Information on Conflicts of Interest

Under applicable securities regulations, Sentinel Financial Management Corp. (“SFMC”, the “Firm”, “us”, “we” or “our”), in its role as both a registered mutual fund dealer and exempt market dealer, is required to take reasonable steps to identify material conflicts of interest that could arise between SFMC (including each individual acting on its behalf) and its clients (also “you”, “your”). Further, if a reasonable client would expect to be informed of the nature and extent of an identified material conflict of interest, SFMC must disclose that conflict of interest to them.

As a mutual fund dealer, SFMC is a member of and regulated by the Canadian Investment Regulatory Organization (“CIRO”); as an exempt market dealer SFMC is regulated by the applicable provincial regulatory authorities in the jurisdictions in which it is registered (at the current time: Saskatchewan, Alberta, British Columbia, Manitoba, Ontario and Quebec).

Under Canadian securities laws, a conflict of interest includes any circumstance where:

the interests of different parties, such as the interests of a client and those of a registrant or an individual acting on a registrant’s behalf, are inconsistent, competing or divergent;
a registrant or an individual acting on a registrant’s behalf may be influenced to put their interests ahead of their client’s interests; or
monetary or non-monetary benefits available to a registrant or an individual acting on a registrant’s behalf, or potential detriments to which a registrant or an individual acting on a registrant’s behalf may be subject, may compromise the trust that a reasonable client has in their registrant.

What makes a conflict of interest “material” will depend on the circumstances. Generally, however, a conflict of interest is considered to be material if the conflict may be reasonably expected to affect either of the following or both of: the decisions of the client in the circumstances or the recommendations or decisions of a representative and/or SFMC in the circumstances.

Under securities laws, as a registrant, SFMC and its employees have a general obligation to deal fairly, honestly and in good faith with its clients. These obligations require SFMC and its employees to legally and ethically act in the best interests of clients.

SFMC’s policies and procedures for managing material conflicts require the Firm and its staff to identify material conflicts of interest that might arise among SFMC, each individual acting on SFMC’s behalf and its clients. This enables SFMC to then ensure that it addresses those conflicts in the best interest of a client. Where a material conflict cannot be addressed in the best interest of a client, SFMC will seek to avoid the conflict. Additionally, all employees/registered individuals receive general training on an ongoing basis, and specifically relating to material conflicts of interests to ensure they are addressed in the best interests of clients.

The following disclosure provides you, our clients, with a description of the material conflicts of interest that SFMC has identified, the nature and extent of the material conflict, the potential impact on and risk that the material conflict could pose to you, and how the material conflict has been or will be addressed in your best interest. From time to time, other conflicts of interest may arise. SFMC will continue to take appropriate measures to identify material conflicts and respond to such situations fairly and reasonably and in the best interests of its clients. Accordingly, this disclosure document will be updated and provided to you in a timely manner. These disclosures are being provided so clients may independently assess if the identified conflicts are significant to them.

SFMC has considered a number of other possible conflicts of interest which have not been identified below but that are generally relevant in the investment industry. SFMC has determined that these other conflicts are either immaterial or not applicable to its current business, such as, financial dealings with clients, having any authority over a client account (such as with a power of attorney, trusteeship, or executorship), and becoming an officer, director or partner of a public company, all of which are prohibited by SFMC. Additionally, SFMC does not have any related or connected issuers, as defined under securities law, does not distribute proprietary securities, nor has other securities related registered entities.

Please contact either your representative at SFMC or SFMC’s Head Office at 1-800-667-3929, or SFMC’s Chief Compliance Officer (“CCO”) at compliance@sentinelgroup.ca with any questions regarding these disclosures and/or how any material conflicts of interest may affect you if you have any questions.

Management of conflicts of interest

1. Related or Affiliated Entities

Inherent conflicts of interests exist when a registrant has related or affiliated entities that offer other products/services and may recommend those products or services offered by the related and/or affiliated entities from which it may receive monetary or non-monetary benefits, but where the product or service might not be appropriate for a client.

SFMC’s related and/or affiliated entities offering other products/services are: Sentinel Life Management Corporation (which also operates as Sentinel Life Group Benefits), Sentinel Tax Services Inc., and Sentinel Life Group Benefits Corp. (the latter two entities do not conduct any new business). These companies are related parties, with common ownership and management.

