Conflict of Interest Client Disclosure

Prime Quadrant Corp. (“Prime Quadrant”, the “Firm”, “we” “our”, “us”) is providing you with this Conflict of Interest Disclosure in accordance with new laws that come into force on June 30, 2021. This document describes existing or reasonably foreseeable material conflicts that may affect your interests as our client, including how we address those conflicts in your best interest. You should refer to Prime Quadrant’s Relationship Disclosure Information document for other information that you may find important about your relationship with us including but not limited to, the services we offer, the fees and expenses we charge you and the risks that you should consider when making investments. A conflict of interest can include any circumstance where:

(a) the interests of different parties, such as the interests of the Firm and those of a client, are inconsistent or divergent;

(b) the Firm or one of its registered representatives may be influenced to put their interests ahead of a client’s interests; or

(c) monetary or non-monetary benefits or disadvantages accrue to Prime Quadrant or its registered representatives that might compromise the trust that a reasonable client has in the firm or any of its registered representatives.

Whether a conflict is “material” or not depends on the circumstances. In determining whether a conflict is material, we will typically consider whether the conflict may be reasonably expected to affect the decisions of our clients in the circumstances, and/or the recommendations or decisions of the Firm or its registered representatives in the circumstances. What follows below are details regarding the specific material conflicts of interest that we have identified to date. In case other material conflicts of interest arise, which may happen from time to time, we will inform you of the nature and extent of any such other conflicts of interest prior to any of your subsequent transactions with us or our advice to you.

1. Proprietary Products and Connected Issuers

For the purposes of this summary, (i) the word “connected” is intended to involve a state of indebtedness to, or other relationship with, the registrant or those “related” to the registrant that, in connection with a distribution of securities, would be material to a purchaser of the securities; and (ii) the word “related” is intended to involve positions permitting, through ownership or otherwise, a controlling influence, and would include all companies under a common controlling influence.

Prime Quadrant’s business model includes managing certain proprietary funds (the “Prime Quadrant Funds”). The Prime Quadrant Funds are connected/related to Prime Quadrant because the Firm established the Prime Quadrant Funds and acts as their portfolio manager and investment fund manager. Please see Schedule A for a list of all related and connected entities of Prime Quadrant.

Regulators have noted that where a registered firm distributes securities of connected/related issuers, a material conflict of interest exists because Prime Quadrant may have an incentive to recommend the Prime Quadrant Funds to its clients over other third party funds that do not provide similar incentives. Prime Quadrant may also be incented to fail to disclose or provide inadequate disclosure to investors about the Prime Quadrant Funds in cases where there is negative information (for example, where a company owned by one of the Prime Quadrant Funds is experiencing financial difficulty), resulting in investors taking on more risk than they could, or wish to, bear.

Prime Quadrant takes the following steps to mitigate the actual and potential conflicts of interest described above:

On an annual basis, Prime Quadrant conducts an analysis of similar funds available to a similar client base. Prime Quadrant is comfortable that the Prime Quadrant Funds compare favorably to these similar funds.

  • Prime Quadrant has policies and procedures in place to ensure that its dealing representatives conduct a suitability analysis for each client accepted into the Prime Quadrant Funds. This suitability analysis ensures that the Prime Quadrant Funds are appropriate for that client. Certain types of clients may be able to waive this suitability.
  • In conducting its suitability analysis for a client, each representative of Prime Quadrant will have a thorough understanding of: (i) the structure and features of the Prime Quadrant funds; and (ii) amongst other client information, the personal and financial circumstances of that relevant client.
  • Prime Quadrant has retained independent legal and regulatory counsel to provide ongoing training regarding a representative’s suitability obligations when accepting a client into the Prime Quadrant Funds.
  • Prime Quadrant representatives are not directly incentivized for accepting a client into the Prime Quadrant Funds. Specifically, no Prime Quadrant representative is subject to sales or revenue targets or earns commission based on Prime Quadrant Funds recommended or sold.

