the following duties in a position independent from the division responsible for the relevant business and any of the Subsidiary Financial Institutions, Etc. of the Branch.

    The Conflict of Interest Management Control Division, etc. will identify any Covered Transactions, and also instruct the divisions responsible for such business of the Branch to properly manage any conflicts of interests regarding the Covered Transactions.

    Inclusive of any Covered Transactions of the Subsidiary Financial Institutions, Etc., the Conflict of Interest Management Control Division, etc. will work with the relevant business (together with local L&C when necessary) to help identify, address and mitigate any transactional conflict that may arise or be identified

    If the interests of our Customers may be unjustly impaired, the Conflict of Interest Management Control Division, etc. will instruct the divisions responsible for such business of the Branch to properly manage conflicts of interests, or review the Covered Transactions, when necessary.

    The Conflict of Interest Management Control Division, etc. will regularly provide training for the management of conflicts of interests based on this Policy and the Conflict of Interest Management Rule to any officers and employees of the Branch or its Subsidiary Financial Institutions, Etc., and keep them informed about the management of transactions that may cause conflicts of interests.

    The Branch Conflict of Interest Management Control Division shall quarterly report to CORC any existence or non-existence of "transactions that may cause conflicts of interests" that have been identified and managed. However, the Branch Conflict of Interest Management Control Division shall immediately report to CORC any matter that has a material effect on the management of the Branch, or significantly impairs the interests of Customers.

    (3) Record and Preservation

    If any officer or employee of the Business Division which the Group nominated and the Sales Division of the Branch identifies any transaction that may cause any conflict of interests and selects the management method thereof, the person responsible for internal control within such Business Division and such Sales Division of the Branch will record such measures, and preserve such record for five (5) years from the creation of such record. In this case, after such record is created, or if the Conflict of Interest Management Control Division, etc. so requests, the person responsible for internal control within the Business Division and the Sales Division of the Branch will immediately send a copy of such report to the Conflict of Interest Management Control Division, etc.

    If the Conflict of Interest Management Control Division, etc. identifies any transaction that may cause any conflict of interests and selects the management method thereof, the responsible person of the Conflict of Interest Management Control Division, etc. will record such measures, and preserve such record for five (5) years from the creation of such record.

Exhibit

“Parent Financial Institutions, etc.” or “Subsidiary Financial Institution, etc.” of the Branch mean the companies organizing Standard Chartered Group. Its main companies are as follows.

Parent Financial Institutions, etc.:

Standard Chartered PLC, UK
Standard Chartered Holdings Ltd., UK

Subsidiary Financial Institutions, etc.:

Standard Chartered Securities Japan Ltd., Japan
Standard Chartered Bank (Hong Kong) Limited, HONG KONG
Standard Chartered Bank (China) Limited, CHINA
Standard Chartered Bank (Taiwan) Limited, TAIWAN
Standard Chartered Securities Korea, KOREA
Standard Chartered Bank (Korea), KOREA
Standard Chartered Investments and Loans (India) Ltd., INDIA
Standard Chartered Finance Ltd., INDIA
Standard Chartered Securities (India) Limited, INDIA
PT. Standard Chartered Securities Indonesia, INDONESIA
PT. Bank Permata, Tbk, INDONESIA
Standard Chartered Bank Malaysia Berhad, MALAYSIA
Standard Chartered Bank Saadiq Berhad, MALAYSIA
Standard Chartered Bank (Pakistan) Limited, Pakistan
Standard Chartered Bank (Singapore) Limited, SINGAPORE
Standard Chartered Bank (Thai) PLC, THAILAND
Standard Chartered Thai Asset Management Company, THAILAND
Standard Chartered Bank (Vietnam) Limited, VIETNAM
Asia Commercial Bank, VIETNAM

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