Conflicts of interest policy | Vanguard DE Professionell

1. Policy Statement

Vanguard Group Europe GmbH (“VGEG”).

This Conflicts of Interest Policy (“Policy”) includes further local requirements next to the Conflicts of Interest Policy as part of the "Code of Ethics" which is applicable for all Vanguard employees globally. This Policy addresses the obligations of VGEG to maintain and operate effective organisational and administrative arrangements with a view to taking all appropriate steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of its clients. It applies to perceived as well as actual conflicts.

This Policy is supported by the VGEG Compliance Manual, Vanguard´s Code of Ethical Conduct as well as a number of related but separate policies relating to matters such as gifts and entertainment, personal account dealing, disclosure of outside business activities and information barriers.

Similar policies to this Policy exist within the Vanguard entities in Ireland, the United Kingdom and Switzerland.

1.1 Scope of Application

This Policy applies to:

a director, principal or equivalent, or manager of VGEG;

crew members of VGEG as well as any contractor, contingent worker or natural person whose services are placed at the disposal of VGEG; and

a natural person who is involved in the provision of services to VGEG under an outsourcing arrangement to enable VGEG’s provision of regulated activity.

It is the responsibility of all crew to familiarise themselves with the Policy and adhere to the requirements of the Policy.

1.2 Purpose

This Policy has been designed to ensure Vanguard’s compliance with its fiduciary and regulatory responsibility to always place the interests of its clients first and to manage conflicts of interest fairly.

2. Regulatory Requirements

VGEG must establish appropriate principles, resources and procedures designed to avoid conflicts of interest that the company itself and its employees comply with the obligations under the laws and regulations mentioned below.

To this end, this policy regulates the treatment of conflicts of interest between

VGEG and its clients

VGEG and its holding (parent company) as well as other group companies (subsidiaries)

VGEG and its employees as well as the members of the management board

clients of VGEG

with the aim of identifying, avoiding, eliminating, reducing or disclosing conflicts of interest.

This policy sets out the steps which VGEG must take to ensure that any conflicts of interest in accordance with the provision of investment advice and ancillary services are identified, recorded and managed properly.

The most relevant obligations are defined in the following legal and regulatory sources WpHG, WpDVerOV and Delegated Regulation (EU) 2017/565 (“MiFID II Delegated Regulation”).

3. Ownership Policy and Conflicts of Interest Matrix VGEG

Compliance VGEG is the owner of this policy and has overall responsibility for (i) the Policy, which is intended to ensure that VGEG manages conflicts of interest effectively and in compliance with German law, and (ii) maintaining and operating effective organisational and administrative arrangements with a view to taking all appropriate steps to identify conflicts of interest and to prevent them from constituting or giving rise to an actual or perceived material risk of damage to the interests of its clients.. This policy will be reviewed annually by Compliance VGEG.

Furthermore, Compliance VGEG is also responsible for the development and update of the Conflicts of Interest Matrix in Appendix 1 to this Policy. This update will also be performed on a yearly basis by Compliance VGEG.

4. Reporting Conflicts of Interest to Compliance (Conflicts of Interest Register)

All employees are required to report any actual or potential conflict of interest into the global MCO tool.

The German Compliance Team will receive an overview of any newly identified conflict of interests and keep as well as regularly update a record of the kinds of investment or ancillary service or investment activity carried out by or on behalf of VGEG in which a conflict of interest entailing a risk of damage to the interests of one or more clients has arisen or, in the case of an ongoing service or activity, may arise. The procedures established are designed to ensure the relevant persons engaged in different business activities involving a potential risk of conflict carry out the activities having a degree of independence appropriate to the size of VGEG.

5. Annual Reports to the Management Board by Compliance

The management board will receive on a frequent basis, and at least annually, written reports on activities referred to above by Compliance. The Conflicts of Interest Map (see Appendix 1) and Conflicts of Interest Register (see Appendix 2) shall be reviewed annually by the Senior Management of Vanguard. This Conflicts of Interest Policy will be reviewed annually by the German Compliance Team.