The potential impact or risk to a client regarding this type of conflict matter is that a client may be recommended a product or service that is not appropriate for them.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has policies and procedures to ensure recommendations and investments are suitable based on a robust “Know-Your-Client” (“KYC”) process (unless a client, determined to be a “permitted client” has waived this obligation in writing). All client trades, are subject to review by the Branch and Head Office (by the CCO) to ensure an investment made for a client is suitable based on the client’s KYC.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.
SFMC is subject to regulatory requirements, oversight and review by the CIRO and provincial regulatory authorities. Sentinel Life Management Corporation, as a life insurance entity, is subject to the regulatory requirements and oversight of the provincial insurance councils in the jurisdictions in which it is registered (currently, British Columbia, Alberta, Saskatchewan, Manitoba and Ontario.

2. Internal Compensation Arrangements and Incentive Practices for Individual Registrants

Inherent conflicts of interest exist where a registered firm creates internal compensation incentives for its individual registrants (such as sales or revenue targets) to recommend certain products or services. An individual registrant may be biased in recommending a product or service due to the compensation arrangement/incentive practice in place or the negative consequences of not achieving the sales/revenue targets.

The potential impact or risk to a client regarding this conflict matter is that an individual registrant may be biased in trading in or recommending a particular investment product due to the compensation arrangement in place, and not give appropriate consideration to the suitability of a product or the appropriateness of the service.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC does not have any incentive programs, sales targets or criteria for sales/revenue generation for any of its employees.
Registered representatives are compensated based on a tiered grid, reviewed on an annual basis, the thresholds of which are based on the previous year’s revenues generated by the registered representative.
SFMC does not provide any variable compensation to registered representatives.
SFMC has policies and procedures to ensure that investments are suitable based on a robust KYC process (unless a Client, determined to be a Permitted Client has waived this obligation in writing). Branch and Head Office compliance staff review all subscriptions/redemptions to ensure an investment made for a client is suitable based on the client’s KYC.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.

3. Compensation of Supervisory and Compliance Staff

Inherent conflicts of interest exist where the compensation of a registered firm’s supervisory or compliance staff (whether registered or not) is tied to sales or revenue targets, and which induce those staff to prioritize these targets. The compliance or supervisory staff may not appropriately oversee individual registrants and ensure that recommended products are suitable/appropriate for a client, if they have concerns about not achieving the compensation incentives arising from those financial targets.

The potential impact or risk to a client regarding this conflict matter is that a trade or recommended investment product may not be suitable for a client.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC does not have any incentive programs, sales targets or criteria for sales/revenue generation for any of its employees.
Supervisory staff are paid a salary only; alternative branch manager(s) are paid a nominal per diem in their capacity as an alternate back-up. Supervisory staff who are also registered representatives are compensated based on a tiered grid, reviewed on an annual basis, the thresholds of which are based on the previous year’s revenues generated by the registered representative.
SFMC does not provide any variable compensation to registered representatives.
SFMC has policies and procedures to ensure investments are suitable based on a robust KYC process (unless a client, determined to be a Permitted Client has waived this obligation in writing). Branch and Head Office compliance staff review all subscriptions/redemptions to ensure an investment made for a client is suitable based on the client’s KYC.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.

4. Compensation from Third-Parties

Conflicts may arise when registrants are compensated by third parties to distribute investment products or recommend services, causing the registrant to be biased in recommending an investment product or services due to the compensation arrangement/incentive practice in place.

The potential impact or risk to a client regarding this conflict matter is that an individual registrant may be biased in trading in or recommending a particular investment product or services due to the compensation arrangement in place, and not give appropriate consideration to the suitability of a product.

Mutual funds offered through SFMC have a sales charge and trailing commission rate that is established by the fund manager, detailed in the applicable “Fund Facts” documentation, and remitted to the Firm, payable to the registered individual. As a mutual fund dealer, SFMC principally uses the embedded compensation model.

Further to industry practice, as an exempt market dealer SFMC may receive due diligence fees from private issuers. These fees are intended to cover the Firm’s costs when it conducts due diligence on an issuer to determine if the issuer’s security can be approved for the Firm’s product shelf. There may be a difference between the costs received from an issuer and the costs incurred by SFMC, in SFMC’s favor.

As well, further to its dealer agreements, SFMC may receive additional commissions from a private issuer, over and above commissions that are paid to registered individuals.

