Conflicts of Interest Disclosure
Wealthsimple is the brand name for the affiliated subsidiaries of Wealthsimple Financial Corp. including Wealthsimple Inc. (“WSI”) and Wealthsimple Investments Inc. (“WSII”). WSI is a registered portfolio manager in each province and territory of Canada. WSII is a registered investment dealer in each province and territory of Canada, a member of the Canadian Investment Regulatory Organization (“CIRO”, which is carrying on the regulatory functions of the former Investment Industry Regulatory Organization or “IIROC”), a registered Investment Fund Manager in Ontario and Quèbec and a member of the Canadian Investor Protection Fund (“CIPF”) the benefits of which are limited to activities undertaken by WSII.
At Wealthsimple we have established policies and procedures designed to identify, disclose, manage and, where necessary, avoid material conflicts of interest in relation to our company, our clients and third parties. This includes actual, potential and perceived material conflicts of interest.
This Conflicts of Interest disclosure explains in greater detail potential material conflicts of interest that may arise as a normal part of doing business with us, how they may affect your interests as our client, and, where possible, how we intend to address them in your best interest. We are required to avoid any material conflict of interest between you and us where the conflict cannot otherwise be addressed in your best interest. We will strive to keep you informed in a timely fashion should we identify any other material conflicts that would adversely affect your interests in the future.
Wealthsimple (all Products)
Affiliate relationships and outsourcing.
We may enter into transactions or arrangements with other companies within the Wealthsimple group. This may give rise to the perception that, when providing products or services to you, we will favour the business interests of these related entities.
The members of the Wealthsimple group are all separate legal entities, each with tailored compliance systems. We only enter into transactions and arrangements within the Wealthsimple group where they are permitted under applicable securities laws.
We establish service agreements between the members of the Wealthsimple group so all parties are contractually bound to carry out their duties.
We conduct due diligence and ongoing monitoring of services being provided in a similar manner as if the companies were not related entities.
Employee personal trading.
Employees may have access to confidential information regarding the trading activities of our clients. This may give rise to the perception that an employee may use the information of one client for the benefit of another client, or for themselves.
We have established policies and procedures that are reasonably designed to ensure trading in securities is performed in accordance with applicable securities laws and regulations and, where necessary, we supplement these regulatory requirements.
We obtain disclosure of trading accounts from applicable employees and monitor and review transactions in those accounts on a regular basis.
Employee outside business activities.
Our employees may engage in approved outside business activities, such as pursuing personal outside business interests, for which they may receive compensation. This may give rise to the perception that these activities influence an employee’s professional dealings with a client.
We have established internal policies and procedures reasonably designed to ensure that prior to engaging in an outside business activity, employees disclose and obtain approval. Potential conflicts of interest are identified and addressed via an established approval process. Outside business activities that give rise to a material conflict of interest are not permitted.
Employee gifts and entertainment.
Our employees may give or receive gifts or entertainment from clients, third parties or other employees. This may give rise to the perception that these inappropriately influence an employee’s professional dealings with a client.
We have established policies and procedures reasonably designed to ensure gifts or entertainment received or given are limited, are in accordance with applicable law and regulation, and are conducted in the spirit of the business to foster and maintain the business relationship.
Related/connected issuers.
We may make available to you, products of related and connected issuers of Wealthsimple. This may give rise to the perception that, when providing products to you, we will favour the business interests of these related issuers.
Additionally, when you invest in Wealthsimple Exchange-Traded Funds (“ETFs”), WSI will benefit directly by receiving a portion of the Management Expense Ratio (“MER”) fees for those ETFs.
Wealthsimple will only buy or sell the securities of related or connected issuers on behalf of its clients in accordance with applicable securities laws and based on its good faith determination of the best interest of its clients (see Managed Investing below) or their instructions (see Self-directed Investing below).
We provide requisite disclosure of applicable relationships and activities to clients.
