Brookfield Multiplex and its related entities (collectively “Brookfield Multiplex”), recognises the importance of identifying and managing conflicts of interest that may arise from time to time within its operations. Having an adequate strategy for managing conflicts of interest is necessary to ensure that Brookfield Multiplex complies with its legal obligations, and ensures that the quality of its financial services are not compromised or diminished by conflicts of interest. It is also a requirement of the Australian Financial Services Licensing regime that all licensed entities (“Licensees”) have conflicts of interest management arrangements in place.
2. SCOPE
This policy applies to the following licensed entities:
3. WHAT ARE CONFLICTS OF INTEREST
Conflicts of interest are circumstances where some or all of the interests of investors are inconsistent with, or diverge from, some or all of the interests of the “Licensee”. This includes actual, potential and perceived conflicts of interest. For Brookfield Multiplex, conflicts of interest may arise from time to time, particularly in the context of:
The conflicts management obligation does not prohibit all conflicts of interest, it merely requires that they be adequately managed.
3.1. LEGISLATIVE REQUIRMENTS
The conflict of interest provisions of the Corporations Act (s912A(1)(aa)) and the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004, require that holders of Australian Financial Services Licenses (“Licensees”) have arrangements in place for the identification and management of conflicts.
In addition, when acting as responsible entity (“RE”) of a registered managed investment scheme, an RE must act in the best interests of the scheme’s members and, if there is a conflict between the scheme members’ interests and the interests of the RE, give priority to the scheme members’ interest.
3.2. MANAGING CONFLICTS OF INTEREST
In circumstances where there is an actual, potential or perceived conflict between the interests of investors and those of a Licensee the conflict must be managed by disclosing it, controlling it, or avoiding it.
Where appropriate and possible, all conflicts with investors should be controlled or avoided. It is not enough to simply disclose conflicts with investors.
All conflicts of interest that relate to the provision of financial services must be reported to the Company Secretariat.
3.2.1. DISCLOSING CONFLICTS
Disclosing conflicts requires licensees to ensure that clients are sufficiently informed about any conflicts which may affect the provision of financial services. Disclosures can be given in writing or orally and should be timely, prominent and specific, occur before or when a financial service is provided and contain sufficient details to enable the client to understand the potential impact of the conflict on the financial service being provided to them.
In situations where disclosing a particular conflict will be inappropriate due to confidentiality restrictions, an assessment of whether any disclosures can be given and whether the conflict can be adequately managed through other mechanisms must be made. If the conflict cannot be managed through other mechanisms it must be avoided.
3.2.2. CONTROLLING CONFLICTS OF INTEREST
Where the provision of, or changes to a financial service will or could have a materially adverse effect on investors it cannot proceed unless the conflict is controlled. Where management have reviewed the situation and made the decision that the effect on investors is unlikely to be materially adverse the transaction can proceed. In situations where additional controls need to be implemented to ensure the conflict will not be materially adverse for investors, the additional controls must be in place before the transaction can take place.
Where a conflict involves a related party dealing, the process outlined in section 4 of this Policy must be followed.
Certain information is not generally available to the public and may have a material affect on the price of a security if it were generally available. Access to this information must be restricted to prevent inappropriate disclosure and to prevent insider trading and conflicts of interest. Where a real or perceived conflict of interest occurs in relation to non-public information Management will implement information sharing protocols on a case by case basis to ensure information flows between departments are restricted to those who need the information to undertake normal business activity related to their function. Segregation of duties may also be used to restrict the flow of sensitive information.
3.2.3. AVOIDING CONFLICTS OF INTEREST
Where a conflict cannot be adequately managed through controls and disclosure it must be avoided or the financial service affected must not be provided.
In addition, where management determine that a conflict is likely to result in any of the following the conflict must be avoided:
1. a materially adverse effect on investors and it is inappropriate or impractical to implement controls to manage the effects of the conflict;
2. the conflict will result in non compliance with the law;
3. the licensee cannot provide the financial service in an independent and objective manner; or
4. a breach of any AFSL condition.
3.3. RECORD KEEPING
Records of identified conflicts and the actions taken to manage them must be recorded in the Conflicts Register maintained by Company Secretariat, for at least 7 years.
4. RELATED PARTY DEALINGS
4.1. DEFINITIONS
Related Party Any of the following:
Giving a financial benefit Any of the following:
4.2. CORPORATIONS ACT REQUIRMENTS
The related party provisions of the Corporations Act (s601LA) provide that to protect the interests of the scheme’s members as a whole, a Brookfield Multiplex Responsible Entity (“RE”) must not give a financial benefit to a related party without the approval of the members of the relevant scheme unless the giving of that benefit falls into one of the exceptions allowed under legislation.
