Goldman Sachs. Summary of Global Index Control Framework

Transcription

1 1 Introduction Goldman Sachs Summary of Global Index Control Framework This Summary is being published in compliance with Principles 4 and 5 of the Principles for Financial Benchmarks published by the Board of the International Organization of Securities Commissions ( IOSCO ) on 17 July 2013 (the IOSCO Principles ). Each of Goldman, Sachs & Co and Goldman Sachs International (together, Goldman Sachs Administrators and each, a Goldman Sachs Administrator ), acting through the Securities Division, acts as Administrator (within the meaning of the IOSCO Principles) of a number of financial indices and strategies that are linked to or referenced by a financial product and which it has identified as Benchmarks within the meaning of the IOSCO Principles (each, a GS Index and together, the GS Indices ). The Global Index Control Framework governs the development, determination, operation and governance of the GS Indices by each Goldman Sachs Administrator as Administrator (as defined in the IOSCO Principles). 2 Oversight and Governance The Securities Division Client Index and Strategy Committee (the Index Committee ) is responsible for the overall oversight of activities related to the development, issuance and operation of the GS Indices. The Index Committee may delegate its responsibilities to one or more bodies. The Index Committee meets on a periodic basis and will have representatives from the front office and control functions. A summary of the main features of the Index Committee charter is set out in the Schedule. 3 Main Features of the Global Index Control Framework (a) (b) (c) Creation of New Indices: All new GS Indices must be approved by the Index Committee (which may approve families of indices) which will review their economic rationale, quality and integrity and assess factors such as the integrity of data inputs, data sufficiency and the hierarchy of data inputs. Each new GS Index must also comply with the Securities Division Global Index Creation Due Diligence Guidelines ( Due Diligence Guidelines ), to ensure that the relevant internal controls have been applied and approvals received. Index Methodology and Index Disclosure: The methodology for each new GS Index will be documented and made available to counterparties to, or investors in, any Goldman Sachs product referencing such GS Index (the Index Disclosure ). The Index Disclosure will comply with the content requirements set out in the Due Diligence Guidelines (e.g. the data inputs used to calculate the GS Index and the identity and role of third parties) and aims to include sufficient disclosure to enable stakeholders to understand how the GS Index is calculated and assess its representativeness. Transparency of Index Determinations: As noted above, the index methodology is made available to counterparties to, or investors in, any Goldman Sachs product referencing such GS Index. 1

2 (d) (e) (f) Hierarchy of data inputs: The hierarchy of data inputs to be applied in respect of an Index will be set out in the Index Disclosure for the relevant GS Index. Changes and Adjustments to existing Indices: As referenced above, any changes or adjustments that require the exercise of expert judgement or discretion will be subject to Index Committee approval. The methodology of new GS Indices will generally outline potential material changes and will summarise the process for effecting these changes. Following any change to the GS Index methodology the GS Index Disclosure will be updated. Expert Judgement: Any exercise of expert judgement or discretion (other than those that are purely mechanical and, where relevant, implemented in accordance with the relevant GS Index disclosure) will be subject to approval by the Index Committee (or its delegate). If a Goldman Sachs Administrator is required or entitled to make a determination in relation to an Index pursuant to the GS Index methodology and that determination involves the exercise of expert judgement or discretion, then that expert judgement or discretion would be exercised (i) in good faith and in a commercially reasonable manner and (ii) in such manner as to ensure, as far as commercially reasonable, consistency in the approach it adopts with regard to the exercise of such expert judgement or discretion. (g) (h) Periodic Review of Indices: Subject to certain exceptions, existing GS Indices will be reviewed by the Index Committee every two years (or such other frequency as the Index Committee determines) to assess whether the GS Index (or family of GS Indices) remains a valid benchmark for the market, strategy or insight it is intended to measure or track. The Index Committee will also review on a periodic basis, among others things, any exercise of discretion in respect of a GS Index and errors or restatements. Discontinuation and Transitional Arrangements: The discontinuation or termination of an index will be undertaken in an orderly manner and will take into consideration the potential impact to client(s) and market integrity. Except where no outstanding products are linked to the relevant GS Index, the discontinuation of a GS Index will require approval by the Index Committee who may require that such discontinuation be subject to a stakeholder consultation process. Stakeholders will be provided with notice of the discontinuation of a GS Index. (i) Oversight of Third Parties: Each Goldman Sachs Administrator will monitor on a periodic basis, the performance of any third parties engaged to perform functions in relation to a GS Index. Written arrangements will be put in place to confirm the role and scope of the third party and the standards with which it should comply. (j) Conflicts of Interests and Information Controls: In addition to broader Goldman Sachs policies on the management of conflicts of interest, in order to monitor and control potential conflicts of interest in respect of GS Indices: all proposed exercises of discretion in respect of an Index must be escalated to the Index Committee or, depending on the nature of the discretion, another relevant control function; and the determination or operation of GS Indices may not be delegated to trading desks. 2