We indicate securities that are for related or connected issuers of Wealthsimple in the user agreement, on your trade confirmations and your account statements as follows: Wealthsimple ETFs, Power Corporation of Canada (POW), Great West Life (GWL) and IGM Financial Inc. (IGM) are related/connected issuers of Wealthsimple.
Purpose Investments Inc. and Wealthsimple may be considered “connected issuers” as a result of an individual being a director of Purpose Investments Inc. and a director of Wealthsimple Financial Corp. However, the individual is not involved with, nor has any ability to influence, investment decisions at Wealthsimple.
Referral arrangements.
We may enter into an arrangement where we receive or pay a referral fee for referring you. This may give rise to the perception that our interests are divergent from you in receiving this referral.
The terms of any referral arrangements made in respect of you will be disclosed to you before any referral takes place.
Referral arrangements with Business Development Representatives.
WSI and WSII have entered into a referral arrangement with Wealthsimple Technologies Inc. (“WSTI”) whereby Business Development Representatives (“BDRs”) employed by WSTI will promote products offered by WSI and WSII. In return, WSI and/or WSII will pay BDRs a referral bonus based on assets transferred to the products they offer. The possibility of a conflict of interest may arise in any paid referral arrangement. In this case, BDRs are receiving a referral bonus based on transferred assets for referring you to WSI and/or WSII and this payment may have impacted their decision to refer you.
WSI and WSII have in place policies and procedures to review this referral arrangement on at least an annual basis.
WSI and WSII must assess the appropriateness of the account, and in the case of WSI, the suitability of the account.
As applicable, WSI and WSII must review for suitability and/or appropriateness as part of their regular operations.
We provide disclosure of these arrangements to clients at the time they are promoted by the BDRs.
Wealthsimple Technologies Inc. is a software development and technology company that does not perform any regulated functions. All activities under this referral arrangement requiring registration will be performed either by WSI or WSII. For more information about the regulatory licences and specific products offered by WSII and WSI please see here.
Personal financial dealings with clients.
Employees engaging in personal financial dealings with clients may be perceived as being inappropriately influenced.
We have established policies and procedures to prohibit personal financial dealings with clients, except for clients who are family members.
Vendor selection/outsourcing arrangements.
We select vendors for the purposes of outsourcing certain services. We may be perceived as favouring vendors that provide us with certain benefits or rebates.
We have established policies that are reasonably designed to ensure Wealthsimple controls costs while mitigating risks associated with vendors including performance and security related risks.
Sharing of information between related entities.
We may make information about you available to our related entities within Wealthsimple. This may give rise to the perception that, when providing products to you, we will favour the business interests of these related entities.
We have established policies that are reasonably designed to ensure Wealthsimple complies with applicable privacy laws and regulations with respect to handling of client information, including our Privacy Policy. A copy of our Privacy Policy can be found here.
Receipt of rebates related to order routing.
We route client orders to executing brokers for trade execution. In Canada, WSII and/or its executing brokers may receive marketplace rebates, and in the U.S., WSII and/or its executing brokers may receive remuneration in the form of cash, rebates and/or credits against fees in return for routing client orders to certain trading destinations (electronic communications networks, market makers and exchanges).
We have established policies that are reasonably designed to ensure WSII complies with applicable securities laws and regulations with respect to handling of client orders, including our Best Execution Policy.
WSII will take all reasonable steps to achieve best execution for client orders and will not allow rebates to influence that obligation. A copy of our Best Execution and Order Handling disclosure can be found here.
Compensation and fees.
We earn compensation by selling products and services to you for which you pay us. Generally, the more money you invest with us and the more products and services you use, the more compensation we earn. This may give rise to the perception that, when providing products to you, we will favour our own business interests.
We endeavour to be fully transparent on fees and commissions and fully inform you of any increases in advance so that you know what you will be paying.