6. Identifying Conflicts of Interest

Pursuant to Sec. 80 para. 1 no. 2 WpHG, VGEG must have effective arrangements for appropriate measures to identify conflicts that arise when providing investment advice withing the meaning of Sec. 2 para. 8 No. 10 WpHG or ancillary services. Furthermore, VGEG must have effective arrangements for appropriate measures to avoid prejudice to customer interests resulting from conflicts of interest.

For the purpose of identifying the types of conflicts of interest that can arise in the course of providing investment services or ancillary services, VGEG shall take into account in particular whether it, its managers, employees, other relevant persons or a person directly or indirectly linked by way of control:

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 of a transaction carried out on behalf of a client, which is distinct from the client’s interest in that outcome;

has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client;

carries on the same business as the client;

receives or will receive from a person other than the client an inducement in relation to a service provided to a client, in the form of monetary or non-monetary benefits, other than a reasonable commission or fee for that service; or

sustainability preferences of the client are used to influence the decision of the client in favour of a financial product creating a financial gain or avoid a financial loss at the expense of the client or is distinct from the client’s interest or outcome.

Conflicts can also arise between two clients.

Conflicts of interest include actual, potential or perceived conflicts.

With the above factors in mind VGEG has set out potential conflicts that might arise and how to mitigate them and these are set out in the Conflicts of Interest Matrix in the Appendix.

In this Conflicts of Interest Matrix VGEG must keep and regularly update a record of the kinds of service or activity carried out by or on behalf of the firm in which a conflict of interest entailing a material risk of damage to the interests of one or more clients has arisen or, in the case of an on-going service or activity, may arise.

7. Procedures and Measures Preventing or Managing Conflicts of Interest

VGEG must take all reasonable steps to avoid conflicts of interest and, when they cannot be avoided, manage, monitor and (where applicable) disclose those conflicts of interest in order to prevent them from adversely affecting the interests of clients.

A Conflicts of Interest Council (the “Conflicts Council”) is established on a European level for the purposes of reviewing and overseeing conflicts of interest management and associated issues across Vanguard’s European entities including VGEG (together, the ‘Vanguard European Entities’). The Council is aligned to the contents of their specific duties and responsibilities stipulated in their Terms of Reference and will operate in accordance with them.

Where the organizational and administrative measures adopted by VGEG are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of clients are prevented, the Management Board of VGEG shall be promptly informed in order to take any necessary decision or action to ensure that it acts in the best interests of clients.

VGEG’s Conflicts of Interest Matrix in the Appendix identifies (by reference to the specific services and activities carried out by the firm) the circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of clients. The Conflicts of Interest Matrix specifies procedures to be followed and measures to be adopted in order to manage such conflicts to ensure that:

the relevant persons engaged in different business activities involving a risk of conflict of interest carry out these activities having a degree of independence which is appropriate to the size and activities of VGEG and of the group to which it belongs, and to the risk of damage to the interests of clients; and

where necessary and appropriate for VGEG to ensure the requisite degree of independence, the procedures to be followed and measures to be adopted in order to prevent, manage and monitor such conflicts shall include the following:

effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients;

the separate supervision of relevant persons whose principal functions involve carrying out activities on behalf of, or providing services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the firm;

the removal of any direct link between the remuneration of relevant persons principally engaged in one activity and the remuneration of, or revenues generated by, different relevant persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities;

measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person carries out investment or ancillary services or activities; and

measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate investment or ancillary services or activities where such involvement may impair the proper management of conflicts of interest

independent and consecutive evaluation of the financial suitability of a product and the client’s sustainability preferences.

If the adoption or the application of one or more of those measures and procedures does not ensure the requisite degree of independence, VGEG shall adopt such alternative or additional measures and procedures as are necessary and appropriate for those purposes.

7.1 Staff Responsibilities

All persons subject to the scope of this policy must:

Never put their own interests above clients’ interests;

Comply with all of Vanguard’s ethics policies;

Follow procedures put in place under this Policy;

Escalate conflicts or potential conflicts that are caused by their own situation (“personal conflicts”) to their manager or Compliance; and

Inform management if they identify new or amended conflicts that are caused by the nature of VGEG’s business (“corporate conflicts”).