There are no other fees that SFMC charges or receives.

Registered individuals distributing prospectus exempt investment products receive commissions (deferred sales charges, front-end load or fee-based) or finder’s fees from an issuer for distributing these products. Information relating to the payment of commissions and payments to SFMC/its registered individuals is provided to investors in the applicable issuer offering documents.

SFMC manages this conflict in the best interest of a client in the following manner:

Registered individuals are prohibited from accepting certain compensation from any other person, outside the scope of their relationship with SFMC, unless they obtain prior approval from SFMC.
Commissions and other fees are paid to SFMC who then remits an applicable allocation to the registered representatives; registered individuals are not paid directly by an issuer.
SFMC has an established and robust product review process considering various factors and free from bias when considering products that pay third-party compensation. The receipt of due diligence fees from private issuers is not a determining factor when approving investment products.
As a matter of practice, commissions received by SFMC from issuers flow to registered individuals based on an established compensation grid (see item 2 above).
SFMC has policies and procedures to ensure that investments are suitable based on a robust KYC process (unless a Client, determined to be a Permitted Client, has waived this obligation in writing). Branch and Head Office compliance staff review all subscriptions/redemptions to ensure an investment made for a client is suitable based on the client’s KYC.
As part of the client onboarding process, various disclosure documents are provided to clients outlining the charges clients may incur and compensation SFMC/its registered representatives may receive including trailing commissions.
The Firm provides clients with an annual report on the Firm’s charges and other compensation received by the Firm in connection with a client’s investments. This includes payments that a registered firm or its registered representatives receive from issuers of securities or other registrants in relation to registerable services to a client. This also includes disclosures relating to the receipt of trailing commissions.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.

5. Dually Registered Individuals and Outside Activities

Conflicts may arise when registered individuals are involved in activities not directly related to the registrant’s securities regulated activities, including in “positions of influence”. Those conflicts have the potential to be particularly challenging when the registered individual owes a legal obligation in connection with those outside activities, if they receive compensation or some sort of benefit from the outside activities, or due to the time commitment required for the outside activities. As well, client confusion may arise as to which entity the client is dealing with.

The potential impact or risk to a client regarding this conflict matter is that an individual registrant may put the interests associated with the various outside activities ahead of the registered individual’s obligations and responsibilities to the registered firm and its clients, which may result in, among other things, unsuitable investments recommended to or traded in for a client.

SFMC registered individuals may be registered as mutual fund dealers and exempt market dealers under securities laws, as well as hold life insurance licenses.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has established policies and procedures that govern outside activities of employees. These include a mandatory and detailed notification/disclosure and pre-approval process to identify and address any potential conflicts, and to restrict any outside 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, SFMC and its clients.
The CCO monitors outside activities of registered individuals, and dually registered individuals, on an ongoing basis to identify and address any new conflicts arising from changes to activities.
Outside activities of registered individuals are disclosed to the applicable regulatory authorities.
SFMC has policies and procedures to ensure investments are suitable based on a robust KYC process (unless a client, determined to be a Permitted Client has waived this obligation in writing). Branch and Head Office compliance staff review all subscriptions/redemptions to ensure an investment made is suitable based on the client’s KYC.
Registered individuals may not be dually registered, employed by, participate in, or accept compensation from any other person, outside the scope of their relationship with SFMC, unless they obtain prior approval from SFMC.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.
SFMC has established policies and procedures that supplement regulatory requirements, including policies on privacy and confidentiality of information.

6. Personal Trading

Conflicts may arise if registered individuals (and other employees) are permitted to trade in the same securities considered for or held by client portfolios, in their personal investment portfolios.

The potential impact or risk to a client regarding this conflict matter is that an individual registrant (and other employees) may give priority to the performance of their personal investment portfolio to the detriment of client portfolios. The associated conflict may also raise a number of issues, including but not limited to, front running trades and retaining certain investment opportunities for personal portfolios.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has policies and procedures which impose various restrictions on personal trading, including requiring pre-clearance of personal securities transactions and post-trade monitoring of account statements by the CCO.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.

