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Disclosure Policy

What do we mean by Conflict-Free Investment Research?

At 5i Research, we are well aware of the potential conflicts in the investment industry. Analysts are conflicted to give a positive view of a covered company so the company is encouraged they do deals with their bank. Advisors can be conflicted due to commissions or pressure to sell their company funds and products. Analysts or writers might be biased due to their ownership of a company or might not talk about a company they own due to the potential restrictions on trading that stock. The only real way around this that we can see is to simply not trade stocks in the market for which you cover. This is why analysts at 5i Research cannot trade in any new Canadian stocks and cannot add to any positions of Canadian stocks. We also do not take payments to cover or issue reports on any companies or funds. Since we still need to be able to invest for ourselves and we love the process of investing, analysts are allowed to trade in ETF’s and/or Mutual Funds traded in Canada as well as securities traded in the US and in international markets (excluding stocks that are cross-listed on a Canadian exchange). So, if we are discussing Canadian stocks at 5i Research, you can be confident that there are no conflicts in the opinion being provided. 

General Disclosure Policy:

  • When a writer or analyst writes a report or article on a stock, ETF, or Mutual Fund, they are to plainly disclose any position or beneficial interest that they have at the end of the article/report.
    • In the case of lists, filters or general headline/news summaries that are done, disclosure of a position is not required (due to the general nature of providing a list) unless the writer specifically addresses a holding within the list that they have exposure to.
    • From time to time, third-parties might provide content to 5i Research. In these cases, they are to disclose any position or beneficial interest they may have at the time of writing at the end of the content.
    • In general, if a formal opinion or report is published, any positions or interest are to be disclosed at the end of the subject matter.

Disclosures for Canadian Stocks

  • At the end of all formal research reports within 5i Research, members will see disclosure that “No employees of 5i Research hold a position in companies mentioned and cannot initiate a position in individual Canadian stocks”.
    • Due to our no-conflict policy for Canadian stocks, this should always be the case.
    • If a circumstance were to arise where an analyst holds a Canadian stock and discusses it, disclosure of this is required.
      • This circumstance might arise when a new analyst joins the team and is in the process of selling their Canadian holdings.
      • Analysts are encouraged to hold no Canadian stocks upon joining 5i Research but if they do still hold a security, any interest is to be disclosed.
      • Due to past business, 5i Research Founder Peter Hodson owns legacy positions in two Canadian stocks. As long as this is the case, 5i Research will not discuss these securities across any of the 5i services.
      • For third parties providing content for 5i Research where they are providing their opinion, disclosure is required.

Disclosures for Non-Canadian traded Stocks (US and International) and Funds (Canadian or otherwise) 

Since analysts are able to trade in non-Canadian markets as well as funds, members need to be aware that conflicts can and will exist if considering any of 5i’s views or opinions on these stocks or funds. From time to time, 5i Research might also have services where non-Canadian stocks are discussed.

  • When a writer or analyst writes a report or article on a stock, ETF, or Mutual Fund, they are to plainly disclose any position or beneficial interest that they have at the end of the article/report.
  • If they do not hold a position in holdings mentioned, they are to plainly disclose this as well for the sake of clarity.
  • The analyst who is responsible for and providing the final opinion or view is the one required to make the appropriate disclosure. This means other analysts that were separate from the formulation of any opinion might still hold positions in stocks discussed. If the final opinion writer feels they have been influenced by another analyst who has a conflict, that analysts’ conflict is to be disclosed as well.

Disclosures within the Question and Answer (Q&A) section:

We offer a unique and high value service within the basic 5i Research service where we do our best to leave the question asker with more information on a stock, idea, strategy, etc. than they had before. While the question asker can be confident that there are no conflicts for Canadian stocks discussed, they need to be aware that when asking any questions on Funds and/or non-Canadian traded investments; there might be a conflict. To address this, every e-mail response includes a note that we ’may hold a position in funds or US and international securities mentioned’. 

We have thought about explicit disclosures within the Q&A service but have decided against this step for a few reasons:

  • Questions are submitted by the member where an opinion is being requested. 5i Research is not soliciting the opinion in any formal way.
  • We answer many questions, and disclosures for portfolio holdings within this section would be burdensome for both the analyst and the member experience.
  • We do not want a member to misconstrue our ownership of a security to mean it is appropriate for a general audience or that it might be a holding that we have a high opinion of, regardless of the answer provided. We do not know who is asking the question and the member may have a very different situation than the analyst. Essentially, we do not want members to try to read between the lines, especially since there may be nothing ‘between them’.
  • There is a responsibility on the member at the end of the day as well: We are clear that we cover Canadian stocks only within the basic 5i Research service, which includes the Q&A section, and it is the members own decision if they choose to ask for an opinion outside of this realm. If a member wishes to seek our views outside of this realm while using the basic 5i service, they need to understand that they are willingly opening themselves up to potentially receive a conflicted opinion. As always, if a member sticks to questions on Canadian traded stocks, they can be confident that conflicts do not exist in any answer. 

Trading Restrictions

The trading restriction for Canadian stocks is that analysts at 5i Research are not allowed to trade in new Canadian stocks.

In the rare cases previously mentioned for legacy positions and/or new employees in transition, if they provide an opinion or report on a Canadian security with which they are exposed, they are to disclose it (as previously mentioned) and also not sell any shares within a 48-hour period (48-hours means business days only, not weekends when markets are closed). 

From time to time, 5i Research might offer formal opinions or reports on US or International stocks or offer services that discuss non-Canadian stocks. For these reports where an opinion is being presented, any interest in the holdings is to be disclosed and the analyst cannot trade in the security or direct others to trade in the security on their behalf (such as a financial advisor of the analyst) within 48 hours of the publish date. 

There may be situations where an analyst has given discretionary authority to another party for the management of their portfolio. In these cases, there are no restrictions on the trading of non-Canadian securities but the analyst still cannot direct the manager to make changes within the 48-hour period. 

If an editor has become privy to information such as a formal opinion, they are also restricted from trading in the holding within 48 hours of publishing.

We do not require trading restrictions on ETFs or Mutual Funds but analysts are encouraged to disclose changes they plan on making within 48 hours of a published opinion.

Finally, we do not have trading restrictions for non-Canadian stocks that are addressed inside of the Q&A section. We answer numerous questions daily and requiring a restriction would simply be too onerous of a request for analysts at 5i Research.

Conclusion

We hope you find this document to be transparent and helpful in understanding our disclosures. While we do our best to ensure the appropriate disclosures are made at all times, there is always potential that a disclosure gets missed and we will do our best to rectify the situation. However, like always, the member or user of the web site is still responsible for their own decisions when making investments and disclosures do not limit this responsibility. 

We are happy to receive feedback on this document at info@5iresearch.ca.