2. Third Party Compensation

Prime Quadrant may recommend third party products that in turn provide compensation to Prime Quadrant. Specifically, Prime Quadrant may receive: i) referral or distribution fees from third party managers; or ii) structuring fees for assisting with creating a third-party fund share class that would appeal to Prime Quadrant clients.

Absent appropriate controls, clients may perceive a Prime Quadrant recommendation as being driven by third party compensation as opposed to what is appropriate for the client. Prime Quadrant takes the following steps to mitigate the actual and potential conflicts of interest described above:

  • All referral or distribution fees received by Prime Quadrant are rebated back to Prime Quadrant clients. Prime Quadrant does not retain any referral or distribution fees collected on account of a recommendation to a third-party manager.
  • Prime Quadrant specifically discloses any third-party fee arrangements to its clients.
  • Third party compensation does not factor into Prime Quadrant’s investment product reviews in any way.
  • Prime Quadrant employees are not directly incentivized to recommend any specific product.

3. Internal Compensation Arrangements

Prime Quadrant’s employees may be incentivized to recommend certain products or services over others. Specifically, Prime Quadrant offers several family office type services and its employees could be perceived as being motivated by the Firm to encourage a client to expand its services with Prime Quadrant. Additionally, Prime Quadrant employees could be perceived as motivated by the Firm to encourage the purchase of any of the Prime Quadrant Funds.

Prime Quadrant takes the following steps to mitigate the actual and potential conflicts of interest described above:

  • Prime Quadrant employees are not directly incentivized to recommend any specific product.
  • The majority of any Prime Quadrant employee’s compensation is paid on a fixed salary basis. Any variable bonus element of employee compensation is significantly smaller than the fixed component.
  • Variable bonus employee compensation is determined on clear criteria that do not include revenue targets and generally revolves around Prime Quadrant client satisfaction.
  • The Chief Compliance Officer reviews client files and suitability recommendations of registered Prime Quadrant employees from time to time. Prime Quadrant employees understand that any variable bonus compensation could be affected if suitability issues are found during these reviews.

4. Conflicts at the Supervisory Level

One of the mitigation tools that Prime Quadrant uses to control for the compensation conflicts of its employees (see Item 3 above) is a Chief Compliance Officer review of suitability recommendations. However, it may be perceived that the Chief Compliance Officer himself could be conflicted during these reviews in that he also may receive variable bonus compensation. To address this conflict, Prime Quadrant has structured the compensation of its Chief Compliance Officer such that any variable bonus compensation represents a small portion of his overall compensation package.

5. Fee Based Accounts

Prime Quadrant could be conflicted where it holds commission-based securities in fee-based accounts. Specifically, it could be perceived that Prime Quadrant is obtaining dual compensation in that it is earning any fees associated with the management of the account while also recommending securities that drive additional compensation to Prime Quadrant. This is sometimes referred as “double charging” the client. However, as Prime Quadrant: i) rebates any and all commissions earned from third parties for any of its recommendations; and ii) does not charge a fund advisory fee for any of its Prime Quadrant Funds invested through a fee based account, Prime Quadrant will never “double charge” a client.

6. Referral Arrangements

Prime Quadrant does not actively seek out referral arrangements. However, from time to time, Prime Quadrant may enter into referral arrangements where another party refers clients to us or where we refer clients to a third party for a fee.

When referring a client to a third party, or accepting a referred client, Prime Quadrant must ensure that such a relationship is in the best interest of the client. Prime Quadrant should not enter into a referral arrangement solely because of the referral fee that they will receive from that party. Furthermore, if a client pays more for the same, or substantially similar, products or services as a result of a referral arrangement, Prime Quadrant would not be seen as appropriately discharging its obligations to its clients.

