Relationship Disclosure
Purpose
This document is intended to augment your Portfolio Management Agreement as well as meet required disclosure obligations for Optimize Inc., doing business as Optimize Wealth Management (“Optimize”). A current version of this document is set out on our website at www.optimize.ca, as well as online links shared with you. When there is a material change to this document, Optimize will notify you electronically and provide a link to the updated version on our website.
An Overview of Optimize
Optimize is a portfolio manager, investment fund manager and exempt market dealer registered under the securities laws of Ontario. Optimize provides investment advice, discretionary portfolio and asset management services in accordance with each client’s Portfolio Management Agreement.
The Products and Services Optimize Offers
As a portfolio manager, Optimize offers investment management services to our clients in investment accounts managed by Optimize on a discretionary basis (“Managed Accounts” and each an “Managed Account”).
Generally, the Managed Accounts are invested in accordance with the Optimize Private Client Program, a proprietary discretionary investment management service offered by Optimize to its clients. To participate in the Optimize Private Client Program, each client enters into a Portfolio Management Agreement and Investment Policy which describes the client’s return objectives, stability objectives, time horizon and liquidity needs for each of the client’s Accounts. On the basis of this information, accounts are invested in model portfolios (“Model Portfolios”) described in the Optimize Private Client Program Model Portfolio Brochure.
Optimize offers two kinds of Model Portfolios: (1) Optimize Model Portfolios, which are comprised entirely of our proprietary Optimize Funds (defined below), and (2) Model Portfolios containing Third Party ETFs, which are comprised of the Optimize Private Opportunities Funds, as well as exchange traded funds (ETFs) managed by third party investment fund managers and traded on public stock exchanges.
Optimize is the trustee, investment fund manager and portfolio manager of a suite of private, pooled investment trusts, which form the building blocks for the Model Portfolios (the “Optimize Funds”). The Optimize Private Client Program Disclosure Document contains important information regarding fees and expenses, risk factors and conflicts of interest associated with the Managed Accounts and Optimize Funds.
Custodial Arrangements
National Bank Independent Network (the “Custodian”) is the custodian of the Optimize Funds and the Managed Accounts, and is responsible for holding the securities and cash held within the Optimize Funds and the Managed Accounts. The Custodian is responsible for the safekeeping and recordkeeping of all securities and cash in the Optimize Funds and your Managed Account. The Custodian is also responsible for providing ongoing statements to you on a timely basis. Although the Custodian is responsible for delivering these statements to you, both Optimize and the Custodian are responsible for ensuring the accuracy of the statements. Should you have any questions related to your statements, you may contact the Custodian directly at the contact details provided below.
The Custodian is an investment dealer and is regulated by Investment Industry Regulatory Organization of Canada (IIROC) and is a qualified custodian under applicable securities law. Each client Managed Account held at the Custodian is insured by the Canadian Investor Protection Fund (CIPF) in an amount up to $1,000,000.
Optimize has trading authority over client assets held at the Custodian, but does not have access to client assets held at the Custodian and is not authorized to transfer securities or cash into or out of Managed Accounts held at the Custodian, except in the limited circumstances described below under “Access to Client Assets”. The Custodian is independent of Optimize, is required to segregate client assets from its own assets and is subject to regulatory oversight, minimum capital and insurance requirements. The Custodian may hold securities on your behalf in its name as your nominee. The Custodian may appoint sub-custodians to hold client assets in foreign jurisdictions or to hold client assets other than cash or securities. Client assets are subject to risk of loss: (i) if the Custodian becomes bankrupt or insolvent; (ii) if there is a breakdown in the Custodian’s information technology systems; or (iii) due to the fraud, willful or reckless misconduct, negligence or error of the Custodian or its personnel. Optimize has reviewed the Custodian’s reputation, financial stability, relevant internal controls and ability to deliver custodial services and has concluded that the Custodian’s system of controls and supervision is sufficient to manage risks of loss to client assets in accordance with prudent business practice.
