Intermediation fees report for the financial year 2018
This report has been published in compliance with article 314-82 of the General Regulations of l'Autorité des Marchés Financiers.
In the context of investment management mandates or managed UCIs, Lazard Frères Gestion outsources order execution to services providers. As the intermediation fees incurred by these services represented over €500,000, Lazard Frères Gestion is obliged to report on the conditions under which investment decision support and order execution services were used. Lazard Frères Gestion must also specify the breakdown between 1° intermediation fees relating to order reception and transmission services and order reception services, and 2° intermediation fees relating to investment decision support and order execution services.
Investment decision support and order execution services (IDSS)
For 2018, Lazard Frères Gestion used investment services providers with which a commission sharing agreement had been signed.
The objective of our policy targeting the best possible selection and control of IDSS providers is, when possible, to collaborate with the best services providers for each speciality (regional analysis, sector analysis, analysis by market cap, arbitrage, etc.).
With this in mind, we may use analysis provided by sell-side executing broker research departments, as well as analysis available from independent research bureaus.
The quality of services from IDSS providers shall be controlled and assessed by the committee which also analyses and controls broker execution services.
IDSS provider monitoring and any potential reallocation of resources between services providers is undertaken using the methodology described below.
Intermediation fees breakdown
Intermediation fees relate to transactions in equities, assimilated instruments and forward market instruments traded in the context of investment management mandates and managed UCIs. Lazard Frères Gestion is not authorised to receive and transmit orders. Intermediation fees are therefore paid to remunerate services providers for investment decision support and order execution services. Global remuneration is split 62.5% for investment decision support and 37.5% for order execution.
Investment decision support and order execution service fees repaid to third-party services providers in the context of commission sharing agreements represented 3.81% of total intermediation fees paid in 2018.
Prevention of conflicts of interest
This report also covers measures implemented to prevent and resolve potential conflicts of interest in our choice of services providers.
Lazard Frères Gestion reviews its services provider selection bi-annually at Broker Committee meetings which are attended by the CIO, fund managers, dealers, compliance and the head of the middle-office. Selection draws on a transparent review process based chiefly on :
- quality and availability of research,
- quality of order execution and prices,
- administrative processing,
- commercial relationship (enabling meeting issuers).
Furthermore, Lazard Frères Gestion does not receive any soft commissions or intermediation fee retrocessions from its services providers.
For the financial year 2017, no conflicts of interests were detected within Lazard Frères Gestion.
ORDER EXECUTION AND INTERMEDIARY SELECTION POLICY
Lazard Frères Gestion, in coordination with Lazard Frères Banque, implements a selection process to establish the intermediaries through which its orders are placed for execution in accordance with a best selection policy as defined by the European Markets in Financial Instruments Directive.
The present policy applies solely to clients classified as professional and non-professional.
The policy covers financial instruments as defined by article L. 211-1 of the Monetary and Financial Code.
The policy does not apply to over-the-counter transactions by Lazard Frères Gestion.
When a client gives a specific instruction, Lazard Frères Gestion is deemed to be discharged from its best selection obligations. It should be noted that in this case, the client cannot be guaranteed the best possible execution.
Best selection policy criteria
- Price of financial instrument
- Execution costs
- Speed of execution
- Probability of order execution and payment
- Order size
- Order type
- All other considerations relating to the nature of the order
For non-professional clients, best possible execution is determined chiefly by the total cost represented by the price of the financial instrument plus execution costs, in accordance with the AMF’s General Regulations.
Intermediary selection policy bi-annual review
Lazard Frères Gestion places orders with intermediaries for execution resulting from its own decisions under the provision of portfolio management or UCI management services.
Lazard Frères Gestion selects the intermediaries with which orders are placed for each class of financial instrument. Intermediary selection is subject to constant monitoring in coordination with Lazard Frères Banque and regularly formalised by the “Broker Committee”.
In order to optimise market order execution, Lazard Frères Gestion and Lazard Frères Banque have given prior authorisation for their instructions to be executed outside of regulated markets or multilateral trading facilities (MTF) when orders concern financial instruments listed on regulated markets or MTFs. If no such authorisation is given, Lazard Frères Gestion's intermediaries shall not be able to access all available execution venues offering the best execution.
Specific instructions from a client are excluded from the selection policy and executed subject to being accepted by Lazard Frères Gestion and Lazard Frères Banque.
APPLICATION OF THE DODD-FRANK ACT BY LAZARD FRERES GESTION
Lazard Frères Gestion SAS does not provide investment services, directly or indirectly, to any clients or investors qualified as “US persons” (as defined by Rule 902 of Regulation S under the 1933 United States Securities Act). Furthermore, Lazard Frères Gestion SAS shall not accept potential clients or investors who :
(i) acquire financial instruments on behalf of, or in the name of, a US person or
(ii) through an intermediary providing investment services on behalf of, or in the name of, a US person
LFG informs its clients that it is implementing a claims procedure. To ensure that claims are processed efficiently, they must be addressed in written to the Secrétariat Général at Lazard Frères Gestion, 25 rue de Courcelles, 75008 Paris.
