Conflicts of Interest and Trading in Securities Policy

Transcription

1 Conflicts of Interest and Trading in Securities Policy October 2009 FOR INTERNAL USE ONLY Policy owner: Group Compliance Date updated: October 2009

2 Policy version control Change no. Date Version Author Description 1 October Group Compliance Amalgamation of Group & BU several policies, including Conflicts of Interest, Gifts & Hospitality, New Issues, Insider Trading, Hedging 1 Conflicts of Interest & Trading in Securities Policy

3 Conflicts of Interest and Trading in Securities Policy Introduction... 4 Intent... 4 Who does this policy apply to?... 4 Business unit procedures... 4 Departures from policy... 4 Consequences of breaching this policy... 4 What is a conflict of interest?... 6 Examples of situations where a conflicts of interest may arise... 6 The need to manage conflicts of interest... 6 How to identify a conflict of interest... 6 Principles for managing conflicts of interest... 7 Treating customers fairly, honestly and efficiently... 7 Methods for managing conflicts of interest... 7 Controlling conflicts of interest... 8 Disclosing conflicts of interest... 8 Avoiding conflicts of interest... 9 Conflicts and ethics management framework The role of the Business Unit Conflicts Committee The role of the Group Conflicts and Ethics Committee Gifts and hospitality...11 What is a gift? What is a reportable amount? When you may accept a gift or hospitality When you may not accept a gift or hospitality Seeking approval and recording gifts and hospitality Providing a gift or hospitality to someone outside the Westpac Group Reporting Gifts to government officials or political parties Compensation by way of gifts to customers Sponsorship and fundraising Employee accounts and transactions Insider trading What is inside information? What do we mean by financial products? Trading across borders Use of Chinese walls to limit flow of confidential or inside information Attributes of Chinese walls Conflicts of Interest and Trading in Securities Policy 2

4 Obligations for authorised persons: Chinese walls Prescribed Employees Trading windows Rules for Prescribed Employees Prescribed Employees participation in share plans Participation in Group-related New Issues Margin loans Miscellaneous prohibitions against trading in Westpac financial products Short term speculative gains Use of derivatives and hedging Arbitraging Employee investment in customer s financial products Outsourcing External business interests Memberships on external boards, committees and working groups External employment Trustees Research independence Related policies for managing conflicts Conflicts of Interest & Trading in Securities Policy

5 Introduction Intent The Westpac Group 1 is responsible for ensuring that it complies with its obligations as a financial service provider. One such obligation is to have in place adequate arrangements to manage conflicts of interest. 2 To manage conflicts of interest, we must identify conflicts of interest; assess and evaluate those conflicts; and decide upon and implement an appropriate response to the conflict of interest. Our Code of Conduct also requires that we do not participate in activities that involve a conflict with our duties and responsibilities to the Westpac Group or which are prejudicial to the business of the Westpac Group. Finally, to aid in good corporate governance the Westpac Group needs to ensure that we do not put the interests of one business unit above those of another. This policy provides a framework for managing conflicts and guidance on how to deal with particular situations. The policy sets out the main principles for dealing with conflicts as they arise and the framework to follow when conflicts arise which do not fall within our existing procedures. This policy is accompanied by detailed business unit procedures to operationalise these principles and framework and to help manage specific conflicts that arise within the business unit. Who does this policy apply to? This policy applies to Westpac Group employees, secondees, people on work experience and contractors, in Australia, New Zealand and other overseas offices (called employees in this policy). If this policy applies to you, you should read it and make sure you understand it. If you need guidance speak to your manager or your Business Unit Compliance representative. Business unit procedures Each business unit must put in place processes for managing conflicts of interest in that business unit. This policy sets the minimum standard for the Group. A business unit may adopt and implement processes of a higher standard to this policy. Employees must comply with this Group policy in addition to their business unit procedures. Departures from policy Any deviation from this policy must be approved by the General Manager of the business unit requesting the change and the General Manager, Operational Risk and Compliance. Consequences of breaching this policy Every person in the Westpac Group has compliance and operational risk related obligations that vary according to their job. If someone breaches our policies, or causes a breach of laws, codes or regulations with which the Westpac Group is obliged to comply, this is a compliance breach. If you are aware of a compliance breach, you should advise your manager or Business Unit Compliance manager. Breaches of this policy will be taken very seriously. A breach of this policy may result in disciplinary action, which could include dismissal if the breach is serious. Information about our disciplinary 1 Westpac Group or Group means Westpac Banking Corporation, its branches and subsidiaries within Australia and overseas, including but not restricted to Westpac New Zealand, St George Group, Hastings Funds Management, BT Financial Group, RAMs, Advance Asset Management and Asgard. 2 Corporations Act, s912a(1)(aa) Conflicts of Interest and Trading in Securities Policy 4

