Article 4
Policies and procedures
1. The policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 shall be set out in writing and shall reflect the size, complexity and nature of the asset-referenced token and the range of activities carried out by the issuer of asset-referenced tokens and the group to which it belongs.
2. The management body of the issuer of asset-referenced tokens shall be responsible for the definition, adoption and implementation of these policies and procedures. It shall periodically identify and address any deficiencies in the effectiveness of those policies and procedures.
3. Issuers of asset-referenced tokens shall establish effective internal communication channels to inform and provide ongoing access to employees and members of the management body of their conflict of interest policies and procedures and provide appropriate updated trainings on those conflict of interest policies and procedures.
Issuers of assets-referenced tokens shall establish effective external communication channels to inform third parties of their conflict of interest policies and procedures.
4. Where the issuer of asset-referenced tokens is a member of a group, the policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 shall cover conflicts of interest between the issuer and other group entities.
5. The policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 shall include:
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(a) |
a description of the circumstances which may give rise to a conflict of interest in accordance with Articles 2 and 3; |
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(b) |
the processes to be applied in order to identify, prevent, manage, and disclose the conflicts of interest referred to in Articles 2 and 3. |
6. The processes referred to in paragraph 5 shall differentiate between conflicts of interest that persist and need to be managed permanently and those that occur occasionally and need to be mitigated by a case-specific measure.
7. The processes referred to in paragraph 5 shall include a description of the following:
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(a) |
effective processes to promptly report and communicate through appropriate internal reporting channels of any matter that may result, or has resulted, in a conflict of interest; |
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(b) |
effective processes to prevent and control the exchange of information between connected persons engaged in activities where a conflict of interest may arise, where the exchange of that information may harm the interests of the holder of asset-referenced tokens or may affect the performance of such connected person’s duties and responsibilities; |
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(c) |
measures to ensure that conflicting activities or transactions are entrusted, where possible, to different persons within the same issuer of asset-referenced tokens or otherwise subject to targeted monitoring and measures that achieve the same effect; |
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(d) |
measures to ensure that connected persons who perform outside business activities related to the issuer of asset-referenced tokens are prevented from having inappropriate influence within the issuer of asset-referenced tokens regarding those activities; |
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(e) |
measures to ensure that the risk of conflicts of interest is addressed at the level of the management body or by its responsible committee. Those measures shall ensure that the members of the committee or members of the management body do not have a conflict of interest and shall provide sufficient guidance on the identification and management of conflicts of interest that may affect the members of the management body to take objective and impartial decisions in the best interests of the issuer of asset-referenced tokens; |
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(f) |
measures to ensure the conferral of the responsibility to the members of the management body to inform other members of and abstain from voting on any matter where the members have or may have a conflict of interest or where the objectivity of those members or ability to properly fulfil their duties towards the issuer of asset-referenced tokens may be otherwise compromised; |
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(g) |
measures to ensure that members of the management body are prevented from being a member of the management body in the management or supervisory function in competing issuers of asset-referenced tokens. |
8. Where the conflicts of interest policies and procedures are insufficient to prevent or mitigate the risks of damage to holders of asset-referenced tokens or the issuer of asset-referenced tokens’, the issuer shall amend the policies and procedures to address any deficiencies.
9. The policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 shall require issuers of asset-referenced tokens to keep records and document the types of activities or situations giving rise or which may give rise to the conflicts of interest referred to in Article 2(1) and Article 3(1) and, for each type of activity or situation, the measures taken to prevent or mitigate such conflicts. The records shall be kept for a retention period of 5 years.
10. The policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 shall ensure that the transactions referred to in Article 2(4) are identified by or notified to the issuer of asset-referenced tokens before a decision on the execution of the transaction and its conditions is taken. Those policies and procedures shall also ensure that decisions to enter into such transactions are taken objectively, in the interest of each party, and that the conditions for the transaction are the same as the conditions that apply between independent parties for the same transactions in the absence of a conflict of interest.
11. In relation to the transactions referred to in Article 2(4), the policies and procedures referred to in Article 32(1) of Regulation (EU) 2023/1114 shall ensure that:
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(a) |
decision-making processes for entering into those transactions are set out and that thresholds, expressed as the volume of the transaction, above which such a transaction requires the approval by the management body are established; |
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(b) |
employees and members of the management body are made aware of the rules applied on those transactions, and of the measures established by the issuer of asset-referenced tokens in relation to them; |
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(c) |
the issuer of asset-referenced tokens is informed promptly of any of those transactions; |
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(d) |
a record is kept of the transaction notified to or identified by the issuer of asset-referenced tokens, documenting the date and time of the transaction, the conditions, its volume, the counterparty and any authorisation or prohibition in connection with that transaction. |