July 1, 2022
This statement is to inform you of the nature and extent of existing material conflicts of interest and material conflicts of interest that are reasonably foreseeable: (a) between Alitis and you; and (b) between each individual acting on Alitis’ behalf and you. This statement contains both general disclosure and specific conflict situations that currently exist and will be updated from time to time as circumstances change. Applicable securities laws require us to make this disclosure to you prior to you opening an account with us. We are also required to disclose to you other material conflicts of interest which arise from time to time promptly after we identify the conflict if your interests are affected and a reasonable client would expect to be informed of the conflict.
Alitis’ Related Issuers, Connected Issuers and Associated Parties
Under certain circumstances we may deal with or for you in securities transactions where the issuer of the securities or the other party to the transaction is a firm or a party having an ownership or business relationship with us. We are required to disclose to you all entities to which we are related issuers, connected issuers, and associated parties. A related issuer means a person or company that influences or is influenced by another person or company through ownership, or direction and control over, voting securities. A person or company is connected to another person or company if, due to its relationships with such person or company, a prospective purchaser of securities of the person or company might question the other person or company’s independence from the first person or company. An “associate” means, if used to indicate a relationship with any person, (a) a partner, other than a limited partner, of that person, (b) a trust or estate in which that person has a substantial beneficial interest or for which that person serves as trustee or in a similar capacity, (c) an issuer in respect of which that person beneficially owns or controls, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to all outstanding voting securities of the issuer, or (d) a relative, including the spouse, of that person or a relative of that person’s spouse, if the relative has the same home as that person.
The following is a list of our related issuers, connected issuers and/or associated parties and a description of the relationship:
- The following Pools are managed by Alitis and Alitis receives investment management fees as disclosed in the Account Opening Documents, Term Sheet and/or Offering Memorandum for the applicable investment, and the Charges and Compensation Report provided to you, as applicable:
- Alitis Strategic Income Pool
- Alitis Income and Growth Pool
- Alitis Growth Pool
- Alitis Dividend Growth Pool
- Alitis Private Mortgage Fund
- Alitis Private REIT
- The Alitis Private Real Estate Limited Partnership (the “Partnership”) is managed by Alitis and Alitis receives investment management fees as disclosed in the Account Opening Documents, Term Sheet for the Partnership, and the Charges and Compensation Report provided to you. The general partner of the Partnership, Alitis Private Real Estate G.P. Ltd., is wholly-owned by Alitis. Cecil Baldry-White is a director and officer of this company. Cecil Baldry-White is a director, officer, employee and majority beneficial shareholder of Alitis and the ultimate designated person of Alitis. The Partnership invested in four real estate projects managed by Westurban Developments Ltd. (“Westurban”). For approximately two years Mr. Baldry-White was a director and shareholder of WestUrban. In late 2018 Mr. Baldry-White sold his shares in Westurban back to the principals, at cost, and resigned as director. The four Westurban projects which Cecil Baldry-White, through a holding company, beneficially owns non-voting Class C Units:
- Nursery Hill Limited Partnership – Mr. Baldry-White has an 18.75% interest in this project;
- Government Road Limited Partnership – Mr. Baldry-White has an 18.75% interest in this project;
- Elliott Road Limited Partnership – Mr. Baldry-White has an 18.75% interest in this project; and
- Moilliet Road Limited Partnership – Mr. Baldry-White has a 16.25% interest in this project.
As a condition to Mr. Baldry-White’s participation in the above investments, Mr. Baldry-White was required to provide personal guarantees in respect of construction financing. As at June 24, 2022, the four Westurban projects above constituted about 7.8% of the portfolio of the Partnership’s investments.
Conflicts of Interest and How They Are Managed
The activities of Alitis and its directors, officers and employees are governed by our Policies and Procedures Manual – a document which outlines how we shall operate our business so that your interests come first. Nevertheless, conflicts of interest can exist and, when they do, we deal with them by disclosing, controlling, or avoiding the conflict. The following is intended to assist you in understanding and assessing material, potential and actual conflicts of interest, including how we address them.