6 process may be found in the Employee Policies for Westpac employees, HRXpress for St.George Group employees, and HR Toolbox for New Zealand employees. It is each person s responsibility to understand how this policy applies to you as an employee. If you are uncertain about whether this policy applies to a particular transaction, or you have any questions about this Policy, speak with your manager or Business Unit Compliance representative. 5 Conflicts of Interest & Trading in Securities Policy

7 What is a conflict of interest? A conflict of interest can arise when a person has an interest that conflicts or may conflict with the interests of someone else to whom that person owes a duty or responsibility. If a conflict arises the person may not be able to perform that duty or responsibility properly or may be perceived as such. In particular, conflicts may occur when an employee has a personal interest which may be inconsistent with the interests of the Westpac Group or its customers such that it may influence or compromise, or appear to influence or compromise, their duties and responsibilities to the Westpac Group or to the customer. A conflict may also occur where the Westpac Group has interests which are inconsistent with our customer s interests to such an extent that the Group s actions may, or may be seen to, give inappropriate preference to the Group. For the purposes of financial licensing, ASIC defines conflicts of interest as circumstances where the interests of clients who receive financial services are inconsistent with, or diverge from, some or all of the interests of the licensee or its representatives providing the financial services. Conflicts may be actual, apparent or potential. Examples of situations where a conflicts of interest may arise A financial adviser has an interest in a client investing in high risk products which pay a higher commission to the adviser but which are inconsistent with the client s risk appetite and profile. A trustee of a fund takes up an investment opportunity for itself which is within the investment mandate of the fund. The need to manage conflicts of interest The potential for conflicts of interest is inevitable in financial services businesses and managing conflicts is part of our every day business. The key is to recognise how conflicts may arise and manage them appropriately. To do this, it is important to understand the relationship between members of the Westpac Group, our employees and contractors, our customers and our suppliers. Our obligation to manage conflicts of interest arises in several ways: Under the Code of Conduct, we are required to manage conflicts of interest; Under the Corporations Act 2001, we are required to manage conflicts of interest as a licensee; From time to time a member of the Westpac Group may be in a position of trust with a client such as when we act as a trustee; By virtue of being employees, all employees owe a duty to the Westpac Group to not allow conflicts of interest to arise between themselves as employees and the Westpac Group; and A commercial conflict may arise between one business unit in Westpac and another. How to identify a conflict of interest Many of the conflicts that arise regularly in our business, have been previously identified and they are effectively managed in our Group or business unit policies or procedures. However, you may occasionally find yourself in a situation of potential or perceived conflict which is not covered by existing policies or procedures. If you think a conflict has arisen, or you are unsure, ask your manager or Business Unit Compliance representative for guidance. If there is a conflict and no existing policy or procedure applies, your Business Unit Compliance representative can help you decide how to manage the conflict, by either putting controls in place, disclosing it or, where necessary, avoiding it all together. Conflicts of Interest and Trading in Securities Policy 6

8 If a significant conflict of interest or ethical issue arises it must be escalated to the Business Unit Conflicts Committee or the Group Conflicts & Ethics Committee. These committees provide a forum for the adjudication and oversight of significant conflict of interest or ethical issues that may not be effectively managed at a team level. Your Business Unit Compliance representative can advise you on whether an issue should be escalated; and, if it should be escalated, to which committee the issue should be escalated. Business unit Compliance representatives must maintain a register of escalated conflicts that arise within their business unit. Group Compliance will maintain a register of escalated conflicts that are managed by the Group Conflicts & Ethics Committee. These conflict registers must include, as a minimum, the names of the parties concerned, the nature and impact of the conflict, and the decision made about how to manage the conflict. All other documentation, relating to the escalated conflict must be maintained in accordance with the Records Management Policy. Principles for managing conflicts of interest The main principles you must follow when faced with a conflict of interest are set out below. Treating customers fairly, honestly and efficiently You must: Make recommendations to the customer based on their needs; Act in accordance with the customer s instructions and the terms and conditions of the product; Maintain the confidentiality of customer information; Act fairly and objectively when making decisions which affect more than one customer; and Act in accordance with the spirit and letter of our policies, our procedures, and the law. Methods for managing conflicts of interest To manage conflicts of interest we must: (a) (b) (c) (d) identify the conflicts of interest; assess and evaluate those conflicts; decide upon, and implement, an appropriate response to those conflicts; and keep documents and records to demonstrate that our conflicts management arrangements are adequate. Westpac will utilise the following methods to manage conflicts of interest that arise in our business: (a) (b) (c) controlling; disclosing; both controlling and disclosing; and (d) if it is not possible to adequately manage the conflict by controlling and/or disclosing it, avoiding it. 7 Conflicts of Interest & Trading in Securities Policy