Securities of investment funds or other issuers held by the client or the Optimize Funds (each, a “Fund”) that are recorded on the books of the Fund or its transfer agent only in the name of the client are not held by the Custodian. Fund securities are subject to the custody and recordkeeping arrangements applicable to the Fund and disclosed in the offering documents of the Fund. Client assets are subject to risk of loss if the Fund or its custodian becomes bankrupt or insolvent, or if the Fund, its custodian or transfer agent experiences a breakdown in its information systems. Optimize has reviewed the system of controls and supervision maintained by each Fund and has concluded that its system is sufficient to manage the risk to a client of loss in accordance with prudent business practice.
Although client assets are generally held by the Custodian, Optimize may have access to client assets in the following circumstances:
- Optimize may accept delivery of securities or cash from or to a client on a temporary basis to facilitate a deposit or the settlement of a trade;
- Optimize may have authority to transfer cash from the client’s account at the Custodian to the client’s bank account;
- certain personnel at Optimize may have authority, under a power of attorney or otherwise, to withdraw funds or securities from client accounts;
- Optimize may have authority to debit client accounts to pay bills on behalf of clients, other than its own management fees; or
- Optimize or its personnel may act as trustees of trusts which are clients or are beneficially owned by clients.
In these cases, the client has granted Optimize or specific personnel at Optimize access to client assets to facilitate certain transactions and provide convenience and efficiency for Optimize in the management of the client’s assets. Granting Optimize access to client assets, even in the limited circumstances set out above, exposes the client assets to risk of loss: (i) if there is a breakdown in Optimize’s information technology systems; or (ii) due to the fraud, willful or reckless misconduct, negligence or error of Optimize or its personnel. In addition, Optimize is required under applicable securities laws to insure against the additional risk of loss which arises due to its access to client assets.
Related and Connected Issuer Disclosure
Privacy Policy
Optimize has adopted a policy outlining collection, use and disclosure of personal information which can be found on its website at www.optimize.ca
Risks
Securities laws requires Optimize to provide all clients with a description of risks that you should consider when making an investment decision. Depending on the nature of your investment, the type of investment risk will vary. Below is a brief summary of some of the applicable investment risks. For a more detailed description of investment risks applicable to the Optimize Funds, please review the section titled “Risk Factors” in the Optimize Private Client Program Disclosure Document.
Capital risk: the risk you may lose the money you invest.
Business risk: the risk inherent in the operations of the entity or industry in which you have invested.
Currency risk: the risk associated with currency fluctuations if you invest in non-Canadian dollar denominated securities, or in companies whose businesses are carried out in foreign jurisdictions which create exposure to foreign currency fluctuations.
Interest rate risk: the risk that the principal of a debt instrument that you’ve invested in will go up or down as the interest rates in the economy go up and down.
Commodity risk: the risk that exposures to certain commodities, or to companies whose business is dependent on commodities, may be directly affected by movements in the price of the commodities.
Concentration risk: if you invest in relatively few securities, then this can result in a lack of diversification across all sectors, regions or countries and may result in higher volatility of your investment performance.
Specialization risk: if you invest primarily in one industry or market capitalization range, then this may cause your investment performance to be more volatile and strongly affected by the overall economic performance of the area of specialization.
Risk of loss: investing, in general, has risk associated with it, including the risk that the investor may lose a portion or all of an investment.
Risk of loss of key personnel: the business you invest in may be dependent on a small number of key officers and employees, the loss of any of whom could have an adverse effect on your investment.
Leverage risk: the risk of loss associated with borrowing.
Risk of Using Borrowed Money to Finance an Investment
Optimize does not lend money, extend credit or provide margin to its clients. Margin is available for your account from the Custodian, and Optimize may trade on margin for your account if it is considered a suitable investment strategy for you. Any use of margin would be approved by you in advance in your Investment Policy Statement.