Investing in the Alitis Pools
Alitis is the manager of the Alitis Strategic Income Pool, Alitis Income and Growth Pool, Alitis Growth Pool, Alitis Dividend Growth Pool, Alitis Private Mortgage Fund, Alitis Private REIT and the Alitis Private Real Estate Limited Partnership and may be the manager of other pools created or managed by Alitis from time to time. If you have a managed account with us, we may purchase these pools on your behalf, as they are the primary investment vehicles used by Alitis for managed client accounts, but only where we believe they are in your best interests according to the parameters outlined in your Investment Policy Statement.
We Earn Compensation from Various Sources
We will inform you of all forms of compensation in advance so that you know what you will be paying. These include management fees, trailer and/or service fees, referral fees – all of which are outlined in the Account Opening Documents, Term Sheet and/or Offering Memorandum for the applicable Pools, the Charges and Compensation Report, Relationship Disclosure Document, Referral Disclosure Form, and/or in your Investment Policy Statement, where applicable.
Differing Levels of Compensation
Different products and services available to Alitis, as well as the Alitis Pools, may have differing levels of compensation which could encourage us to promote those that offer a higher level of compensation. We are required by industry regulations and firm policy only to make investment recommendations that are suitable and appropriate for you. We try to mitigate this issue by principally compensating employees by way of a fixed salary and bonuses that are not tied to sales activity; any compensation that is tied to sales activity is based on a bonus schedule that is not impacted by the level of compensation received from a specific investment.
Ownership of Alitis
Alitis is principally owned by Cecil Baldry-White and/or entities controlled by Cecil Baldry-White. Kevin Kirkwood, Mitchell Prothman, and Emily Hofmann also own small portions of Alitis, and it is anticipated that other employees will also become owners of Alitis in the future. As a result of such ownership, these persons will benefit indirectly from any fees earned by Alitis and/or an affiliate of Alitis. The conflicts of interest between Alitis and individuals acting on its behalf and our clients that results from ownership of Alitis by such individuals and their associates is addressed by Alitis providing full transparency of fees payable to Alitis and/or its affiliates and ensuring that there is no duplication of any investment management or other fees in respect of the operations of Alitis client accounts and the Alitis Pools.
Allocation of Investment Opportunities
Because we handle many accounts for many clients, there is the possibility that a client could receive preferential treatment and get access to investment opportunities ahead of other clients. To mitigate this concern, we allocate investment opportunities on a basis that is fair and equitable to all clients based on each client’s investment objectives and policies. No individual shall be given preferential treatment in trade executions that represent the interests of more than one client. In determining which of your accounts should participate in a given investment opportunity, and in what amounts, the following shall be taken into consideration:
- Your Investment Policy Statement,
- Your portfolio’s goals and intended risk policies,
- The intended structure of your portfolio,
- The size of your account and potential orders, and
- Settlement, compliance, credit and other practical considerations.
When a partial fill is received on a bulk order, we will generally attempt to make allocations pro-rata on the basis of the order size. We will also take into consideration the proportion of your portfolio that the security represents, the weight of the industry or security type in the portfolio and the cash reserve position in your portfolio.
Guarantees given by Alitis Pools for Real Estate Projects
Certain of the Alitis Pools (Alitis Income and Growth Pool, Alitis Private REIT, Alitis Private Real Estate Limited Partnership) invest from time to time in real estate projects. These projects typically obtain secured loan financing where lenders often require guarantees to be given by beneficial owners. Where an Alitis Pool having a beneficial ownership interest in a real estate project is required to provide a guarantee to a lender, Alitis requires the aggregate amount of the guarantee to be capped at the Alitis Pool’s proportionate beneficial ownership in the project. In addition, Alitis requires the other beneficial owners to provide proportional indemnification to the Alitis Pool in the unlikely even the lender seeks remedy against only the Alitis Pool giving the guarantee, and not the other beneficial owners, in a partial loss scenario. In this unlikely scenario, and further where more than one Alitis Pool has invested in the same real estate project, it may be the case that one Alitis Pool has to seek indemnification on its guarantee from other Alitis Pools for their proportionate interest in the project. In situations where more than one Alitis Pool invests in a real estate project, Alitis will ensure that the guarantee and indemnification documentation provides that each Alitis Pool will be responsible for its proportionate share of any loss. Alitis will evaluate the liquidity and solvency of each Alitis Pool in the same manner as it does for third parties for the purposes of determining the ability of each beneficial owner to contribute its proportionate share to any payments required to the lender under any guarantee given by an Alitis Pool.