9 Controlling conflicts of interest Many conflicts of interest can be managed by internal controls. Depending on the circumstances and the nature of any given conflict of interest, it may be appropriate to control the conflict of interest by any or all of the following: a) Code of Conduct prohibiting or limiting personal behaviors; b) individuals excusing themselves from any decision making where a conflict exists; c) policies and procedures containing processes to manage regular conflicts; d) remuneration schemes designed to prioritise customer needs; and e) obtaining customer consents. Note: This is not an exhaustive list. What constitutes an appropriate control for a given conflict of interest will always depend on the facts and circumstances. Disclosing conflicts of interest Making customers aware of a conflict may be sufficient to effectively manage conflicts of interest. Disclosure of regular conflicts of interest should be made in documents such as letters of engagement, Terms & Conditions, Product Disclosure Statements, Financial Services Guides or Statements of Advice or other standard documentation relating to the financial product or financial service provided. It is considered prudent for employees to also point out the conflict even when it is disclosed in standard documentation provided to customers. Where a conflict is not disclosed in the standard documentation but it is still to be managed by disclosure the disclosure made must be in enough detail, and in a clear, concise and effective enough form, to allow the customer to make an informed decision about how the conflict may affect the product or service being provided to them. The disclosure must: (a) (b) (c) be timely, prominent, specific and meaningful to the customer; where relevant, disclosure must occur before or when the financial service is provided, but in any case at a time that allows the client a reasonable time to assess its effect. If a conflict arises after financial service is provided, it also must be disclosed to the customer, if it is relevant to the customer making a determination to continue with the financial service; and refer to the specific product or service to which the conflict relates. What constitutes appropriate disclosure to any given customer will depend on all of the facts and circumstances, including (amongst other things): (a) (b) (c) (d) the level of financial sophistication of the customer; the extent to which other customers (especially retail customers) are also likely to rely, directly or indirectly, on the financial service; how much the customer already actually knows about the specific conflict; and the complexity of the service. Conflicts of Interest and Trading in Securities Policy 8

10 Employees must disclose any matters relating to the affairs of Westpac in which they have a material personal interest to their manager respectively. The manager will determine what steps, if any, are required to manage the actual or perceived conflict of interest. If an employee is involved in the decision making process in a matter in which they have a material personal interest, in addition to disclosing their interest they should avoid being part of the decision making process. Avoiding conflicts of interest Where a conflict of interest has a serious potential impact and that conflict of interest cannot be managed appropriately by controlling and/or disclosing it, Westpac will seek to avoid it. 9 Conflicts of Interest & Trading in Securities Policy

11 Conflicts and ethics management framework The role of the Business Unit Conflicts Committee Each business unit must put in place processes for managing conflicts of interest, including transactional conflicts, within their business unit ( BU conflicts ). Business units are permitted to set up specific committee(s) to manage BU conflicts. If the business unit elects not to set up a separate conflicts management committee, then the Business Unit Conflicts Committee will consist of the Group Executive, the General Managers that directly report to him/her and the Business Unit Head of Compliance (or equivalent). Unless modified by the Business Unit Conflicts Committee, the Business Unit Conflict Committee operates under the pro forma Business Unit Conflicts Committee Terms of Reference. A BU conflict must be escalated to the Group Conflicts & Ethics Committee, if a conflict arises: involving more than one business unit; or where the matter is a serious, non-routine issue that falls outside the normal processes for conflict management in the business unit; or where there is a risk of damage to the Group s reputation if the conflict is mismanaged; or where the conflict otherwise cannot be effectively managed or resolved using the normal processes for conflicts management in the business unit. The role of the Group Conflicts and Ethics Committee A Group Conflicts and Ethics Committee has been established to: Manage significant conflicts within Westpac that may not be effectively managed at a business unit level; Manage conflicts which impact upon more than one business unit that can not be effectively managed at a business unit level or which give rise to enterprise issues; Manage situations which impact upon the customers of another business unit; Manage situations that give rise to ethical issues within Westpac that give rise to enterprise issues; and Oversee Westpac s framework for conflicts of interest. The Charter of the Committee sets out the conduct, terms of reference and membership of the Committee. Any decision of the Committee will be communicated to the relevant business unit by Compliance. The decision will outline appropriate protocols that must be followed where there is a potential conflict. Conflicts of Interest and Trading in Securities Policy 10