7. Gifts and Entertainment

Conflicts of interest may arise where a firm or registered individual of the firm is provided benefits (including gifts and entertainment) by a party with which the registered individual or firm interacts on behalf of clients, or where the registered individual or firm provides comparable benefits to third parties. The associated conflict arises because registrants may be incentivized, or may incentivize others, through the provision or receipt of such benefits, in a manner that may compromise objective and independent business decisions, to the detriment of clients.

The potential impact or risk to a client regarding this conflict matter is that the exchange of frequent and/or extravagant gifts and business-related entertainment may impair the independence and/or objectivity of the recipient, which could impact investment management decisions, trading activities, or expenses incurred by an investment account to the detriment of clients.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has policies and procedures (including a Code of Conduct) which governs the approval and provision/receipt of gifts and business entertainment to/from persons or entities with which SFMC has an existing or potential business relationship. Employees of SFMC may give or accept gifts or business entertainment of only a nominal prescribed value per person per year and only where such gifts or entertainment given or received in connection with services provided to clients are not so frequent or so large as to compromise the employee’s independence or objectivity.
SFMC has policies and procedures to ensure investments are suitable based on a robust KYC process unless a client, determined to be a “permitted client” has waived this obligation in writing). Branch and Head Office compliance staff review all subscriptions/redemptions to ensure an investment made for a client is suitable based on the client’s KYC.
SFMC has an established and robust product review process considering various factors and free from bias when considering products that provide gifts or entertainment.

8. Marketing Practices

Conflicts of interest may arise from the discretion that a registered firm has over marketing materials (and representations included in those materials) made to current and prospective clients. The conflicts may arise given that attracting and retaining investment capital is critical to the profitability and general success of the registered firm and its employees. The registrant may have an incentive to misrepresent or overstate various evaluation metrics (including but not limited to investment performance and service offerings) in order to influence investing decisions of current and prospective clients, possibly to the detriment of those clients.

The potential impact or risk to a client regarding this conflict matter is that a decision to establish a relationship with the registered firm may be based on misleading or exaggerated information provided to the client, and not on the basis that the advancement of such a relationship should be based on the best interest of a client. In turn, this could result in unsuitable investments being made on behalf of a client.

SFMC manages this conflict in the best interest of a client in the following manner:

Marketing materials are reviewed and approved by the CCO or Branch Manager prior to use or distribution, to ensure information is accurate, complete, not misleading and can be substantiated.
Performance criteria are disclosed in accordance with regulatory obligations.
Fund returns and performance are provided by the fund manager or prospectus exempt security issuer.
SFMC does not actively market investment products or services.

9. Fee-Based Accounts

Conflicts of interest may arise if a client is in a fee-based account and that account holds securities with embedded commissions. The associated conflicts arise from products in that account not being commensurate with the client’s needs and objectives, as well as the registrant receiving additional third-party compensation for the product.

The potential impact or risk to a client regarding this conflict matter is that an individual registrant may be biased in trading in or recommending a particular investment product based on the potential to receive (embedded) commissions, and not give appropriate consideration to the suitability of a product.

SFMC offers both fee-based accounts and accounts with trailing commission-paying mutual funds to clients. Clients determine which type of account they wish to open, with the consultation of their SFMC representative.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has an established and robust product review process considering various factors and free from bias when considering products that pay commissions.
SFMC has policies and procedures to ensure that investments are suitable based on a robust KYC process (unless a Client, determined to be a Permitted Client has waived this obligation in writing). Branch and Head Office compliance staff review all subscriptions/redemptions to ensure an investment made for a client is suitable based on the client’s KYC.
As part of the client onboarding process, various disclosure documents are provided to clients outlining the commissions/compensation SFMC/its registered representatives may receive.
To avoid duplicate fees being charged in fee-based accounts, products with embedded commissions are excluded from the assets for the purpose of calculating fees. SMFC also utilizes the services of another registered carrying dealer through which clients may set up fee-based accounts which assist in addressing these conflicts.

10. Allocation of Private Investments Amongst Clients

Conflicts of interest may arise if investment opportunities with private issuers are not allocated across different clients in a fair and reasonable manner. A registrant may have an incentive (such as increased fees) to allocate superior investment opportunities to new clients, higher fee-paying clients. This concern is most acute when a security is unusually attractive at the time of purchase and/or difficult to obtain, or it is unattractive at the time of sale and disposal is difficult.

The potential impact or risk regarding this conflict matter is that investment opportunities may not be allocated in a fair and reasonable manner to all clients, such that certain clients may be deprived of advantageous opportunities.