Using borrowed money to finance the purchase of securities or make other investments involves greater risk than a purchase using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remain the same even if the value of the securities purchased declines. Using borrowed money to purchase securities can magnify the gain or loss on the cash invested. It is also important that you are aware of the terms of any loan that is secured by securities or other investments. The lender may require that the amount outstanding on the loan does not rise above an agreed percentage of the market value of the securities or other investments. Should this occur, you will be required to pay down the loan or sell the investments so as to return the loan to the agreed percentage relationship.
For clarity, Optimize may use margin when managing the Optimize Private Opportunities Funds, as described in the Optimize Private Client Program Disclosure Document. The use of margin within an Optimize Fund does not constitute the use of margin for your Account, and will not impose any loan obligations on you or your Account.
Conflicts of Interest
Optimize has a regulatory obligation to manage conflicts of interest in the best interest of its clients. A conflict of interest includes any circumstances where: (i) your interests, and the interests of Optimize or its personnel (including Licensed Optimize Representatives and Relationship Managers) are inconsistent or divergent; (ii) Optimize or its personnel may be influenced to put our interests ahead of your interests; or (iii) monetary or other benefits are available to Optimize or our personnel that may compromise your trust in us.
Optimize has a regulatory obligation to make certain disclosures regarding conflicts of interest. This statement provides information with respect to any conflicts of interest that may exist, or could be expected to arise. Optimize has taken steps to identify all potential conflicts of interest, and to ensure fairness to clients, has adopted policies and procedures to assist in identifying and addressing any conflicts of interest that may arise. In general, Optimize deals with conflict of interests as follows: (1) Avoidance – This includes avoiding conflicts which are prohibited by law as well as conflicts which cannot effectively be managed; (2) Disclosure – By providing you with information about conflicts, you are able to assess independently their significance when evaluating recommendations and any actions Optimize may take; (3) Control – Optimize manages acceptable conflicts through means such as physical separation of different business functions and restricting the internal exchange of information. In circumstances where Optimize cannot avoid a potential material conflict of interest, Optimize will disclose such conflicts to you as they arise.
Potential conflicts of interest include:
- Referral arrangements
- Sales practices, compensation arrangements and incentive practices
- Conflicts of interest in fee-based accounts
- Outside business activities
- Proprietary products or mixed shelves
- Relationships with issuers
Compensation Paid to Us and Other Costs of Making, Holding and Selling Investments
Reporting to You
You will be provided an account statement at least every three months by the Custodian that will show:
- Details of every transaction made during the reporting period: the date of the transaction; whether the transaction was a purchase, sale or transfer; the name of the security; the number of securities; the price per security if the transaction was a purchase or sale; the total value of the transaction if it was a purchase or sale; and
- Details of your investment inventory: the name and quantity of each security in the Managed Account; the market value of each security in the Managed Account; the total market value of each security position in the Managed Account; any cash balance in the Managed Account, the total market value of all cash and securities in the Managed
Additional reporting obligations relating to the Optimize Funds are set out in the Optimize Private Client Program Disclosure Document.
Complaints and Dispute Resolution
Schedule “B” describes the complaints and dispute resolution service available to you.
Your Relationship With Optimize
Optimize is required to determine that its recommendation to you to make an investment in the Optimize Funds is suitable for you and puts your interests first.
It is important that you actively participate in our relationship. In particular, we encourage you to:
- Keep your Licensed Optimize Representative fully and accurately informed regarding your personal circumstances, and promptly advise us of any change to information that could reasonably result in a change to the types of investments appropriate for you, such as a change to your income, investment objectives, risk tolerance, time horizon or net worth.
- Review the documentation and other information we provide to you regarding your account, transactions conducted on your behalf and the holdings in your portfolio.
- Ask questions of and request information from your Licensed Optimize Representatives to address any questions you have about your account, transactions conducted on your behalf or the holdings in your portfolio, or your relationship with us or anyone acting on our behalf.
KYC and Suitability
- Optimize’s concerns about the possible financial exploitation of the client;
- Optimize’s concerns about the client’s mental capacity as it related to the ability of the client to make decisions involving financial matters;
- the name and contact information of a legal representative of the client, if any; and
- the client’s contact information.
