Conflict of Interest Policy

Last Updated: December 20th, 2022
CoinSmart

  1. Policy Purpose

    The purpose of this policy (the “Conflicts Policy”) is to inform clients and regulators how Simply Digital Technologies Inc (“CoinSmart”) identifies and manages potential conflicts of interest.

    Introduction

    CoinSmart is a Crypto Asset Trading Platform (“CTP”) and operates a proprietary platform (the “Platform”) that enables users to buy, sell, hold, withdraw and deposit crypto assets that are not themselves securities and/or derivatives (collectively, the “Crypto Assets”). The Platform is made available through CoinSmart’s website and mobile application. CoinSmart is registered in all provinces and territories in Canada as a Restricted Dealer and Marketplace. CoinSmart’s principal regulator is the Ontario Securities Commission.

    Regulatory Background

    As a result of CoinSmart’s marketplace registration, the firm factors in applicable securities laws that require marketplaces to establish, maintain and ensure compliance with policies and procedures that identify and manage conflicts of interest arising from the operation of the marketplace or the services the marketplace provides. Such conflicts may include those, actual or perceived, which are related to: (i) the commercial interests of the marketplace; (ii) the interest of the marketplace’s owners or operators; (iii) referral arrangements; and (iv) the responsibilities and sound functioning of the marketplace.

    Additionally, as CoinSmart is registered as a restricted dealer the firm factors in applicable securities laws require restricted dealers to: (i) identify existing and reasonably foreseeable material conflicts of interest between a Client and  or any individual acting on ’s behalf; (ii) address all material conflicts of interest in the best interests of the Client; (iii) avoid material conflicts of interest that cannot be otherwise addressed in the best interests of the Client; and (iv) provide affected Clients with disclosure of material conflicts of interest at account opening or in a timely manner if they are identified later.

    CoinSmart is required to supervise how existing or potential material conflicts of interest between the Approved Person and the client are addressed. All CoinSmart personnel, including members of the Board of Directors, must disclose any outside activities to Compliance which is reviewed and approved at least annually. Individuals are required to consider and address any existing or potential material conflicts of interest between the individual and CoinSmart and between the individual and CoinSmart’s client(s). If the issue cannot be addressed via written client consent or disclosure, the outside activity will be denied and must be avoided.

    CoinSmart recognizes that carrying out a marketplace and a restricted dealer business as divisions of the same corporate entity may be a source of confusion and perceived conflict and has addressed those conflicts through disclosure by CoinSmart to its client and through segregation of personnel and their responsibilities and access. We further recognize that conflicts may arise as a result of future business development and/or regulatory changes. Consequently, this Conflicts Policy may be amended from time to time to address such changes.

    Conflict Identification and Management

    The management of all potential conflicts of interest is taken very seriously at CoinSmart. Consequently, CoinSmart operates with an eye to maintaining a robust level of ethics and integrity. To do so,  CoinSmart operates in a fair, orderly and transparent manner, addressing the following subject matter:

    • Identifying Conflicts
    • Disclosure of Conflicts of Interest
    • Avoiding or Addressing Conflicts of Interest in the Best Interest of Clients
    • Onership: CoinSmart
    • Distinguishing Commercial Activity from Supervisory, Finance and Compliance Oversight 
    • Personal Dealings: Personal Trading, Outside Business Activities, Gifting & Entertainment

    Identifying Conflicts

    It is important to have a means to properly identify and address situations wherein even unintended conflicts may arise. In all cases,  employees, officers and directors and any employees, officers, directors or contractors of any  outsourced service provider working directly on behalf of  (collectively, “ Personnel”) are required to adhere to any and all CoinSmart’s applicable conflicts-related policies and procedures. This is captured and attested to on an annual basis as part of CoinSmart’s Ethical Code of Employees. CoinSmart reviews potential conflicts of interest regularly, and at least annually, as part of the annual Compliance report to the Board of Directors.

    At a minimum, whenever a new business line or relationship is considered, and whenever a senior officer’s participation on the board of, or as a senior officer of, another corporate entity creates any new potential, actual, or perceived conflict, CoinSmart’s Ultimate Designated Person (“UDP”) shall consider whether or not there is any actual material conflict of interest with CoinSmart, any of its business units, affiliates, or clients. CoinSmart’s Compliance department shall maintain a registry of all possible conflicts, and note how they were addressed, either by disclosure, avoidance, or otherwise and, as applicable, every outside business activity of CoinSmart by a CoinSmart officer or employee shall be disclosed to, and supervised by CoinSmart’s Compliance department in accordance with the procedures described in the Outside Business Activities – Desk Procedure; and with respect to directors specifically, additional procedures shall apply in accordance with the Board of Directors Conflict of Interest Policy . 