SFMC, as exempt market dealer, manages this conflict in the best interest of a client in the following manner:

SFMC has policies and procedures which have been established to ensure the fair and reasonable treatment of all accounts with SFMC in situations where one or more accounts have parallel objectives. This policy is designed to ensure that SFMC does not unfairly favor one account over another.
Private investments are generally allocated on a first come first serve basis so clients are not provided preferential treatment. Additionally, further to policies and procedures relating to personal investing, employees are not permitted to trade ahead of private investments to the detriment of a client.
Employees are required to comply with the Firm’s Code of Conduct and annually attest they have adhered to the Firm’s compliance policies and procedures.

11. Complaints Management

Conflicts of interest may arise when addressing complaints from clients. A registrant may have an incentive to minimize, neglect or otherwise obstruct client complaints, to avoid negative consequences (including potential obligations to provide financial compensation to clients who filed complaints of wrongdoing against the registrant or an individual at the registrant).

The potential impact or risk regarding this conflict matter is that client complaints may not be given appropriate consideration and financial restitution, where warranted, may not be granted.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has policies and procedures to address complaints from clients, to ensure those complaints are investigated and addressed in a timely and documented manner, with appropriate communication to the client through the complaint process.
Clients may request details on SFMC’s complaint management policies and procedures for further review and contact SFMC if they wish to file a complaint.
SFMC maintains an ongoing membership with the Ombudsman for Banking Services and Investments (“OBSI”). Generally, OBSI provides independent dispute resolution or mediation service to a client, at a registered firm’s expense for specified complaints where the firm’s internal complaint handling process has not produced a timely decision that is satisfactory to the client.
If the Québec-based client is not satisfied with the outcome or with the examination of its complaint, they may ask SFMC, at any time, to transfer the file to the Autorité des Marchés Financiers.

12. Referral Arrangements

Conflicts arise when registrants receive or pay referral fees from affiliated entities or third parties. The associated conflict may arise where the registrant is incentivized to distribute or trade in securities, or maintain a client in an investment, due to the associated benefit. Additionally, a conflict may arise if clients are paying more for the same or similar products with the registrant.

The potential impact or risk to a client regarding this type of conflict matter is that a client may have limited investment options presented to them due to the referral arrangement or investments made or held may be unsuitable for the client.

SFMC, as a mutual fund dealer and exempt market dealer, has entered into a few referral arrangements where a registered individual may refer their clients to another entity for which SFMC may receive a referral fee.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC has established policies and procedures regarding referral arrangements. These include ensuring the terms of the referral arrangement are set out in a written agreement formal agreement and the recording and monitoring of all referral fees.
Prior to taking on a referred client, SFMC provides written disclosure to the client, which a client must acknowledge in writing, and which includes prescribed regulatory information. Changes to the written disclosure document are provided to the affected client, as soon as possible and no later than the 30th day before the date on which a referral fee is next paid/received.
SFMC has policies and procedures to ensure investments clients are suitable based on a robust KYC process (unless a client, determined to be a “permitted client” has waived this obligation in writing). All client trades, are subject to review by the Branch and Head Office (by the CCO) to ensure an investment made for a client is suitable based on the client’s KYC.

13. Growth of the Business

Conflicts may arise when a registered firm actively seeks to grow its business and achieve a targeted level of profitability. In some circumstances, the registered firm’s obligations towards clients may interfere with growth and profitability objectives.

The potential impact or risk to a client regarding this conflict matter is that a registrant’s obligations such as, but not limited to, obtaining sufficient KYC from clients, ensuring investments are suitable for clients, or ensuring marketing materials are accurate, complete and not misleading, may be subordinated to the registered firm’s goals of growing its business.

SFMC seeks to grow its business over a reasonable period of time both organically and through merger or acquisition where appropriate.

SFMC manages this conflict in the best interest of a client in the following manner:

SFMC does not establish sales/asset level targets for any registered representatives.
Compensation for representatives is based on the previous year’s revenues.
SFMC has policies and procedures to ensure investments clients are suitable based on a robust KYC process (unless a client, determined to be a “permitted client” has waived this obligation in writing). All client trades, are subject to review by the Branch and Head Office (by the CCO) to ensure an investment made for a client is suitable based on the client’s KYC.