12 Gifts and hospitality What is a gift? A gift includes anything of value that a person receives from another person, outside the normal fees or remuneration which they are entitled to receive from that person. Examples may include donations, wine, souvenirs and other items. Tickets for sporting, cultural or entertainment events are a gift if the donor or a representative of the donor company will not be going with the recipient. For example, if a client gives you tickets to the football which are just for you and your family and the client does not attend, the tickets are a gift, not hospitality. If you receive tickets for transport to and from such an event, this forms part of the gift. In establishing the value of any gift, the normal retail cost must be used as the benchmark. The fact that a gift may be customised to the recipient s needs or taste should be taken into account in assessing the treatment of the gift under the policy. What is hospitality? Hospitality means conventional business courtesies, such as joining a customer or vendor in attending lunch, sporting events, outings or cultural or entertainment events, or acceptance from the customer, vendor or others of payment for working session meals or reasonable expenses where Group-related work is discussed. What is a reportable amount? Under this policy, certain gifts or hospitality must be reported. This applies where the value of the item exceeds AU$ This amount is the 'reportable amount'. When you may accept a gift or hospitality The acceptance of some types of reasonable and incidental business hospitality and gifts is permissible when it is clear that they are unsolicited, there is no conflict of interest, and the donor is not attempting to influence you. The acceptance of some types of gifts and hospitality is not permissible when there is an actual, perceived or potential conflict of interest or the donor may be attempting to influence you. The following are permissible: Gifts or hospitality with a value of less than, or equal to AU$300. If you receive multiple gifts or hospitality under AU$300 from the same party, the total value of all gifts and hospitality in a financial year is used to determine whether you must get approval from your BU Head or nominated manager as outlined in your individual business unit policy (as applicable) Gifts greater than AU$300 and approved by your BU Head or nominated manager that are given in relation to special occasions, that are reasonable in value in the circumstances. Your business unit may set a lower amount (such as nil or $100). If a lower threshold is set, the business unit threshold is the reportable amount. 3 For gifts and/or hospitality received in New Zealand, NZ$350; for gifts and/or hospitality received in the United Kingdom, UK 100; for gifts and/or hospitality received in the United States, US$225. For gifts and/or hospitality received in other countries the equivalent of AU$300 (check local procedures). 11 Conflicts of Interest & Trading in Securities Policy

13 When you may not accept a gift or hospitality You must never: accept cash gifts (or the equivalent such as gift cards or vouchers for a designated value); or request or solicit a gift or hospitality; or accept a gift or hospitality in exchange for doing something, or refraining from doing something, for someone else. Seeking approval and recording gifts and hospitality You must seek prior approval from either your 'Business Unit Head' or nominated manager, before accepting any item of a reportable amount and record the item in the Gifts Register. In the following circumstances, you must also record offers of gifts or hospitality in the register as 'declined' with the reason, when they are over AU$300: Items which the approving manager refuses to approve, regardless of the reason Items that the recipient has declined because of a potential, perceived or actual conflict of interest if the item had been accepted. Note: Items need to be reported in the register before the end of the month in which they are received. If you have not been able to comply with that time requirement for any reason then you must advise your manager of the reason for the delay when you enter the report. Providing a gift or hospitality to someone outside the Westpac Group It may be acceptable and customary for the Westpac Group to extend gifts or hospitality to customers or other external parties. When giving gifts to a customer or someone who does business with us, you should be certain the gift would not give rise to a conflict of interest, whether actual, potential or perceived. Also, you should not offer the gift if you believe it will violate any codes or policies of the Westpac Group or of the recipient. Advance clearance from the Business Unit Head of Compliance and the management of the recipient company or firm is required in cases where a particular gift or hospitality might be construed as excessive or an improper inducement, either by the employer of the recipient or a third party. If you have appropriate authority, you may provide business gifts at the Group's expense, provided the following requirements are met: the gifts must be of reasonable value in the circumstances, and cannot exceed a value of AU$300 unless prior approval of the appropriate Business Head (or their delegate) is obtained; the gift must be lawful and in accordance with generally accepted business practices of the governing jurisdiction; and gifts in the form of cash or cash equivalents must not be given regardless of the amount. If the approving manager refuses to approve the giving of the gift or hospitality, the item should be recorded in the register as 'declined' as evidence that a proper assessment has been made. Items need to be reported in the gifts register before they are provided. If you have not been able to comply with that time requirement then you must advise your manager of the reason for the delay when you enter the report. Conflicts of Interest and Trading in Securities Policy 12

14 Reporting The Heads of Compliance for each business unit will table a report to the General Manager, Operational Risk and Compliance (GM, ORC) commenting on any unusual items. The GM, ORC will review any such items and take appropriate action, which may include proposing additional controls, policies or procedures and taking disciplinary action. 13 Conflicts of Interest & Trading in Securities Policy