Benchmarks
We do not believe that money should be managed with relative performance in mind, but that absolute wealth creation and its sustainability are of the utmost importance. As a result, we do not benchmark the performance of our Managed Accounts against any indices, but measure our success against the benchmark of producing long-term after-tax returns that are greater than inflation in order to increase our clients’ purchasing power. Some clients may find that comparing their portfolio to a benchmark is a useful exercise for monitoring purposes. Benchmark comparisons can help you determine if your investment approach is delivering the desired results, or whether changes might be called for. Investment benchmarks are also helpful for developing realistic expectations about returns your portfolio can generate over the long-term. Investment benchmarks usually provide a broad measure of the return generated by specific asset classes over a given period. They are often referred to as reference indices since the most common form of investment benchmark is an index - such as a stock or bond index. A benchmark must replicate the security or portfolio you are monitoring closely as possible for the comparison to be meaningful. Examples of benchmarks would include the S&P/TSX for Canadian stocks, the DEX Universe for Canadian bonds and the S&P 500 for U.S. stocks. For a portfolio composed of securities from several different asset classes, the appropriate benchmark would be a blend of indices weighed according to the portfolio’s asset mix.
Referral Arrangements
Optimize has established referral arrangements and offers (and/or accepts) payments to (or from) third parties for the introduction of potential clients and the provision of financial services. Where you are receiving services which fall under such arrangements, you will receive specific disclosure regarding the nature of the agreement between Optimize and the person or company that is making or receiving the referral.
Standards of Fairness
The following sets forth in general terms the standards of fairness that Optimize will exercise in dealing with you and all other clients. Optimize and its employees and representatives along with any of its affiliated companies or their representatives shall conduct themselves with integrity and act in an ethical manner in their dealings with you. Optimize shall not knowingly participate or assist in the violation of any statute or regulation governing securities markets. Responsible employees shall exercise reasonable supervision over subordinate employees subject to their control to prevent any violation by such persons of applicable statutes or regulations. Optimize shall exercise diligence and thoroughness when taking any investment action for you, and all other clients, and shall have a reasonable and adequate basis for such actions, supported by appropriate research and investigations. In taking investment action for you, Optimize will consider its appropriateness and suitability for your Managed Account. Optimize will manage your Managed Account within the guidelines established with each client, as detailed in the Portfolio Management Agreement. Optimize shall ensure that your Managed Account is supervised separately and distinctly from our other client accounts; however, in placing orders for the purchase or sale of securities, Optimize may pool your order with that of another client, or clients. Transactions for client accounts shall have priority over transactions completed for Optimize employees so that employee transactions do not act adversely to your interests. Optimize shall preserve the confidentiality of information communicated by you, and all other clients, concerning matters within the scope of a confidential relationship. Our Privacy Policy can be found on our website at www.optimize.ca.
Personal Trading
Optimize employees trade in the same securities as its clients. While some employees invest directly in the Optimize Funds, others hold securities in accounts that are segregated and therefore trades may be executed in the same individual securities held by our clients. Where this is the case every attempt will be made to have employees trade right alongside clients so that all Managed Accounts are treated fairly. Optimize has created a personal trading policy that employees must adhere to when executing orders for any accounts where they, or an immediate family member, are a beneficial owner or where the employee influences control over the account.
Optimize Employee Code of Conduct
Optimize employees may at times find themselves in a situation where there is a conflict between their own personal interests and those of a client. In order to address these situations, Optimize has established a Code of Conduct (“Code”) that employees must abide by. The Code covers a number of potential conflicts; among them are situations involving outside business activities, accepting gifts and entertainment from service providers, and the use of confidential information.
SCHEDULE"A"
CUSTODIAN CONTACT INFORMATION
National Bank Independent Network
130 King Street West #3200
Toronto, ON M5X 1J9
Todd Brennand
SCHEDULE "B"
COMPLAINTS PROCESS AND INDEPENDENT DISPUTE RESOLUTION SERVICE
OPTIMIZE WEALTH MANAGEMENT
WHAT TO DO IF YOU HAVE A COMPLAINT
Our Complaint Process
Optimize maintains detailed policies and procedures for handling client complaints which are outlined below. Effective May 1, 2014, the Canadian Securities Administrators implemented a requirement for all registered firms to ensure that the Ombudsman for Banking Services and Investments (the “OBSI”) is made available as an independent dispute resolution or mediation service for all clients that have an eligible compliant. Optimize is registered as a Participating Firm with the OBSI.