7.2 Management Responsibilities

Management at each level in the organisation must:

Take responsibility for conflict identification and management across the full range of activities for which they are responsible;

For each conflict that cannot be avoided, determine whether it is possible to put in place sufficiently robust mitigating procedures to prevent the risk of damage to clients’ interests;

In the event it is not possible to put in place sufficiently robust mitigating procedures, the activity must not be undertaken or the conflict must be disclosed to the client(s) and, if appropriate, the client's consent must be obtained;

Promptly inform Compliance of new or changed conflicts or potential conflicts that are caused by the nature of VGEG’s business;

Ensure that the crew in their areas receive periodic training and that conflicts awareness forms a part of the induction programme for new crew;

Clearly allocate responsibility and delegate authority to accountable individuals to ensure that those involved are aware of their responsibilities and obligations and that the individuals responsible for managing/controlling conflicts have a sufficient level of authority and independence in order to carry out his/her responsibilities effectively; and

Ensure that records relating to conflicts of interest management are kept and remain current.

7.3 Training

Training in the identification and escalation of conflicts of interest should be provided to all staff at least annually and should form part of the induction programme for new crew.

8. Disclosure of Conflicts of Interest to Clients

If the organizational arrangements made by VGEG to identify, prevent, manage and monitor conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to clients’ interests will be prevented, VGEG must clearly disclose the general nature or sources of conflicts of interest to the investors before undertaking business on their behalf. Disclosure is a measure of last resort.

The disclosure to be provided to investors shall clearly state that the organizational and administrative arrangements established by VGEG to prevent or manage that conflict are not sufficient to ensure, with reasonable confidence, that the risks of damage to the interests of the client will be prevented. The disclosure shall include a specific description of the conflicts of interest that arise in the provision of investment and/or ancillary services, taking into account the nature of the client to whom the disclosure is being made. The description shall explain the general nature and sources of conflicts of interest, as well as the risks to the client that arise as a result of the conflicts of interest and the steps undertaken to mitigate these risks, in sufficient detail to enable that client to take an informed decision with respect to the investment or ancillary service in the context of which the conflicts of interest arise.

The information to be disclosed to investors shall be provided to investors in a durable medium.

Appendix 1: Conflicts of Interest Matrix

This map should be read in conjunction with the Conflicts of Interest Register.