    Disclosure Of Conflicts of Interest

    Unless avoided, an existing or potential material conflict of interest must be disclosed to the client in all cases where a reasonable client would expect to be informed:  

    1. for new clients, prior to opening an account for the client; and  
    2.  for existing clients, either as the conflict of interest occurs or, in the case of a transaction related conflict of interest, prior to entering into the transaction with the client. 
    3.  CoinSmart will also disclose on the CoinSmart website any applicable conflicts in the CoinSmart Relationship Disclosure Information.

    Generally, a conflict of interest is considered material if the conflict may be reasonably expected to influence either a Client’s decisions or ’s or its representatives’ recommendations or decisions in the circumstances.

    Ownership

    CoinSmart is wholly owned by Simply Digital Technologies Inc. However, the board of directors of CoinSmart  (the “ Board ”) shall meet the following terms and conditions at all times, unless staff of the relevant provincial securities regulatory authority (or authorities, as the case may be) expressly permit an alternative: 

    1.  the Board shall be comprised of more than 50% independent directors;  
    2. the Chair of the Board shall be an independent director;
    3. the quorum for the Board shall consist of a majority of the Board members, with at least 50% of the majority being independent directors; 
    4. for greater certainty, an individual is an independent director if the individual is “independent” within the meaning of section 1.4 of National Instrument 52-110, as amended from time to time, but is not independent if the individual: 
    • is a shareholder that owns or controls, directly or indirectly, more than 5% of the shares of CoinSmart, or a partner, officer or employee of CoinSmart or an associate of that shareholder, partner, officer or employee, 
    • is a shareholder, partner, officer, director or employee of an affiliated entity of CoinSmart or an associate of that shareholder, partner, officer, director or employee, 
    • is a shareholder, partner, officer, director or employee of a person or company that owns or controls, directly or indirectly, more than 5% of the shares of CoinSmart, 
    • is a client or subscriber of CoinSmart, or is a shareholder, partner, officer, director or employee of a client or subscriber of CoinSmart who is responsible for or is actively engaged in the day-to-day operations or activities of that CoinSmart’s client or subscriber 
    • is a director that was nominated, and as a result appointed or elected, by a founding shareholder or launch shareholder, or 
    • has, or has had, any relationship with a shareholder that owns or controls, directly or indirectly, more than 5% of the shares of CoinSmart that could, in the view of the Board, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgment as a director of CoinSmart. 

    Digital Access Separation

    System access controls ensure that only select CoinSmart technology personnel, as well as the Chief Financial Officer (“ CFO ”) and Chief Compliance Officer (“ CCO ”) and their delegates, have access to client information. In particular, client information is not shared with any affiliate or third-party service provider of CoinSmart  except to the extent required for the affiliate or third-party service provider to carry out any key service or system that the CoinSmart has outsourced to it, in accordance with applicable laws and regulations, as well as with the confidentiality procedures referred to in paragraph (f) below. 

    No referral arrangements

    CoinSmart and its affiliated entities (eg: Smart Pay) do not engage with each other in referral arrangements, as defined in National Instrument 31-103 (“ NI 31-103 ”) section 13.7 or elsewhere. 

    Affiliate support services

    CoinSmart may allow key members of personnel, including senior officers, to act in dual roles for the SmartPay and OTC under Simply Digital Technologies Inc  (“the parent”), and other affiliates, relating to human resources, legal, compliance, and administrative matters, pursuant to inter-company shared services arrangements. 

    Confidentiality procedures

    All Personnel of CoinSmart are required to follow the confidentiality procedures set out in CoinSmart’s written policies and procedures.  

    CoinSmart trading for its own account

    CoinSmart, as a registered CTP firm, is subject to compliance with applicable securities law as it related to client/principal trading requirements and must abide by principal trading requirements, which includes disclosure to clients that the CoinSmart may from time to time trade its own accounts as principal and that all orders and trades will be marked as principal trades and must abide by client/principal trading requirements, which includes giving clients priority over principal trades, unless the client has given specific consent to trade alongside the principal order. 

    Supervision, Finance and Compliance Oversight

    In order to sustain proper controls and oversight, including the mitigation and management of any conflicts of interest within CoinSmart’s affiliates or third-party outsourced service providers, the CoinSmart has appropriate levels of supervision and oversight by means of a Supervisor, a CCO, a CFO, and an UDP, all of whom must be approved by CoinSmart’s principal regulator and, if applicable, registered with the appropriate provincial securities regulatory authority in their respective categories, consistent with NI 31-103. CoinSmart makes a clear distinction between supervision by and within the trading side, and compliance oversight by personnel outside the trading side of the firm. 

       (i) Supervision

    The Supervisor is a trading business supervisor engaged in the daily flow of trading who has the means and authority to supervise the trading and other activities of personnel of CoinSmart from a regulatory perspective. The Supervisor reports directly to the Chief Executive Officer (“ CEO ”). 

       (ii) UDP

    The UDP is CoinSmart’s CEO and has ultimate control and responsibility to ensure, in particular, that CoinSmart operates in accordance with good governance principles, including confidentiality of information, managing conflicts of interest, and upholding relevant laws, regulations, and rules inside CoinSmart. 