4.2.1. EXCEPTIONS
Member approval is not required when:
1. transactions are conducted at arm's length and on commercial terms or are less favourable to the related party than if the transaction was conducted at arm's length and on commercial terms;
2. the Benefits are reasonable remuneration to a related party acting as an officer or Employee;
3. the benefit is a payment of expenses incurred or to be incurred, or reimbursement for expenses incurred, by a related party in performing duties as an officer or employee of the Group or the RE and the benefit is reasonable in the circumstances;
4. the benefit is remuneration to the related party as an officer or employee of the Group or the RE and the benefit is reasonable in the circumstances;
5. the benefit is given to the related party in their capacity as an officer of the Group or RE and the benefit is an indemnity, exemption or insurance premium in respect of a liability incurred as an officer of a Group company or entity that is reasonable in the circumstances;
6. the benefit is given to the related party in their capacity as an officer of the Group or RE and the benefit is the making of a payment in respect of legal costs incurred by the officer in defending an action for a liability incurred as officer of the public company or entity that is reasonable in the circumstances;
7. the benefit is given to the related party as a member of a managed investment scheme (“Scheme”), and giving the benefit does not discriminate unfairly against the other members of the scheme; or
8. a financial benefit is given under a Court Order.
Transactions carried out under an existing agreement, which itself has been approved in accordance with the Corporations Act and this policy, do not require further approval unless the transaction is outside the terms of the original agreement.
4.3. ASX LISTING RULES
Where a related party transaction relates to listed funds, ASX Listing Rule 10.1 Transactions with persons in a position of influence imposes additional obligations on the RE.
The RE of a listed Fund (including its child entities) must ensure that neither it, nor any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to, any of the following persons without the approval of the unitholders or without the grant of a waiver by the ASX:
1. a related party as defined in the Corporations Act;
2. a subsidiary;
3. a substantial holder, if the person and their associates have a relevant interest, or had a relevant interest in the preceding 6 months, in at least 10% of the total votes attached to the securities;
4. an associate of a related party or substantial holder; and
5. a person whose relationship to any of the entities or persons described above is such that, in ASX’s opinion, the transaction should be approved by unitholders.
An asset is ‘substantial’ if its value or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the entity as set out in the latest accounts given to ASX.
4.3.1. EXCEPTIONS
Listing Rule 10.1 does not apply to:
4.4. PROCEDURE FOR DEALING WITH RELATED PARTY TRANSACTIONS
Generally, transactions between related parties should be conducted at arm's length and on commercial terms which are consistent with the conduct of similar transactions with third parties. All transactions should be structured to address any actual or perceived conflicts of interest between the transacting parties.
Where an RE either on its own account or as RE of a scheme proposes to enter into a related party transaction the following procedure applies:
1. The relevant responsible officer makes appropriate disclosure to an Executive Director of an RE Board or Company Secretary about the proposed transaction. This disclosure should include the following:
(a) Details of the proposed transaction;
(b) Details of the parties to the transaction and how they are related;
(c) Whether an exception to the member approval obligation applies;
(d) How arm’s length may be proven (if relevant);
(e) What member approval may be required; and
(f) What steps must be taken to obtain that approval.
2. The Executive Director or Company Secretary will consider the information provided to determine whether and how to proceed with the proposed transaction may confer with other Executive Directors and the Company Secretary, as appropriate, and may take external legal advice, in reaching this determination.
3. Where the related party transaction is considered not to be at ‘arms length’ and is not subject to any of the allowed exceptions, the transaction should be referred to the Company Secretary to ensure that, if proceeded with, the transaction is carried out in compliance with the requirements of the Corporations Act and/or ASX Listing Rules. This may include calling a meeting of members to approve the related party transaction.
4. Where the Company Secretary or Executive Director believes the transaction is permitted, it should be submitted to the relevant RE Board for approval by a majority of independent directors. Once approved by the RE Board, the transaction can be carried out in accordance with normal operational procedures.
If the Boards of the transacting Entities have common members, any decision made by either Board in relation to the Relevant Transaction should be made by a sub-committee of the Board which is comprised of the independent directors. Where the related party transaction involves a Director, the spouse or de-facto spouse of a director or a parent or child of a Director or the Director’s spouse or de-facto spouse, the Director must not vote on the transaction and must not be present when the board is considering the transaction.
4.5. NOTIFYING ASIC
At least 14 days before sending a notice convening a shareholders’ meeting, copies of the shareholders documents must be given to ASIC including:
ASIC may make comments on the lodged documents, other than whether the proposed resolution is in the company’s best interests and will usually comment if, in its view, the documents do not comply with the Corporations Act requirements or whether the documents fully disclose material facts, are clear and unambiguous.
4.6. DOCUMENTING TRANSACTIONS
Every related party transaction must be fully and clearly documented. Any relevant information including proposals, board papers and due diligence materials should be retained. The documentation should also include a clear statement about the basis on which the parties are transacting and the authorisation process where relevant.
5. POLICY REVIEW
This policy will be reviewed at least every two years and updated as required from time to time. The policy will be reviewed following relevant triggers such as:
6. NON-COMPLIANCE WITH THIS POLICY
Incidents of willful non-compliance with this Policy are considered to be serious and may be grounds for legal action, dismissal or both.