15 Gifts to government officials or political parties The Group s approach to political engagement is set out in our Annual Report. Group Government and Industry Affairs holds responsibility for all political engagements made on the Group s behalf in accordance with the limits set by the Westpac Board from time to time. Our policy is that Westpac s engagement in the political process is made on a generally bi-partisan basis to major political parties which have a broad cross-section of parliamentary representation. Westpac does not engage politically where there can be any misrepresentation of their purpose. For example, if the Westpac Group were to make a donation to a particular political party in the hope of influencing policy, this would conflict with the public s interest to have unbiased decision-making on market regulation. Such donations are prohibited by board direction. Payments made to attend conferences, dinners or other events run by political parties are treated as donations and you must obtain approval from Group Government and Industry Affairs prior to committing to attend. Direct cash donations are prohibited by board direction. Group Government and Industry Affairs maintains a register of political donations which is reported, as per the federal electoral laws to the Australian Electoral Commission. In addition to this, these donations are reported to the various state electoral commissions in accordance with that states electoral laws, and reported in the Westpac Annual Report. You should be aware that various government agencies, legislative bodies and jurisdictions may have their own rules and regulations regarding the receipt of gifts by their employees or officials. These regulations may differ from country to country and state to state. In some cases, government employees or officials may be prohibited from accepting any gifts. Entertainment and other acts of hospitality extended to government or political officials should never compromise, or appear to compromise the integrity or reputation of the official or the Westpac Group. When hospitality is extended, it should be with the expectation that it will become a matter of public knowledge. Before such offers are made, advice should be sought from the Head of Government & Industry Affairs. You must also contact the Head of Compliance for your business unit prior to making any gift from the Group to a government employee or official, including a representative of a regulator. The Head of Compliance will advise whether there is a conflict of interest and suggest a course of action. If there is no conflict and the gift is made, it should be recorded in both the gifts register for the business unit, regardless of the amount, and in the Government & Industry Affairs register.. Conflicts of Interest and Trading in Securities Policy 14

16 Compensation by way of gifts to customers Gifts or payments made to customers that are covered by the Improving Customer Relations Gifts Policy are not covered by this Group Gifts and Hospitality Policy. The Improving Customer Relations process is to compensate a customer, by way of a gift, for inconvenience, frustration or aggravation in their dealings with the Group. For details of this policy and process, see the Customer Resolution and Support Team Intranet page. 15 Conflicts of Interest & Trading in Securities Policy

17 Sponsorship and fundraising Westpac occasionally enters into sponsorship arrangements. You must not approve or sign off on a sponsorship if there is any actual or perceived conflict of interest. For example, you must not approve an arrangement if benefits will go to a person or organisation related to you, such as a family member. If the sponsorship consists of purchasing and giving away tickets to sporting or other events, the value of the tickets must be entered in the gifts register. The Community Involvement team and/or the Executive Office are responsible for making decisions in relation to the Group's partnerships with community organisations. Further information about Westpac s community partnerships is available on the Community Involvement intranet page. Generally, fundraising activities conducted by employees and contractors on Group premises or during working hours are subject to the fundraising guidelines published on the Community Involvement intranet page. You may personally make personal donations to registered charities at any time. Such donations will not be treated as gifts under this policy. However, if a prize over AU$300 (or equivalent) is solicited from a third party on behalf of the Group to give away or auction at a charity event, the prize must be entered in the gifts register. Conflicts of Interest and Trading in Securities Policy 16

18 Employee accounts and transactions You must not process your own transactions nor those of your friends, family, business associates or any other related party. You must not use your position as an employee to gain an advantage not available to customers. For example, you can not ask for fees to be waived if the waiver of fees would be denied to customers. This does not extend to benefits available under the mybenefits Program. You must maintain your own accounts with the Westpac Group in accordance with the accounts' conditions and accept the consequences (including fees or penalties applied) if any of your own accounts are not properly maintained. 17 Conflicts of Interest & Trading in Securities Policy

19 Insider trading What is inside information? As an employee with the Westpac Group you may become aware of information not generally available that, if made generally available, could have an impact on the price or value of financial products in the market. This information is "inside information." Inside information may relate to Westpac, one of our subsidiaries, a corporate customer or any other company. It also does not matter how or where the information is obtained it does not have to be obtained from within the Westpac Group to constitute inside information. Information will no longer be regarded as inside information when it becomes generally available. If you require further information on when inside information becomes generally available contact your manager or Business Unit Compliance representative. What do we mean by financial products? Frequently people assume that inside information only applies to shares or securities but Australian law imposes a much broader application. You cannot use inside information in relation to the following financial products: (a) (b) (c) (d) (e) (f) (g) Securities including shares or bonds issued or proposed to be issued by a company; or Derivatives including swaps, equity or credit derivatives; or Units in a managed investment scheme; or Debentures, stocks or bonds issued or proposed to be issued by a government; or Superannuation products; or Options; or Any other financial products under the Corporations Act that are able to be traded on a financial market. For the purposes of the law, what constitutes a financial product can be complex. For employees working in other countries, specific restrictions may apply that are different from the laws in Australia. You should check with your manager or local Business Unit Compliance representative for advice. Insider trading is prohibited at all times If you have inside information, you must not: 1. Trade (i.e. buy, sell or subscribe for) or agree to trade in relevant financial products; 2. Get somebody else to trade or agree to trade in relevant financial products on your behalf; or 3. Directly or indirectly communicate, or cause to communicate, inside information to another person who is likely to trade or get somebody else to trade in relevant financial products. You must not communicate inside information about Westpac or any other entity to: Conflicts of Interest and Trading in Securities Policy 18