Areas of Potential Conflict	Conflicted Parties	Circumstances that give risk to conflicts	Mitigation
Governance	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	The devotion of insufficient management resources, time or priority to the management of potential conflicts	Senior Management is fully aware of the requirement to adequately monitor, record and manage conflicts and has implemented a conflicts policy and register. Senior Management will receive on a frequent basis, and at least annually, written reports relating to the management of conflicts of interest.
Governance	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	The devotion of insufficient compliance resources or time or priority to the identification and management of potential conflicts.	The Compliance Specialist monitors, supervises and regularly reviews this map, the conflicts register and conflicts policy. There are quarterly declarations by Crew.
Inducements	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Vanguard maintains business relationships with third parties who may remunerate Vanguard, or are paid, in the form of monetary or non-monetary benefits. The existence of such inducements may impair Vanguard’s duty to act in the best interests of its clients.	The Compliance Specialist will regularly review whether inducements received from third parties impair Vanguard’s ability to act in the best interests of its clients.
Gifts and Hospitality	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Acceptance of gifts and hospitality could compromise Vanguard and its employees’ duty to act in the best interest of its clients.	No employee may accept from, or give to, any person any gift or other benefit that cannot properly be regarded as justifiable in all circumstances. Crew and their connected persons shall not offer or accept gifts or inducements which may give the perception that decisions or actions are not impartial.
Anti-Bribery	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Acceptance of bribes could compromise Vanguard’s and its employees’ duty to act in the best interest of its clients.	Vanguard prohibits the offering, the giving or acceptance of any bribe intended to induce an ‘improper performance’ of a relevant function or activity. This applies to any employee, or associated person, whether they are situated in Germany or extra territorially.
Personal Account Dealing	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Vanguard’s managers, employees or any person directly or indirectly linked to it by control acquire compliance-relevant information and seek to trade on this information for their own account.	Vanguard’s Policy on Restriction on Dealing (Weisung persönliche Geschäfte) prohibits employees trading on their own account when they are in possession of compliance relevant information.
Outside Business Interests	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Conflict created by an outside business interest (directorship, shareholding etc.). In particular, an employee may use confidential information about Vanguard to benefit his/her personal business interests.	No employee may engage in any additional occupation without the consent of Senior Management. In certain circumstances, consent may be withheld. Employees must not accept personal fiduciary appointments (such as trusteeships or executorships other than those resulting from family relationships) without first obtaining written approval from the Senior Management. All approved outside interests should be recorded in the Conflicts Register.
Outside Business Interests	Between two clients with conflicting interests	Clients may have conflicting interests which impedes Vanguard’s ability to fairly perform its duties	Any potential conflicts between clients will be considered at the outset of any potential client relationship and during the course of the relationship. Any potential conflicts identified will be discussed at Senior Management meetings and an appropriate course of action agreed to ensure that Vanguard acts in the clients’ best interests at all times, this may involve declining business or terminating an existing relationship.
Complaints management	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Vanguard will exclusively distribute the collective investment schemes managed by Vanguard’s affiliates. Vanguard might have an interest in not properly managing complaints if the proper resolution of the complaint could lead to a reduction in sales of Vanguard’s collective investment schemes.	Vanguard has a complaints policy (Weisung Beschwerdemanagement), which clearly sets out how complaints should be dealt with. Complaints must be resolved and cannot be ignored.
Information Barriers	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	In extremely rare cases, it is possible that Vanguard might come into possession of insider information regarding the financial instruments in which the collective investment schemes it distributes invest or relating to its clients.	If Vanguard should come into possession of inside information or other compliance-relevant information, Vanguard’s compliance function will seek to avoid potential conflicts of interest through the notification by employees of all personal transactions.
Remuneration	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Direct link between the remuneration of relevant persons principally engaged in one activity and the remuneration of, or revenue generated by, different persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities.	Mitigated by implementation of Vanguard’s Remuneration Policy which is designed to ensure that the interests of clients are not prejudiced by the remuneration of relevant persons in the short, medium or long term.
Delegation and use of third party providers	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Delegation of tasks to third parties could lead to conflicts with the interest of clients.	Vanguard will ensure that the delegate takes all reasonable steps to identify, manage and monitor potential conflicts of interest that may arise between itself, Vanguard and Vanguard’s clients. Vanguard shall ensure that the delegate has procedures in place corresponding to those required under Art. 34 Delegated Regulation. Vanguard will ensure that the delegate discloses potential conflicts of interest as well as the procedures and measures to be adopted by it in order to manage such conflicts of interest to it.
Suitability and appropriateness	Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.	Vanguard will exclusively distribute the collective investment schemes managed by Vanguard’s affiliates. Vanguard may have an incentive to deem collective investment schemes to its clients to be suitable or appropriate when, in fact, they are not.	The criteria for assessing suitability and appropriateness are clearly set out in Vanguard’s Suitability Policy (Weisung Geeignetheit).

Areas of Potential Conflict

Conflicted Parties

Circumstances that give risk to conflicts

Mitigation

Governance

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

The devotion of insufficient management resources, time or priority to the management of potential conflicts

Senior Management is fully aware of the requirement to adequately monitor, record and manage conflicts and has implemented a conflicts policy and register.

Senior Management will receive on a frequent basis, and at least annually, written reports relating to the management of conflicts of interest.

Governance

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

The devotion of insufficient compliance resources or time or priority to the identification and management of potential conflicts.

The Compliance Specialist monitors, supervises and regularly reviews this map, the conflicts register and conflicts policy. There are quarterly declarations by Crew.

Inducements

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Vanguard maintains business relationships with third parties who may remunerate Vanguard, or are paid, in the form of monetary or non-monetary benefits. The existence of such inducements may impair Vanguard’s duty to act in the best interests of its clients.

