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 advising representatives 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 advising representative’s 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 advising representative’s recommendations or decisions in the circumstances. When addressing material conflicts of interest in the best interest of clients, Security Financial Services and our advising representatives:

  • must put the interests of clients first, ahead of our own interests and any other competing
  • 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 arisingfrom 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.

One of the methods Security Financial Services uses to address conflicts of interest arising from third party compensation is by ensuring that the Know Your Product review process completed by Approved Persons is free from bias when selecting products that pay third-party compensation, or products that pay little or no third party compensation (such as some ETFs), and considering other factors such as the services provided to clients in connection with such products. Approved Persons may offer a wide range of ongoing services to their clients such as monitoring of portfolio changes, ongoing recommendations and investment advice, financial planning, estate planning, tax planning, etc. The dealer has policies and procedures in place to ensure that investment recommendations are based on the quality of the investment product without influence from any third-party compensation associated with the investment product selected for the client. The second method to address conflicts of interest arising from third party compensation is full and clear disclosure via the Relationship Disclosure document and pre-trade disclosure of charges section of the documentation form. The documentation form outlines the specific charges applicable to a client as a result of the trade being processed, with a disclosure in place that outlines the amount of compensation being paid out to Security Financial Services as a result of the investment product being purchased.

The dealer regularly performs reviews on the products being used by our Approved Persons. Due diligence Know Your Product (KYP) reviews are performed on at least a monthly basis in order to determine whether there have been any fundamental changes in the characteristics of the products held by the clients of Security Financial. Security Financial offers a wide variety of ETF’s and mutual funds to our clients. As such, we carry out due diligence on these products to ensure that a reasonable range of alternatives are provided to our clients (at a product level) while comparing the various fee structures of these products.

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 pennitted 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.

In addition to the above, compliance staff reviews all fee for service plans to review the reasonability of the fee charged. It is the responsibility of the compliance officer reviewing the paperwork to assess whether the fee charged is within reason, and to query any fee that appears to be outside of the typical range offees charged based on the historical fee for service plans established at the Dealer. When assessing the reasonability of the fee charged, the compliance officer takes into account all of the various services the approved person is providing to the client in relation to the account which should be adequately described on the documentation form.

Conflicts of interest arising from referral arrangements

Advising Representatives 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 advising representatives 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; advising representatives 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.

Outside Activities

Advising Representatives 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. An advising representative 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 tum, the Canadian Investment Regulatory Organization (“CIRO”).

With respect to outside activities, Security Financial Services considers issues relating to potential conflicts of interest prior to approving any such activities of an Approved Person. This would include consideration of compensation to be paid under the arrangement, the nature of the relationship between the Approved Person and the outside entity, whether the Outside Activity is a position of influence and any other potential conflicts that are identified. If any conflict cannot be properly managed in accordance with CIRO Rule 2.1.4, the outside activity will not be approved and permitted. Security Financial Services also monitors on an ongoing basis the outside business activities for conflicts of interest that may anse.

The aforementioned Conflict of Interest Disclosure can be found on our website by visiting https://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.

Sincerely,
Leo Belmonte
Chief Executive Officer

Security Financial Services & Investment Corp.
Email: l.belmonte@securityfinancial.ca
T: 416-964-0440
F: 416-964-0091
3901 Highway #7
Suite 601
Vaughan, ON L4L 8L5
www.securityfinancial.ca