If you have become a client of Alitis through a referral from another party, it is important that you understand the respective roles of Alitis and this other party. We will ensure that you receive full disclosure of any applicable referral arrangement before you open an account with Alitis. This will include information about referral fees to be paid, the activities that the referring party is allowed to perform, and disclosure about how your personal information may be shared between the referring party and us. For clarity, Alitis will be responsible for all licensable, investment-related activities and all regulatory requirements to perform these activities. The referring party may perform other activities, such as financial planning and facilitating service requests, which do not require securities licensing.
Investments from Firms with which We Have a Referral Relationship
Some firms with which Alitis has a referral relationship may also create their own investment products directly or through a related company. These products may be appropriate for use in the Alitis Pools or SMA, but it could appear that their inclusion is a result of referral relationship rather than because of the investment merits of the product. To mitigate this risk, all investments in this situation will go through the same due diligence process as all other investments prior to approval or rejection by Alitis’ Investment Committee. As well, Alitis’ Chief Compliance Officer shall review and approve or reject the investment based on an assessment of the whole relationship between Alitis, the referring firm, and the investment product.
Personal Trading of Alitis Employees
There is the possibility that an employee at Alitis may trade in securities in such a way as to gain an advantage over a client. To reduce this risk, all employees are subject to our personal trading policies which require trades in certain securities where potential conflicts of interest could arise to be reviewed and approved by compliance prior to execution. If any proposed trades could potentially be a conflict with our clients, the client’s interest will take priority.
Employee Involvement in Other Activities
Alitis’ employees may have involvement in other activities which could negatively impact Alitis’ operations. To mitigate these concerns, Alitis’ employees shall devote as much time as is required for the effective management of your account, other clients’ accounts, and the Alitis Pools. If an employee wishes to undertake other activities, these must be approved by Alitis and appropriate regulatory authorities before such activities are undertaken to ensure that there are no conflicts of interest.
Employee Ownership of Associated Parties
Some firms with which an employee of Alitis has an ownership interest may also create their own investment products directly or through a related company. These products may be appropriate for use in some or all of the Alitis Pools or SMAs, but it could appear that their inclusion is a result of the ownership interest rather than because of the investment merits of the product. To mitigate this risk, all investments in this situation will go through the same due diligence process as all other investments prior to approval or rejections by Alitis’ Investment Committee. As well, Alitis’ Chief Compliance Officer shall review and approve or reject the investment based on an assessment of the whole relationship between Alitis, the firm in which the employee has an ownership interest, and the investment product.
Alitis Private Real Estate Limited Partnership
We take a number of steps to disclose and minimize any conflicts of interest stemming from the relationship of the Partnership as a connected and related issuer to Alitis, as described later in this section. These include:
- Prior to investing in the Partnership, each investor in the Partnership is given and must sign an Acknowledgement and Agreement to be Bound which includes conflict of interest disclosures;
- Alitis selects investments for the Partnership pursuant to a management agreement entered into between the Partnership and Alitis which requires Alitis to manage with the degree of care, diligence and skill that a reasonably prudent manager in comparable circumstances would exercise;
- With respect to Cecil Baldry-White’s minority interest in the West-Urban projects, Mr. Baldry-White is excluded from any Investment Committee decisions with respect to WestUrban projects. Investment Committee members are not permitted to make personal investments directly with developers, though they may invest directly into the Partnership along with other Alitis clients.
Services Provided by Alitis Investment Counsel Inc. and Alitis Wealth Planning Inc.
Alitis Investment Counsel Inc. will only undertake discretionary investment management services and basic retirement planning services. Should you want insurance products, advanced financial planning, estate planning or individual off-book GICs (not held by Credential), these products and services will be performed by Alitis Wealth Planning Inc.