20 4. another Westpac employee unless it is necessary for business purposes and you have authority to communicate the information; 5. any person, outside Westpac, in particular, external advisors unless appropriate confidentiality arrangements are in place; and 6. industry analysts or business journalists, or confirm any suspicions or hunches which they may have, even if these suspicions or hunches are based on their own research and analysis. Trading across borders The policy is based upon Australian legislation which may differ from inside trading legislation in other countries. If you are working in a country other than Australia or you are dealing from one country in financial products in another country, you should ensure that you also comply with the laws of that other country. You should seek advice from your manager or Business Unit Compliance representative if this situation applies to you. 19 Conflicts of Interest & Trading in Securities Policy

21 Use of Chinese walls to limit flow of confidential or inside information Chinese Walls are barriers designed to limit the flow of confidential or non-public, price sensitive ( inside ) information from the private side 4 function of our business to the public side 5 function. Chinese Walls are physical and conceptual (procedural and behavioural) barriers which provide a defence against insider trading and forms part of our Conflicts of Interest Framework. Chinese Walls allow the public side function to continue its usual activities even though another part of the business may be in receipt of inside information. The following outlines the principles which the Chinese wall process must conform to if it is to be effective from a business and legal viewpoint. Attributes of Chinese walls Chinese walls require three elements to be effective. 1. Physical construction: The physical construction including IT processes should ensure access to the area behind the wall is restricted to those who are authorised to be behind it. Information behind the wall is controlled in such a manner that nobody outside the wall can receive it unless authorised. 2. Protocols: The main protocols to be incorporated in operating guidelines include restrictions on communication of confidential and/or price-sensitive information and a process for wall crossing. 3. Monitoring: Compliance will monitor the process, which supports the wall. Obligations for authorised persons: Chinese walls Employees permitted behind the Chinese wall are obliged to: 4 Acknowledge that they understand and accept Chinese wall processes prior to crossing the wall; inform Business Unit Compliance of any breaches of Chinese wall procedures, particularly Chinese wall crossing; obtain Business Unit Compliance's consent for proposed Chinese wall crossing for unauthorised persons, who are to be given temporary access; prevent unauthorised people inside the Chinese wall, unless Business Unit Compliance consent is obtained or they are accompanied into an office inside the Chinese wall set aside for the purpose and then accompanied out without giving them access to the main area behind the Chinese wall; 4 The private side function of Westpac is often in receipt of confidential information and also inside information. We have an obligation to our private side customers to ensure any confidential or inside information is kept secured and the information is only shared with persons on a need to know basis. In addition to Westpac s obligations to its customers, we have to ensure that we avoid even the appearance of insider trading. 5 The public side function of Westpac is involved in dealing in Division 3 financial products as defined in s1042a of the Corporations Act. An important aspect of our Chinese Walls defence is to demonstrate that the public side function is completely separate from the private side function to avoid even the appearance of insider trading. Generally, support functions are considered to be on the public side of the wall, however this is often determined by the level of information that is required to fulfil their support functions (for example, Executive Office and Risk is considered to be Over The Wall. Whilst there is no technical term or reference to a person being over the wall it is generally understood that there are certain functions within a financial institution that are required to have a complete understanding of the business regardless of the private or public side functions. Conflicts of Interest and Trading in Securities Policy 20

22 acknowledge in writing the Chinese Wall procedures set out in this guide and re-affirm, when asked to do so; report price sensitive information immediately to your Business Unit Compliance representative; communicate sensitive "Chinese wall" business only by telephone or facsimile from a secure area behind the Chinese wall; retain all physical records, s, documents, correspondence, etc in relation to "Chinese wall transactions" behind the Chinese wall, whilst they are confidential and/or price sensitive and consult with Legal before disposal; use standard documents in the format agreed with Legal; enter into confidentiality agreements only after the prior approval of Legal; avoid personal conflicts of interest in relation to transactions/assignments; report corporate conflicts of interest to Business Unit Compliance; and do not disclose sensitive information to unauthorised persons outside the Chinese wall. 21 Conflicts of Interest & Trading in Securities Policy