In order to mitigate any actual or potential conflicts, Prime Quadrant will bring the referral relationship and the terms of that referral relationship to the attention of the referred client. In addition to client disclosure, Prime Quadrant has adopted several procedures to ensure it determines that accepting a referral is in a referred client’s best interest. These procedures include: (i) requiring Chief Compliance Officer approval of any referral arrangement; (ii) conducting due diligence on potential third-party referrers; (iii) ensuring that the referred client does not pay additional fees or compensation for the same service or product provided to other Prime Quadrant clients as a result of the referral arrangement; and (iv) keeping a record of all payments related to Prime Quadrant’s referral arrangements.

7. Affiliated Firms Providing Other Products or Services

Prime Quadrant’s parent company is Focus Financial Partners, a US based company that invests in wealth management firms. One of the managers that the Prime Quadrant Funds may invest in is SCS Financial. SCS Financial’s parent company is also Focus Financial Partners.

Additionally, Prime Quadrant sponsors the Prime Quadrant Foundation (the “Foundation”), a non-profit organization whose mission is to improve the quality of life and healthcare in the community. The Foundation hosts events such as the Lunches with Legends series. This series is promoted by Prime Quadrant to its clients as learning and networking opportunities.

The above affiliated companies operate in the financial services sector. Accordingly, it may be perceived that Prime Quadrant would be inclined to prefer these related parties over other entities or services which may be a better solution for Prime Quadrant clients. As an example, it may be perceived that a Prime Quadrant Fund is only investing in SCS Financial due to Prime Quadrant’s relationship with Focus Financial Partners. Furthermore, the Foundation is run by employees of Prime Quadrant and employs a similar name and branding. Clients may become confused as to which entity they are dealing with, the Foundation or Prime Quadrant.

Prime Quadrant takes the following steps to mitigate the actual and potential conflicts of interest described above:

  • The Prime Quadrant Funds employ: i) a robust and documented due diligence process; and ii) ongoing performance monitoring processes. Accordingly, any investment in SCS Financial can be objectively substantiated.
  • Prime Quadrant employees are prohibited from investing in Focus Financial Partners.
  • Prime Quadrant employees are not directly incentivized to recommend any specific product.
  • Prime Quadrant employees employ policies and procedures to ensure that written communication, business cards and presentations always clearly identify what entity that employee is currently acting for. This identification policy mitigates any client confusion.

8. Outside Activities

Prime Quadrant’s registered individuals may become involved in other activities outside of their employment with Prime Quadrant (e.g., sitting on boards of directors or providing volunteer services for a charity). These outside activities could: (i) impact the amount of time a Prime Quadrant registered individual spends on Prime Quadrant employment or registration obligation; and (ii) create a conflicting interest as to how a Prime Quadrant registered individual discharges its obligations to Prime Quadrant or its clients.

Prime Quadrant has policies and procedures to ensure that all outside activities are reported to and considered by its Chief Compliance Officer. The Chief Compliance Officer will only approve such outside activities that do not conflict with Prime Quadrant operations or obligations.

9. Best Execution

Prime Quadrant may hire a brokerage firm to execute trades on behalf of the Prime Quadrant Funds based on a pre-existing relationship, rather than objective qualitative or quantitative considerations. This is considered a best execution conflict of interest.

Prime Quadrant has policies and procedures to ensure that when Prime Quadrant directs brokerage transactions to brokers, the service is comparable to that which Prime Quadrant may obtain from other brokers and the commission rates are equivalent to or better than those that would have been normally charged by the broker. Prime Quadrant monitors the level of service provided by any broker retained on behalf of the Prime Quadrant Funds with respect to the cost and execution of trades.

10. Fair Allocation of Investment Opportunities

Prime Quadrant owes its clients a duty to treat each client fairly. This duty must be considered when allocating investment opportunities.

Non-Exempt Securities

Where an allocation is insufficient to meet the demand of each interested client, as a general policy, and to the extent that no client will receive preferential treatment, the Firm will address fair allocation for Non-Exempt Investment Opportunities as follows:

  • where orders are entered simultaneously for execution at the same price, or where a block trade is entered and partially filled, fills are allocated proportionately based on the amount of each client’s order or account equity as appropriate;
  • where a block trade is filled at varying prices for a group of clients, fills are allocated on an average price basis; and
  • in the case of IPOs (again, not securities the Firm expects to recommend to clients but included here for the sake of completeness), participation is allocated proportionately based on the amount of each client’s order or account equity as appropriate.