We have implemented a standard fee schedule based on measurable criteria including client account size, offering a wide variety of pricing options to choose from.
Information about our fees and commissions can be found on our website at https://www.wealthsimple.com/en-ca/pricing and in your account opening documentation.
Wealthsimple Investments Inc. and Self-directed Investing Accounts
Related/connected issuers.
We may make available to you products of related and connected issuers of Wealthsimple. This may give rise to the perception that, when providing products to you, we will favour the business interests of these related issuers.
We will only buy or sell the securities of related or connected issuers on behalf of our clients in accordance with applicable securities laws and with the express instruction of those clients.
We indicate securities that are for related or connected issuers of Wealthsimple in the user agreement, on your trade confirmations and your account statements.
Fully Paid Lending and Selection of Positive and Negative Rate Loans.
In high interest rate environments, WSII may loan client securities at a positive rate (i.e., pay a borrower to borrow the securities) as the interest income from the cash collateral received exceeds the fee paid to the borrower. In some market circumstances, a client may benefit more from having their securities lent at a positive rate, but WSII would prefer a negative rate loan.
We will always preference a negative rate loan.
We will generally only engage in positive rate loans when negative rate loans are unavailable. We engage in positive rate loans as clients can benefit from earning income on positive rate loans, and the alternate option would be for clients’ securities to not be loaned at all (with no income earned).
Wealthsimple Inc. and Managed Investing
Compensation arrangements and sales practices.
We may compensate our portfolio managers by a combination of one or more of the following:
Base salary.
Bonus based on the value of assets under administration.
These arrangements may be perceived as inappropriately influencing an employee.
We address the conflict inherent in the compensation and incentives received by our representatives through a comprehensive approach to compensation design that incentivizes our representatives to put your interests first ahead of their own.
We cannot and do not provide recommendations or advice solely for the purpose of generating revenue for us without any benefit to you.
Discretionary managed accounts investing in related or connected issuers.
We may, on your behalf, buy or sell securities of related issuers or connected issuers. This may give rise to the perception that, when providing products to you, we will favour the business interests of these related or connected issuers.
Additionally, when your portfolio is invested in Wealthsimple ETFs, such as those found in an SRI portfolio, WSI will benefit by receiving a portion of the MER fees for those ETFs.
We will only buy or sell the securities of related or connected issuers on your behalf in accordance with applicable securities law and based on our good faith determination of your best interests.
Wealthsimple managed investing fees.
Wealthsimple makes money when you have more assets in your account, which means we are incentivized to encourage you to add assets to your account. In certain situations, and at certain times, it may be better for you not to add more assets to your account. This would create a potential conflict of interest between advising you to grow your account versus a strategy less profitable for Wealthsimple.
We endeavour to be fully transparent on fees and commissions, and fully inform you in advance so that you know what you will be paying. Information about our fees can be found on our website.
As a portfolio manager, we have a duty to act in your best interest and will make decisions based on what is right for you.
Affiliate relationships and outsourcing.
WSII is the custodian that WSI uses to hold your assets and execute trades, among other brokerage services used to support your Wealthsimple Managed Investing account. That means that you are a client of both WSI and WSII; however, WSII does not provide any investment advice.
WSII is registered as an investment dealer in each province and territory of Canada and is a member of CIRO and the CIPF. WSII and WSI are separate, but affiliated entities. Although they are separate entities, information about you and your account may be shared between WSI and WSII in order to service your account.
Allocation of limited investment opportunities.
When allocating investment opportunities to clients, we may be perceived as favouring one client or group of clients over another when allocating these opportunities, as they are limited.
We have established policies that are reasonably designed to ensure the allocation of investment opportunities amongst client accounts is performed in accordance with applicable securities laws and regulations.