23 Prescribed Employees In addition to the above, Prescribed Employees are subject to additional obligations. Prescribed Employees are employees who are likely to come in contact with key financial, operational and strategic information about Westpac. You can either automatically come under the definition of a Prescribed Employee based on your position or can be nominated by your General Manager. You are also responsible for ascertaining whether or not you are a Prescribed Employee as determined by Westpac. Group Compliance maintains a Register of Prescribed Employees and General Managers must advise changes to the register on an ongoing basis. Prescribed Employees must immediately provide Group Compliance with the HIN/SRN and other personal information relating to their Westpac holdings for their personal accounts and any other accounts that they control. If you have any doubt as to whether you are or should be a Prescribed Employee you should speak with your manager or Business Unit Compliance representative. If you are a manager and you have any doubt as to which members of your team should be Prescribed Employees you should speak to your Business Unit Compliance representative. Trading windows Prescribed Employees are not permitted to buy or sell Westpac securities or Westpac derivatives, except within a Trading Window. The Trading Windows are 56 calendar days long (including holidays and weekends), commencing two full trading days after announcement of the Westpac half and full year results. However, the General Manager Operational Risk & Compliance has discretion to extend or restrict (conditionally or unconditionally) the Trading Window period. You may not trade in the Trading Window if you are in possession of inside information. Rules for Prescribed Employees If you are a Prescribed Employee, the following applies to you: during a Trading Window you must not buy or sell Westpac securities, or Westpac derivatives; or enter into a hedging arrangement over vested Westpac securities; unless you have completed the online Prescribed Employee Trade Notification Form giving notice of your intention. If you do not have access to the online form, a fully completed notice of intention must be provided to the Risk Intelligence & Monitoring Unit; during a Trading Window you must not arrange for another person to try to buy or sell Westpac securities or Westpac derivatives on your behalf, or enter into a hedging arrangement over vested Westpac securities on your behalf, unless you have completed the online Prescribed Employee Trade Notification Form giving notice of your intention. If you do not have access to the online form, a fully completed notice of intention must be provided to the Risk Intelligence & Monitoring Unit. any transaction which causes a change in ownership of the shares or derivatives will be considered "buying" or "selling" under this policy, even a transfer to a family member, family unit trust or personal superannuation scheme. Conflicts of Interest and Trading in Securities Policy 22

24 Prescribed Employees participation in share plans Eligible Prescribed Employees may participate in dividend reinvestment plans, share purchase plans, rights issues or bonus issues ( corporate action ) which are offered to all shareholders regardless of whether the corporate action is made, or acceptance falls, within or outside a Trading Window. However, if the corporate action is a Group-Related New Issue, any restrictions in this Policy apply (such as, an employee can not participate in a share purchase plan if they had inside information on the pricing of offered shares). Eligible Prescribed Employees may accept an invitation to participate in an employee share plan regardless of whether the offer is made, or acceptance falls, within or outside a Trading Window. Following the vesting or exercise (if any) of securities issued in the above manner, Prescribed Employees can only sell or dispose of the securities during a Trading Window" 23 Conflicts of Interest & Trading in Securities Policy

25 Participation in Group-related New Issues From time to time Westpac may be involved in Group-related New Issues ( New Issues ). The New Issues Policy has a distribution and allocation approach ( approach ) for each New Issue. The principles for the distribution and allocation of New Issues are outlined in the Distribution and Allocation Approach Standards. Whether employees can participate in a particular New Issue is governed by the approach for that particular New Issue. The approach may be unlimited, restricted or nil eligibility for specified employees, for Prescribed Employees or even for all employees. Prescribed Employees and/or employees will be advised as to their eligibility to apply for a particular New Issue. If a Prescribed Employee is permitted and does participate in a New Issue, they can only sell or dispose of the securities during a trading window. Conflicts of Interest and Trading in Securities Policy 24

26 Margin loans Prescribed Employees may take out margin loans over their holdings in Westpac securities so long as the Prescribed Employee does not meet a margin call outside a trading window by allowing any of the Westpac securities to be sold. Prescribed Employees are expected to have sufficient resources to meet a margin call by means other than a sale of their Westpac securities. If a Prescribed Employee has any doubt about their ability to meet a margin call by means other than a sale of their Westpac securities, they should take steps to rearrange their affairs so as to have a facility that does not contain price triggers such as an investment loan secured against other assets. In the event that your margin lender sells any of your Westpac securities, outside a trading window, whether on your instructions to do so or not, this will be considered a breach of this policy and disciplinary action may be taken against you. Furthermore, your Westpac securities cannot be sold within a trading window to meet a margin call if you have inside information at the time. To ensure that prescribed employees are not disadvantaged by the new rules governing margin lending, transitional arrangements will apply. If you currently have a margin loan over holdings in Westpac securities you have until 30 September 2010 to align your margin loan and related financial affairs with this policy. If you have any questions about aligning your margin loan and related financial affairs with this policy please contact Group Compliance in Group Risk. 25 Conflicts of Interest & Trading in Securities Policy