Further detail regarding our fair allocation policy is contained in our compliance manual and is available upon request.

Exempt Securities

Where an allocation to an exempt market investment opportunity is insufficient to meet the demand of all interested clients, as a general policy, and to the extent that no Family Portfolio Consulting (“FPC”) or Investment Solutions (“IS”) client will receive preferential treatment, all orders received from FPC and IS clients will be prorated to match the capacity. If there is more capacity than demand for an investment opportunity from FPC and IS clients, the additional capacity will be offered to transactional clients of Prime Quadrant (“Transactional Clients”). For further clarification, Prime Quadrant will offer all of its FPC and IS clients the opportunity to participate in an investment offering. It may choose not to do the same for Transactional Clients.

In certain situations, a manager may impose a minimum investment threshold for a particular offering. Where a required pro-rata allocation would prevent a client or client(s) from investing by reducing their investment amount below that threshold, Prime Quadrant will endeavor to allocate the minimum to those impacted clients before pro-rating the remaining capacity amongst larger orders, in an effort to maximize participation opportunities amongst its clients.

In furtherance of Prime Quadrant’s policy that it puts its own capital alongside its clients, Prime Quadrant employees may also invest, however such employees may only invest where there is sufficient allocation for all existing clients to first participate.

Prime Quadrant may choose to override the above fair allocation approach in the event Prime Quadrant believes it appropriate to allocate a particular investment to a smaller group of Prime Quadrant’s clients. It may also cap an individual client’s allocation relative to the overall size of the opportunity or their portfolio if appropriate for the situation based on suitability and concentration. Should this occur, Prime Quadrant will still ensure that all FPC and IS clients are treated equitably on an aggregate basis over time. Specifically, while an FPC or IS client may not be presented with a specific investment opportunity, over the course of their relationship with Prime Quadrant they will be exposed to comparable opportunities on an aggregate basis.

Further detail regarding our fair allocation policy is contained in our compliance manual and is available upon request.

11. Gifts and Entertainment

While it is recognized that conducting business may involve some modest exchange of gifts and business-related entertainment, the value of such gifts and entertainment must not create a real or perceived conflict of interest and must not impair the independence or objectivity of the recipient.

Prime Quadrant has policies and procedures in place with respect to the receipt or giving of gifts and/or entertainment. These policies and procedures require employees to contact the Chief Compliance Officer with any concerns about the receipt or giving of a gift or entertainment and whether that may create a conflict of interest. Further, employees are required to notify the Chief Compliance Officer upon receipt of a gift or entertainment in excess of $200 (on an individual basis).

Schedule A

Related and Connected Entities of Prime Quadrant

Table outlining Prime Quadrant's related and connected entities
Related and Connected Entities Chart
Contact Us
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Copyright © 2021 Prime Quadrant Corp. All rights reserved. Privacy Policy.

The offering, sale, and/or distribution of the products or services described on this website are not intended for any U.S. Person. If you intend to obtain any product or service from Prime Quadrant that is described on this website, you must first inform Prime Quadrant whether you are a U.S. Person. This website and its contents do not constitute an offer or invitation to purchase or subscribe for any securities or a solicitation of any offer to sell any securities to U.S. Persons. “U.S. Persons” are generally defined as natural persons residing in the United States, or entities organized or incorporated under the laws of the United States. U.S. citizens living abroad may also be deemed “U.S. Persons”.

References herein to Prime Quadrant refer to Prime Quadrant Corp., which is registered as a Portfolio Manager and Exempt Market Dealer in Alberta, British Columbia, Manitoba, Ontario and Quebec, and as an Investment Fund Manager in Ontario and Quebec.