Any complaints with respect to the services provided by Optimize should first be directed to a representative of Optimize at:
Optimize Inc.
161 Bay Street, 45th Floor
Toronto, Ontario
M5J 2S1
Phone: 1-866-209-6862
Fax: 416-840-4939
Email: compliance@optimize.ca
You may want to consider using a method other than email for sensitive information.
Tell us:
- what went wrong
- when it happened
- what you expect (for example, an apology, or an account correction)
We will acknowledge your complaint
Optimize will acknowledge your complaint in writing, as soon as possible, but no later than ten business days after receiving your complaint. Optimize may ask you to provide clarification or more information to help it resolve your complaint. In order to help Optimize respond as quickly as possible you should make your complaint as soon as possible after the event that causes the complaint occurs, reply promptly if Optimize asks you for more information and keep copies of all relevant documents, such as letters, emails and notes of conversations with Optimize.
We will provide our decision
Optimize will provide written notice of its decision within 90 days of receiving your complaint which will include:
- a summary of the complaint,
- the results of Optimize’s investigation, and
- Optimize’s decision to make an offer to resolve the complaint or deny it; and an explanation of our decision.
If our decision is delayed
If Optimize cannot provide you with its decision within 90 days Optimize will:
-
inform you of the delay,
-
explain why its decision is delayed, and
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give you a new date for its decision
If you are not satisfied with our decision
You may be eligible for the independent dispute resolution service offered by OBSI.
If you are a Québec resident
You may consider the free mediation service offered by the Autorité des marches financiers.
Taking Your Complaint to OBSI
You may be eligible for OBSI’s free and independent dispute resolution service if:
- Optimize does not provide its decision within 90 days after you made your complaint, or
- you are not satisfied with Optimize’s decision
OBSI can recommend compensation of up to $350,000.
OBSI’s service is available to clients of Optimize. This does not restrict your ability to take a complaint to a dispute resolution service of your choosing at your own expense, or to bring an action in court. Keep in mind there are time limits for taking legal action.
Who can use OBSI
- your complaint relates to a trading or advising activity of Optimize or by a representative of Optimize,
- you brought your complaint to Optimize within 6 years from the time that you first knew, or ought to have known, about the event that caused the complaint, and
- you file your complaint with OBSI according to its time limits below
Time Limits apply
- If Optimize does not provide you with its decision with 90 days, you can take your complaint to OBSI any time after the 90-day period has ended.
- If you are not satisfied with Optimize’s decision, you have up to 180 days after Optimize provides you with its decision to take your complaint to OBSI.
Filing a complaint with OBSI
Contact OBSI
Email: ombudsman@obsi.ca
Telephone: 1-888-451-4519 or 416-287-2877 in Toronto
Information OBSI needs to help you
- Your contact information as well as contact information for Optimize,
- The name and contact information of any Optimize representative involved with your complaint,
- Details of your complaint, and
- All relevant documents, including any correspondence and notes of discussions with Optimize.
OBSI will investigate
OBSI works confidentially and in an informal manner. It is not like going to court and you do not need a lawyer. During its investigation, OBSI may interview you and representatives from Optimize. Optimize is required to cooperate in OBSI’s investigation.
OBSI will provide its recommendations
Once OBSI has completed its investigation, it will provide its recommendations to you and Optimize. OBSI’s recommendations are not binding on either party. OBSI can recommend compensation of up to $350,000. If your claim is higher, you will have to agree to that limit on any compensation you seek through the services provided by OBSI. If you want to recover more than $350,000, you may want to consider another option, such as legal advice, to resolve your complaint.
For more information about OBSI, visit www.obsi.ca