27 Miscellaneous prohibitions against trading in Westpac financial products Short term speculative gains Westpac encourages all employees to manage their financial affairs with a medium to long term perspective and, although short term speculative gains are not prohibited, personal account dealing should not distract you from your normal work responsibilities. However, you should note the paragraph headed Arbitraging below. Use of derivatives and hedging You are prohibited from entering into any financial products such as options or derivatives which operate to limit the economic risk of an unvested holding in a Westpac Group financial product (including limiting the economic risk of participating in unvested entitlements under equity-based remuneration schemes). Arbitraging Employees must not engage in any personal trading activity that could reasonably be perceived as amounting to arbitraging of BTFG (including Asgard and Advance) managed funds to make a gain at the expense of non-transacting members of the fund. A BTFG managed fund includes a fund for which we are responsible, as manager or trustee or in some other capacity including any: Registered managed investment scheme; Unregistered scheme; Public offer superannuation fund; & Pooled superannuation trust; but not including BTFG Cash Management Trusts. Conflicts of Interest and Trading in Securities Policy 26

28 Employee investment in customer s financial products You must not act on behalf of the Westpac Group in any business in which you, a family member or an entity controlled by you or your family members, have a significant managerial influence, or a substantial ownership or beneficial interest. All such business interests should be notified to your manager. In addition, the following employee investment principles apply to all employees: Prior ownership: If you take up a new position in the Group, you may find yourself in conflict with respect to your personal holding of financial products. Prior to accepting the new appointment, you must notify your manager, who will agree with Compliance the process for managing your holding. Credit: Employees in risk management including their support staff who have responsibility for determining the Group's credit exposure are prohibited from trading in financial products in the corporations for which they have responsibility. Relationship Managers: Employees in a relationship management role including their support staff are prohibited from trading in financial products in the corporations for which they have responsibility. Advisory: If you advise corporations, you are prohibited from trading financial products in the corporations you advise during the advisory period, or until you no longer possess any inside information after the advisory assignment has concluded. This restriction may be relaxed by the Group Conflicts and Ethics Committee for Initial Public Offerings (IPOs) and other New Issues, as part of the distribution and allocation approach for a particular New Issue. You should also consult your manager or Business Unit Compliance representative to determine if your business unit has specific policies relating to personal account dealing. 27 Conflicts of Interest & Trading in Securities Policy

29 Outsourcing The selection of a particular service provider must not result in an unacceptable concentration of services with the chosen provider or a material conflict of interest. For further information on outsourcing refer to the Group Outsourcing Policy. Conflicts of Interest and Trading in Securities Policy 28

30 External business interests Memberships on external boards, committees and working groups When you join the Group, you must disclose any directorships, committee memberships or working parties (collectively called directorships ) which may give rise to a conflict of interest. You must also obtain the consent of your manager before accepting a directorship with another (non-westpac Group) entity, including charities and not for profit organisations. This policy does not apply to directorships or external business interests for personal family investments, planning, trust or estate purposes. Your Manager will provide consent if the directorship does not give rise to conflict in your role. Managers are required to keep a record of any directorships notified to them and make this available to Business Unit Compliance if requested. If you receive a payment for representing the Westpac Group on a board, committee or working party or delivering an external presentation on behalf of the Westpac Group, you must credit the payment to the Westpac Group, as the Westpac Group will be paying you during your participation. Generally, employees are not permitted to accept directorships of external organisations as they are expected to devote their time and energy to fulfilling their commitments to Westpac. Therefore, approval to hold a directorship will be refused if the directorship would significantly impact upon an employee s ability to perform the activities of their role. When approving existing directorships or requests from employees to hold a directorship, managers should take the following factors into account: Will the directorship significantly impact upon an employee s ability to perform the activities of their role? Is the employee approaching the end of their career with the Westpac Group and/or are they making a transition to a non-executive director career? Does the employee intend to maintain ongoing employment with the Westpac Group? If so, accepting the directorship must: not create an actual conflict, or a perception that the director s interests are in conflict with Westpac s interests contribute to the personal development of the employee in ways not available by other means be in the Group's interest not bring harm to Westpac, including reputational risk or vicarious liability not impinge on the employee s time and energy available for their Westpac responsibilities Is the company or organisation involved in activities which could be seen as in competition or in conflict with Westpac; Will the employee receive payment as part of their duties for the directorship or external business interest. External employment You cannot participate in business activities as a consultant, principal, partner, director, agent, guarantor, investor or employee (collectively called employee ) outside your employment in the Westpac Group without the approval of management. Management will provide consent if the work would not adversely affect your ability to carry out your duties and responsibilities to Westpac and the work does not create a conflict with Westpac. 29 Conflicts of Interest & Trading in Securities Policy