We are committed to treating your accounts fairly and will not display favouritism or discrimination. In circumstances where subscriptions or orders for multiple accounts may be grouped and submitted together, each account generally receives its pro rata share and the same blended price of each fill wherever practicable. In the event that securities are purchased for the accounts of more than one client and an insufficient number of securities are available to satisfy the purchase order, the securities available will be allocated to the extent reasonably possible pro rata based on the size of the accounts.
There may be times, however, where strict application of this policy would not lead to a fair, practical and reasonable allocation. In such circumstances, allocation by a method other than this policy will be permitted, provided that such allocation produces a fairer and more reasonable result for all accounts involved.
MER fee rebates.
WSI may negotiate MER fee rebates with third-party investment fund managers in respect of non-Wealthsimple ETFs. This may give rise to the perception that, when providing products to you, we will favour our own business interests.
When successful, WSI will share the benefit of such rebates with you by adjusting the price of the applicable ETFs.
We select ETFs that are better suited for our clients notwithstanding any rebates granted. We cannot and do not provide recommendations or advice solely for the purpose of generating rebates for us without any benefit to you.
Wealthsimple Investments Inc. and Crypto
Crypto staking.
We select validators for the purposes of staking rewards. Under the commercial agreements between WSII and validators, the validators may pay some of this share of staking rewards to WSII for arranging the staking with nodes operated by the validators.
We have adopted policies and procedures for the approval of validators and delegation of client crypto assets to validators ensuring that these decisions are based on factors other than financial considerations under commercial agreements. The performance of validators is assessed on a recurring basis.
Crypto-asset Inventory.
WSII may buy, hold and sell crypto-assets in its inventory for operational purposes, such as payment of network/transaction fees required to transfer crypto-assets, facilitating client sales and withdrawals, and testing.
WSII will not take any long or short positions on crypto-assets for speculative or investment purposes.
WSII does not operate a marketplace nor does it engage in proprietary trading or market making.
Buying and selling crypto-assets.
WSII earns compensation when you buy and sell crypto-assets on our platform. This may give rise to the perception that we will favour our own business interests.
WSII does not have any authority to act on a discretionary basis on behalf of clients.
WSII has adopted policies, procedures and controls designed to mitigate any potential conflicts of interest that may arise from WSII earning revenue when you buy or sell crypto assets and any incidental profits from holding crypto assets for operational purposes.
Information about our fees and commissions can be found on our website at https://www.wealthsimple.com/en-ca/legal/fees/crypto and in your account opening documentation.
The Wealthsimple Private Credit, Private Equity and Venture Funds (the “Funds”)
Expense allocation.
Expenses may be allocated to the Fund relating to the services of WSII, WSI or another affiliate. When we allocate fees for our services to the fund, we may be perceived as favouring our business interests ahead of the Fund and its investors.
We ensure that expenses allocated to the fund have a direct relationship to the daily operation of the fund and are fair and reasonable. To the extent possible, these expenses are disclosed to you.
Affiliate outsourcing.
WSI will act as portfolio manager of the Funds and WSII will act as investment fund manager. In addition, for the Private Credit Fund, Wealthsimple has appointed Sagard Holdings Manager (US) LLC (together with its affiliates, “Sagard”) to act as credit manager. Sagard is an affiliate of Wealthsimple. This may give rise to the perception that, when providing products or services to you related to the Funds, we will favour the business interests of these related entities.
The members of the Wealthsimple group are all separate legal entities, each with tailored compliance systems. We only enter into transactions and arrangements within the Wealthsimple group where they are permitted under applicable securities laws.
Sagard is a separate legal entity that carries on its business independent of the Wealthsimple group.
We establish services agreements between the members of the Wealthsimple group and/or Sagard so that all parties are contractually bound to carry out their duties.
We conduct due diligence and ongoing monitoring of services being provided in a similar manner as if the companies were not related entities.
Where necessary, we use independent third-party resources including auditors and valuators to calculate and verify the value of the underlying assets and fees.
We have clear criteria for how to process purchases and redemptions detailed in each Fund’s documentation and/or disclosure.