The Compliance Specialist will regularly review whether inducements received from third parties impair Vanguard’s ability to act in the best interests of its clients.

Gifts and Hospitality

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Acceptance of gifts and hospitality could compromise Vanguard and its employees’ duty to act in the best interest of its clients.

No employee may accept from, or give to, any person any gift or other benefit that cannot properly be regarded as justifiable in all circumstances.

Crew and their connected persons shall not offer or accept gifts or inducements which may give the perception that decisions or actions are not impartial.

Anti-Bribery

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Acceptance of bribes could compromise Vanguard’s and its employees’ duty to act in the best interest of its clients.

Vanguard prohibits the offering, the giving or acceptance of any bribe intended to induce an ‘improper performance’ of a relevant function or activity.

This applies to any employee, or associated person, whether they are situated in Germany or extra territorially.

Personal Account Dealing

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Vanguard’s managers, employees or any person directly or indirectly linked to it by control acquire compliance-relevant information and seek to trade on this information for their own account.

Vanguard’s Policy on Restriction on Dealing (Weisung persönliche Geschäfte) prohibits employees trading on their own account when they are in possession of compliance relevant information.

Outside Business Interests

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Conflict created by an outside business interest (directorship, shareholding etc.). In particular, an employee may use confidential information about Vanguard to benefit his/her personal business interests.

No employee may engage in any additional occupation without the consent of Senior Management. In certain circumstances, consent may be withheld.

Employees must not accept personal fiduciary appointments (such as trusteeships or executorships other than those resulting from family relationships) without first obtaining written approval from the Senior Management.

All approved outside interests should be recorded in the Conflicts Register.

Outside Business Interests

Between two clients with conflicting interests

Clients may have conflicting interests which impedes Vanguard’s ability to fairly perform its duties

Any potential conflicts between clients will be considered at the outset of any potential client relationship and during the course of the relationship. Any potential conflicts identified will be discussed at Senior Management meetings and an appropriate course of action agreed to ensure that Vanguard acts in the clients’ best interests at all times, this may involve declining business or terminating an existing relationship.

Complaints management

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Vanguard will exclusively distribute the collective investment schemes managed by Vanguard’s affiliates. Vanguard might have an interest in not properly managing complaints if the proper resolution of the complaint could lead to a reduction in sales of Vanguard’s collective investment schemes.

Vanguard has a complaints policy (Weisung Beschwerdemanagement), which clearly sets out how complaints should be dealt with. Complaints must be resolved and cannot be ignored.

Information Barriers

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

In extremely rare cases, it is possible that Vanguard might come into possession of insider information regarding the financial instruments in which the collective investment schemes it distributes invest or relating to its clients.

If Vanguard should come into possession of inside information or other compliance-relevant information, Vanguard’s compliance function will seek to avoid potential conflicts of interest through the notification by employees of all personal transactions.

Remuneration

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Direct link between the remuneration of relevant persons principally engaged in one activity and the remuneration of, or revenue generated by, different persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities.

Mitigated by implementation of Vanguard’s Remuneration Policy which is designed to ensure that the interests of clients are not prejudiced by the remuneration of relevant persons in the short, medium or long term.

Delegation and use of third party providers

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Delegation of tasks to third parties could lead to conflicts with the interest of clients.

Vanguard will ensure that the delegate takes all reasonable steps to identify, manage and monitor potential conflicts of interest that may arise between itself, Vanguard and Vanguard’s clients. Vanguard shall ensure that the delegate has procedures in place corresponding to those required under Art. 34 Delegated Regulation.

Vanguard will ensure that the delegate discloses potential conflicts of interest as well as the procedures and measures to be adopted by it in order to manage such conflicts of interest to it.

Suitability and appropriateness

Vanguard, including its managers, employees or any person directly or indirectly linked to it by control, and Vanguard’s clients.

Vanguard will exclusively distribute the collective investment schemes managed by Vanguard’s affiliates. Vanguard may have an incentive to deem collective investment schemes to its clients to be suitable or appropriate when, in fact, they are not.

The criteria for assessing suitability and appropriateness are clearly set out in Vanguard’s Suitability Policy (Weisung Geeignetheit).