Conflict of Interest Disclosure
Security Financial Services & Investment Corp. Conflict of Interest Disclosure
In accordance with new securities laws effective June 30, 2021, we are providing enhanced disclosures below relating to the existing and reasonably foreseeable material conflicts of interest that may affect our clients, including how Security Financial Services & Investment Corp. (Security Financial Services) and our financial advisors address material conflicts of interest in the best interest of our clients.
What is conflict of interest?
A conflict of interest includes any circumstance where:
- the interests of different parties, such as the interests of a client and those of Security Financial Services or our financial advisors are inconsistent or divergent
- Security Financial Services or our financial advisors may be influenced to put their interests ahead of their client’s interests, or
- monetary or non-monetary benefits or disadvantages to Security Financial Services or our financial advisors might compromise a reasonable client’s trust
A conflict of interest is considered material if the conflict may be reasonably expected to influence either the decisions of a client, or Security Financial Services or its financial advisor’s recommendations or decisions in the circumstances. When addressing material conflicts of interest in the best interest of clients, Security Financial Services and our financial advisors:
- must put the interests of clients first, ahead of our own interests and any other competing considerations.
- must avoid those conflicts, or by using controls to mitigate those conflicts sufficiently so that the conflict has been addressed in the client’s best interest.
At Security Financial Services we consider a commitment to compliance to be a cornerstone of dealing fairly, honestly, and in good faith with our clients.
The first step we have taken to address material conflicts in the best interest of our clients is to promote a tone from the top, set by the firm’s Ultimate Designated Person, Chief Compliance Officer and senior management, that emphasizes the importance of integrity when dealing with clients.
The second step we have taken is to create policies and procedures to identify and address material conflicts of interest including: a broad definition of conflicts of interest, a defined escalation procedure for handling potential conflict situations, a clear delineation of the firms’ and representatives’ responsibilities with respect to identifying and addressing material conflicts of interest, the appropriate resources, independence, and authority for the Chief Compliance Officer and other internal control functions to address conflicts of interest, regular internal reporting and periodic testing of the conflicts management framework.
How do we manage material conflicts of interest?
Security Financial Services has also established a system for confirming that effective disclosure of material conflicts of interest is provided to clients.
Conflicts arising from third-party compensation
Third-party compensation is received in the form of trailing commissions, services fees, or commissions for mutual funds and other investment products available through Security Financial Services. Please see our Relationship Disclosure document provided to you at account opening for detailed information on forms of compensation. Pre-trade disclosure of compensation and fees is provided to all clients and is also included in each fund facts document provided to our clients. We have policies and procedures in place to ensure that client recommendations are based on the quality of the investment product without influence from any third-party compensation associated with the investment product. It is important to note that Security Financial Services does not offer incentives or internal compensation arrangements to our financial advisors to recommend certain investment products over others. Security Financial Services also has policies and procedures in place regarding promotional items and business activities which help ensure the provision of the benefits and activities received is neither so extensive nor so frequent as to cause a reasonable person to question whether the provision of the benefits or activities improperly influence investment advice given to clients.
Conflicts arising from fee-based accounts with ongoing account fees and with trailing commission-paying mutual funds or investment products
This conflict of interest is managed through ensuring that clients with fee-based accounts do not hold any trailing commission paying mutual funds or investment products in the fee-based account, and that the fee-based account is suitable for the client based on their investment objectives and needs. Security Financial Services conducts quarterly reconciliations of all intermediary and client name fee-based accounts to ensure that mutual fund or investment products with trailing commissions or embedded commissions are not held in the same account. There are rare scenarios where a trailing commission paying or embedded commission mutual fund may be present in a fee-based account but a control is in place to ensure that these mutual funds are excluded from the fee-based calculation. These scenarios are only permitted if a) the fund is not included in the fee-based calculation and b) the financial advisor has demonstrated to compliance staff that this is in the best interest of the client.
Conflicts of interest arising from referral arrangements
Financial advisors may receive compensation in the form of referral fees arising from a referral arrangement with a third-party with whom Security Financial Services has a referral arrangement. These referral arrangements are for products and services not offered by Security Financial Services. This conflict of interest is managed through allowing only permitted referral arrangement with third parties and providing the client with a referral disclosure that includes information on referral fees. Security Financial Services has policies and procedures in place to ensure that referrals of clients to third parties are made in the client’s best interest, irrespective of referral fees or any form of compensation or non-monetary benefit.
Full or partial authority over the financial affairs of a client
Security Financial Services has policies and procedures in place to ensure that financial advisors do not have full or partial control or authority over the financial affairs of a client, including a prohibition on acting as Powers of Attorney, Trustees, or Executors on behalf of clients.
Personal financial dealings with clients
This conflict of interest is managed through policies and procedures that clearly state that financial advisors are prohibited from borrowing money from clients, lending money to clients, or entering into private investment schemes or clubs with clients. In regards to borrowing money from clients or lending money to clients, there are permitted exceptions in certain circumstances; financial advisors have been provided training and guidance on these permitted exceptions as per securities legislation. It should be noted that all monetary and non-monetary benefits provided directly or indirectly to or from clients must flow through Security Financial. Moreover, Security Financial Services must be notified of any such arrangements, so that the firm is in a position to determine the significance of the benefit and to monitor the activity. In general, monetary and non-monetary benefits provided to or from clients that are of nominal value do not present concerns regarding conflicts of interest.
Financial advisors may participate in outside business activities which are defined as any activity conducted where: a) for which direct or indirect payment, compensation, consideration or other benefit is received or expected b) involving any officer or director position and any other equivalent positions or c) involving any position of influence. Security Financial Services has policies and procedures in place to ensure that no conflicts of interest arise as a result of outside activities of the financial advisor(s) and if they do arise, that they are properly managed or the outside activity will not be approved. Client disclosure of all financial advisor outside activities, if any, is provided to all clients at account opening via an Occupational Disclosure document. A financial advisor may under certain circumstances properly be involved in a business arrangement as a partner, shareholder, director or officer of a business owned, co-owned or controlled by the client. This must be disclosed to Security Financial and in turn, the Mutual Fund Dealer’s Association of Canada.
The Conflict of Interest Disclosure can also be found on our website by visiting www.securityfinancial.ca/conflictsofinterest. If you have any questions, comments, or concerns about the content of this disclosure document please contact your financial advisor directly. We value your business and thank you for your continued trust in Security Financial Services.
Chief Executive Officer and Chief Compliance Officer
Security Financial Services & Investment Corp.
4665 Yonge Street, Suite 309
Toronto, Ontario M2N 0B4