The purpose of this policy is to let participants in Coinut’s marketplace (“Clients”) and regulators alike know how Coinut Canada Ltd. (“Coinut”) identifies and addresses potential conflicts of interest in order to best serve Clients.
Introduction to Coinut
Coinut 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”) through Coinut. The Platform is made available through Coinut’s website and mobile application. Coinut has been registered as a restricted dealer in Ontario subject to specified terms and conditions that are the subject of a specific order and as such may not be subject to all requirements otherwise applicable to an investment dealer and IIROC member, including those that apply to marketplaces and to trading on marketplaces. Coinut’s principal regulator is the Ontario Securities Commission.
Applicable securities laws 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.
Coinut is registered as a restricted dealer in Ontario. Applicable securities laws require restricted dealers to: (i) identify existing and reasonably foreseeable material conflicts of interest between a Client and Coinut or any individual acting on Coinut’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.
Coinut is wholly owned by a Singaporean company, Coinut Pte. Ltd. (“CPL”).
Coinut recognizes that potential or perceived conflicts of interest may have a negative effect on investor confidence. In accordance with applicable securities laws, this document serves to capture some of these potential conflicts of interest and how they are addressed.
Participation of BCP on the Platform
The Founder of Coinut uses a Singaporean company named Block Calculus Pte. Ltd. (“BCP”), which is fully owned and controlled by himself, to provide liquidity in Coinut’s marketplace. BCP’s primary business purpose is to support and enhance liquidity and price discovery on the Platform. BCP gathers pricing data from third-party platforms, aggregates that external pricing data and, in turn, places bids and offers across the Platform’s order books. BCP’s trading strategies are designed to provide liquidity around the prevailing market trading price and to offset any purchases or sales simultaneously through third-party platforms. No compensation is provided to BCP for participating on the Platform, although it may earn a spread through its offsetting transactions through third-party platforms by using its capital to perform arbitrage strategies. BCP uses the same API and is subject to the same fee rates as all other liquidity providers in the marketplace.
Due to potential conflicts of interest arising in connection with BCP’s participation on the Platform, Coinut implements specific escalation procedures to ensure appropriate governance oversight: (i) where a user complains about the conduct of BCP; (ii) where BCP is a contra-party to a trade which is requested to be amended, cancelled or corrected (whether the request is made by BCP or the other contra-party); and (iii) in connection with its monitoring and supervision of BCP’s trading activities. In keeping with the “Fair Access” requirements set out in applicable securities laws, Coinut does not provide any preferences, benefits, information or special pricing to any Client, including any Coinut affiliate or related party that may access the Platform (such as BCP).
All Clients pay Coinut the same standard Coinut Client fees to trade on the Platform and no Client receives any rebates or any other preferential price incentives.
Coinut does not currently support any referral arrangements between the marketplace and any service providers or vendors. Coinut only gets paid directly by the Clients.
Coinut supports a standard referral arrangement in which Coinut agrees to pay a referral fee to existing Clients for referring new Clients to Coinut. Under these referral arrangements, the existing Client is generally entitled to receive 30% of the trading fees paid to Coinut by the referred Client for a period of one year following the referred Client’s registration on the Platform.
If Clients are part of a referral arrangement, they will receive written disclosure of the referral arrangement to ensure they understand the extent of the referring Client’s financial interest in the referral arrangement, any potential conflict and the general terms of the arrangement prior to any services being provided. All Clients, regardless of how they became Clients, are treated equally and fairly.
Disclosure to Clients and Regulators
Applicable securities laws require public disclosure of these policies on the marketplace’s website. This document is published on the “Policies” page of the Coinut website under the heading “Regulatory Policies”.
Coinut recognizes that new actual or perceived conflicts may arise as the result of business developments and/or regulatory changes. Consequently, these policies and procedures may be amended from time to time and each time a material amendment is made, the most current version of this document will be published to the Coinut website.
Conflict Identification and Management
Coinut treats seriously the management of all potential conflicts of interest. Consequently, Coinut operates its marketplace with an eye to maintaining a robust level of integrity. To do so, Coinut operates its marketplace in a fair, orderly and transparent manner, addressing the following subject matter:
- the identification and addressing of possible conflicts of interest;
- the disclosure of ownership interests, such as BCP’s ownership of Coinut;
- the ensuring of proper supervision from several viewpoints: commercial, regulatory, financial and compliance; and
- reviewing any personal dealings.