3 Staff who participate in the GS Index determination process are not directly rewarded or incentivized by the levels of the GS Index. 1 All trading activity in relation to GS Indices is subject to a separate policy and set of controls. (k) (l) (m) (n) (o) Retention of records: Written records in relation to the GS Indices will be retained for a period of at least five years (subject to applicable legal or regulatory requirements). Complaints: All complaints relating to GS Indices will be handled in accordance with Goldman Sachs written complaints handling procedure and policies, which may include notification to the Index Committee. Any complaint relating to a GS Index should be sent to your usual Goldman Sachs contact. Whistleblowing: Goldman Sachs has an established business integrity program in place, to provide its people and the public with various channels through which integrity concerns can be raised without reprisal. The firm prohibits any retaliation for reporting a possible violation of laws, ethics or firm policy, no matter whom the report concerns. Training: Members of the Index Committee and all Securities Division staff involved in the development, determination, operation and governance of GS Indices will be provided with training on relevant rules, policies and on ethics and conflicts of interest in respect of GS Indices. Co-operation with Regulatory Authorities: Policies and records relating to Index determinations are to be made available promptly upon request to any relevant regulatory authorities in carrying out their regulatory or supervisory duties. November 2016 Note: Investors in any product linked to or referencing a GS Index should refer to the Index Disclosure in respect of that GS Index for further information on that index including the methodology for such GS Index. Investors in any product linked to or referencing a GS Index should not rely on this summary for information in respect of the relevant GS Index. 1 Staff who participate in the GS Index determination process are paid in part based on the profitability of The Goldman Sachs Group, Inc., which includes earnings from the firm's trading, capital markets, investment banking and other businesses (including the trading of investment products that may reference the levels of GS Indices). 3

4 Schedule Main feature of the Index Committee Terms of Reference 1 Mission Statement The Index Committee is responsible for (i) the review and approval of new GS Indices (or families of indices); (ii) reviewing and providing challenge on the index determination process, expected or known usage of the Index and the materiality of existing or potential conflicts of interest identified; (iii) overseeing the implementation and control infrastructure for such GS Indices; and (iv) overseeing the continuing operation of existing GS Indices, including exercises of discretion by Goldman Sachs in relation to the GS Indices. 2 Duties and Responsibilities The duties and responsibilities of the Index Committee include: reviewing the economic rationale, quality and integrity of the new GS Indices being marketed, implemented and traded; reviewing and providing challenge on the index determination process, expected or known usage of the Index and the materiality of existing or potential conflicts of interest identified; periodically reviewing the performance, methodology and rationale of existing GS Indices; reviewing internal or third party errors in the calculation of any GS Index approved by the Index Committee in accordance with the Global Index Control Framework after they are notified to the Index Committee; maintaining oversight of the exercise of discretion by Goldman Sachs as Administrator to a GS Index approved by the committee, including determinations required following disruptions, changes to embedded costs and amendments to the calculation methodology; taking measures to remain informed of market-wide risks and issues relating to GS Indices; and considering the results of any internal or external audits, and following up on the implementation of remedial actions highlighted in the results of any such audits. 3 Membership The Securities Division Client and Business Standards Committee (the Securities Division CBSC ) appoints the chairperson (s) of the Index Committee. The chairperson of the Index Committee and the Chairperson of the Securities Division CBSC will define the size and select the members of the Index Committee. The Index Committee will include a majority of control side function members. The Index Committee will also have front office representatives (who may be involved in the design and/or hedging of GS Indices) with appropriate seniority and sufficient experience to ensure an informed consideration of the issues. 4

5 Members must disclose any private interests in any transaction or matter to be considered by the Index Committee (excluding group-managed investments) to the Chairperson and Counsel who will then take appropriate steps in line with the charter. 5