       (iii) CCO

    The CCO must ensure compliance with applicable laws and regulations with the provincial securities legislation. The CCO reports directly to the UDP on an ongoing basis and provides a compliance report to the UDP and the Board of CoinSmart at least annually

       (iv) CFO

    The CFO is charged with ensuring proper financial controls and oversight, and oversees the business with independence. The CFO must ensure compliance with applicable financial requirements, as well as applicable legislation. The CFO reports directly to the UDP and reports all appropriate financial issues directly to the UDP and the Board of CoinSmart. 

    Whistleblower Committee

    CoinSmart has created and shall permanently maintain a “whistleblower” program that contains reporting channels that are independent, broadly communicated and accessible to all employees and officers of the company (the “ Internal Whistleblower Program ”). 

    The Internal Whistleblower Program meets the following terms and conditions, failing which CoinSmart shall immediately advise the Ontario Securities Commission and take appropriate measures to promptly remedy such failure: 

    1.  it reports directly to an independent committee of the Board (the “Independent Board Committee”), 
    2.  it includes protections from reprisal and mechanisms for anonymous reporting;  
    3.  the Independent Board Committee exercises oversight of the Internal Whistleblower Program and ensures that information being submitted is properly investigated and resolved, and 
    4.  the Independent Board Committee ensures that information received from the Internal Whistleblower Program is reported to the relevant provincial securities regulatory authority (or authorities, as the case may be), a recognized self-regulatory organization, or a law enforcement agency where appropriate or otherwise required by law.  

    Additional policies and procedures relating to the Independent Whistleblower Program are set out in a separate policy document (the Whistleblower Policies and Procedures). 

    Personal dealings 

    Personnel are made aware of and are trained to determine what constitutes a conflict of interest. Further, Personnel are required to report any personal dealings, trades made through personal accounts and outside business activities that could reasonably be considered to give rise to a potential conflict of interest.

    If a potential conflict of interest is determined to be material or otherwise adverse to the interests of Clients,  will take reasonable steps to resolve the conflict either by denying approval for the activity or by properly mitigating the potential conflict. This ensures that all personal trading which may pose a potential conflict of interest are identified and addressed or avoided. CoinSmart will take reasonable steps to resolve the conflict either by denying approval for the activity, or properly mitigating the potential conflict. The Coinsquare Dealer leverages an internal compliance system to register and address potential conflicts of interest. This includes: 

       (i) Supervision of personal trading

    All personal trading by employees of the Coinsquare Dealer must be disclosed to and pre-cleared by the CCO, in accordance with the Employee Trading Policy

       (ii) Outside Business Activities

    Outside Business Activities (“OBAs”) include any employment, directorship, charity, or other activity by a registered CoinSmart Personnel. Some OBAs involve a potential interaction with a client, which may give rise to an actual or perceived conflict, and in those cases, such OBAs are generally prohibited. 

    In accordance with the Outside Activities – Desk Procedure , all OBAs must be disclosed by CoinSmart Personnel  to the CCO in the manner prescribed by the Outside Business Activities – Desk Procedure ,which shall be delivered by the completion and submission of the OBA Google Form, the content of which shall be sent to compliance via the Google Form submission which shall populate the Google Sheet. 

    Compliance shall review and, where appropriate, ensure that appropriate approval (or denial) of the OBA is granted, and that the OBA is adequately documented on the Google Sheet. If necessary, the material conflict would be disclosed to clients on CoinSmart website within the Relationship Disclosure Information. 

    Gifts & Entertainment  

    Entertainment of, or by subscribers of the Coinsquare Dealer must not be excessive or be seen to unduly influence any parties. Gifts received or given must be disclosed to the CCO via the Google Form to ensure they are only nominal in value and frequency. On an annual basis, no one person should receive more than CAD $100 in gifts. Additional policies and procedures concerning gifts and entertainment are set out in other CoinSmart policies and procedures. 

    Any questions about this Gifts & Entertainment policy should be directed to the CCO. 

    Confidentiality

    All  Personnel are required to follow the confidentiality procedures set out in internal  policies and procedures. Compliance with these policies and procedures ensures that information is disclosed only on a “need-to-know” basis and that Client identity and trading information is released only as permitted by applicable regulations.

    Continuous Compliance with Conflict Management Policies

    The information and examples contained herein have been compiled to the best of our ability and are not meant to be exhaustive of all possible conflicts of interest but rather a compilation of those conflicts that have been identified to date. We undertake to continue taking the necessary steps to identify and respond to such situations in a fair, equitable and transparent manner and consistent with the best interests of our clients.

    Availability of CoinSmart’s Conflict Management Policies

    This document is made available to all  Personnel and is also available to the public on website at www.coinsmart.com by selecting the Conflicts Policy from the  website under the heading “Legal”.

    For any inquiries, please contact the CCO of CoinSmart at compliance@coinsmart.com