Identification of Conflicts
It is important to have a means to properly identify and address situations wherein even unintended conflicts may arise. In all cases, Coinut employees, officers and directors and any employees, officers, directors or contractors of any Coinut outsourced service provider working directly on behalf of Coinut (collectively, “Coinut Personnel”) are advised to refer to any and all applicable conflicts-related policies and procedures of Coinut.
Specific to operating a marketplace, below are some principles which govern conflict situation identification:
- Coinut’s priority is to provide a stable, fair and orderly market with transparency of policies and process. This aim must not be overridden by any commercial interests of Coinut or any of its affiliates, Clients or outsourced service
- Coinut must make similar prioritization of the good of the marketplace and all Clients, over commercial interests of any affiliate owner or any client of any such affiliate owner, when making regulatory, financial, supervisory or compliance decisions.
- Coinut Personnel and Clients should similarly not attempt to inappropriately influence such
- Such decisions should also be in accordance with the letter and spirit of the marketplace rules identified in applicable securities laws, other applicable regulations and internal Coinut and CPL policies and
- Coinut Personnel must maintain the confidentiality of all Client information.
In respect of Coinut’s activities as a restricted dealer, a “conflict of interest” generally may arise where:
- the interests of different parties, such as the interests of a Client and those of Coinut or any of its employees, are inconsistent or divergent;
- Coinut may be influenced to put its interests ahead of a Client’s interests; or
- monetary or non-monetary benefits or disadvantages to Coinut that may compromise the trust that a reasonable Client has in Coinut.
Generally, a conflict of interest is considered material if the conflict may be reasonably expected to influence either a Client’s decisions or Coinut’s or its representatives’ recommendations or decisions in the circumstances.
Coinut is the sponsoring firm for certain registered individuals (the “Registered Individuals”). Registered Individuals must take reasonable steps to identify existing material conflicts of interest, and material conflicts of interest that are reasonably foreseeable, between the Registered Individual and the Clients. If a Registered Individual identifies a material conflict of interest, the Registered Individual must promptly report that conflict of interest to Coinut. A Registered Individual must address all material conflicts of interest between the Client and the Registered Individual in the best interest of the Client. A Registered Individual must avoid any material conflict of interest between a Client and the Registered Individual if the conflict is not, or cannot be, otherwise addressed in the best interest of the Client. A Registered Individual must not engage in any trading or advising activity in connection with a material conflict of interest identified by the Registered Individual unless: (i) the conflict has been addressed in the best interest of the Client; and (ii) Coinut has given the Registered Individual its consent to proceed with the activity.
Affiliate Support Services
Coinut relies upon non-Client-facing support from certain operational personnel of its affiliates for the following functions: finance, development, legal, human resources, technology and infrastructure.
All Coinut Personnel are required to follow the confidentiality procedures set out in internal Coinut 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.
In order to preserve proper controls and oversight, Coinut has appropriate levels of oversight by means of an Ultimate Designated Person (“UDP”) and a Chief Compliance Officer (“CCO”), as prescribed by applicable securities laws.
The UDP has ultimate control and responsibility to ensure Coinut operates in accordance with good governance principles, including confidentiality of information, managing conflicts of interest and upholding relevant rules and regulations inside Coinut.
The CCO is charged with ensuring that a proper governance structure and appropriate supervision are in place and oversees the business from a detached view with a regulatory eye. The CCO reports directly to the UDP on an ongoing basis and provides a compliance report to the UDP and the directors of Coinut quarterly.
CPL has quarterly board meetings to review the ongoing operational soundness of the marketplace. The attendees include the UDP and CCO of Coinut.
Coinut Personnel are made aware of and are trained to determine what constitutes a conflict of interest. Coinut 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 by Coinut to be material or otherwise adverse to the interests of Clients, Coinut will take reasonable steps to resolve the conflict either by denying approval for the activity or by properly mitigating the potential conflict.
Availability of Coinut’s Conflict Management Policies
This document is made available to all Coinut Personnel and is also available on the “Policies” page of the Coinut website under the heading “Regulatory Policies”.
(Last updated: )