Upon reception of a claim, Lazard Frères Gestion commits to process the claim within ten working days after reception of the claim. Barring a response within the aforementioned ten working days, Lazard Frères Gestion will commit to respond within a delay of two months as of reception of the claim, unless unexpected, justified circumstances arise. If the client deems that the claim is unsatisfactorily processed by Lazard Frères Gestion, then the former can request mediation with the Autorité de Marché Financier Ombudsman at the following address: Autorité des Marchés Financiers, Service Médiation – 17 Place de la Bourse, 75082 PARIS-CEDEX 02, or simply fill in an electronic form on the AMF’s internet site on http://www.amf-france.org (AMF Mediator section). This site also contains a mediation charter drafted by the AMF’s Ombudsman.
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The Lazard Frères Gestion name and associated logo are trademarks registered by the Lazard Group. Copying, deleting, reusing or modifying the name and associated logo shall be considered as a breach of copyright.
Confidence in the digital economy
Lazard Frères Gestion SAS is an authorised fund management company registered with l'Autorité des Marchés Financiers, the French market regulator, under number GP 04 000068.
- Address/registered office: 25, rue de Courcelles 75008 Paris
- RCS number: PARIS B 352 213 599
- Capital: €14,487,500
- Intra-community VAT number: FR21352213599
- Person responsible for publication: François-Marc Durand
- Website host: Lazard Frères Gestion
- Reference made to the simplified declaration of the CNIL, the French data protection authority, regarding data concerning clients: no client information is collated through the websites
Technical integrity and defects
The security and the integrity of communications via the internet cannot be guaranteed. Lazard Frères Gestion therefore declines all responsibility in the event of technical defects, particularly regarding difficulty of access to the website or the unavailability of the website.
FATCA, a new regulatory measure for non-US financial institutions
FATCA objectives and legal framework
The Foreign Account Tax Compliance Act (FATCA) is a US law which was ratified on 18 March 2010 with the objective of preventing US tax evasion. Under FATCA, an annual declaration of accounts held outside of the US by US taxpayers must be made to the US Internal Revenue Service (IRS).
US tax legislation obliges US taxpayers, wherever their country of residence, to make their own declaration.
The regulations concern “US Persons”, i.e. US nationals or US residents. Under the regulations, financial institutions are required to report on the identity of US nationals or US residents and their account balances, financial revenues and, in the future, products from the sale of securities.
The first annual IRS declaration was drafted for the year 2015 regarding 2014. This declaration shall also concern the accounts of corporations and trusts held by US taxpayers.
In France, the FATCA law has been transposed through the Inter-Governmental Agreement (IGA) signed on 14 November 2013 and submitted to parliament for ratification. The agreement aims to render the reporting of banking and tax information obligatory between France and the US.
The FATCA law concerning Lazard
From 1 July 2014, Lazard Frères Banque and Lazard Frères Gestion must comply with the FATCA law under their status as Participating Financial Institutions granted by the IRS.
In this context, Lazard Frères Banque and Lazard Frères Gestion apply identification obligations under the FATCA law.
Upon opening an account, Lazard collects information from individual and corporate clients to enable the identification of US Persons and request clients to confirm their status.
Information regarding existing Lazard clients is also analysed in order to identify elements which may determine a US Person status. Clients concerned shall be contacted in order to verify their status as defined by the FATCA law.
Clients may contact their usual correspondents for any further information.
In accordance with AMF Position 2004-07, Lazard Frères Gestion SAS informs holders of units and/or shareholders of its managed UCIs that it may have to report the composition of the UCI portfolios to certain professional investors requiring this information, in order to calculate regulatory requirements, under EC Directive 2009/138/ (known as Solvency II).
Fixed and variable remunerations paid by the investment management company to its staff, on a prorata basis for funds managed under its Undertakings for Collective Investments, excluding investment management mandates, may be requested in written from the Lazard Frères Gestion UCI legal department.
The global variable remuneration envelope is set by the Lazard Group based on various criteria including Lazard Groupe financial performances for the previous year, taking results into account.
The Management Board decides on the total split between fixed and variable remunerations, respecting total segregation between the fixed component and the variable component of the remuneration.
Total variable remuneration is determined considering all risks.
The amount of variable remuneration is then individualised and determined partly as a function of individual performance.
The Management Board supervises the determination of individual remunerations established chiefly on the basis of an individual performance appraisal, which is referred to at the annual review.
The individual annual appraisal ensures that the individual’s level of expertise is suited to the position occupied and also serves as a gauge of reliability and autonomy.
The appraisal considers the previous year’s annual objectives and therefore enables objectives to be set for the following year.
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