FCPA and Anti-Corruption Compliance Policy

 

 

I. Statement of Policy

Mercator Navigation GmbH & Co. KG and its affiliated investment advisory entities (collectively, the “Firm”) is committed to conducting business in a legal, ethical, transparent, and professional manner. Accordingly, it is the policy of the Firm to comply fully with the United States Foreign Corrupt Practices Act (the “FCPA”) and with all other applicable anti-corruption (including anti-bribery) laws when conducting any business of any type anywhere in the world.

This Policy applies to (1) the Firm and its employees, officers, and directors (regardless of citizenship); and (2) all funds managed by the Firm (collectively, the “Funds”) and any employees, officers, and inside directors thereof (regardless of citizenship). Persons included within (1) and/or (2) above are collectively referred to herein as “Mercator Navigation Personnel.” This Policy also applies to (3) the Firm’s and the Funds’ independent directors, third-party agents (including placement agents), consultants, representatives, lawyers, joint venture partners, intermediaries or other similarly-related parties (collectively, “Third-Party Intermediaries”). This Policy applies to conduct undertaken anywhere in the world.

The FCPA prohibits a person or entity from directly or indirectly offering, authorizing, or giving money or any other thing of value to any Foreign Official (as defined below) with the corrupt purpose of (1) influencing any official act or decision of any Foreign Official; (2) inducing any Foreign Official to do or omit to do an act in violation of a lawful duty; (3) securing any improper business advantage; or (4) obtaining or retaining business for, or otherwise directing business to, any person or entity. Other nations have similar laws prohibiting corrupt payments to government officials. Various United States and non-United States laws also make it illegal to offer or pay bribes, kickbacks, or other illegal inducements to employees or representatives of various companies, including companies not connected to Foreign Officials. “Companies” can include any business or organization.

To ensure compliance with these laws, the Firm strictly prohibits the offering or giving of bribes, kickbacks, or other corrupt inducements to Foreign Officials or to any other persons or entities to advance the business interests of the Firm and/or the Funds. Mercator Navigation Personnel and Third-Party Intermediaries must comply with the applicable federal, provincial, and local anti-corruption and anti-bribery laws of any country in which the Firm and/or the Funds conduct business.

Violation of the FCPA is a United States federal crime that can result in severe fines, prison time, and other sanctions for the Firm and/or its employees, officers, and directors, including employees who are not United States citizens or who do not work in the United States. Similar penalties can result from violating anti-corruption laws in other countries. Even an allegation of corruption can result in enormous expense and disruption to the business of the Firm or the Funds, including by damaging their reputation and business prospects. Accordingly, a violation of this Policy by any Mercator Navigation Personnel can result in disciplinary action up to and including termination of employment. All Mercator Navigation Personnel and Third-Party Intermediaries worldwide must understand how the FCPA and other applicable anti-corruption laws may affect their activities on behalf of the Firm.

II. Administration of this Policy

The Chief Compliance Officer, under the oversight of the Board of Directors of the Funds, shall have responsibility for the administration of this Policy. The Chief Compliance Officer shall report at least annually to the Board of Directors on the Firm’s anti-corruption compliance.

III. Key Concepts

A. Definition of a “Foreign Official” and Coverage by the FCPA

The FCPA prohibits corrupt inducements not only to senior officials (such as heads of state or cabinet-level personnel) but also to any officer, employee, or representative (including any low-level personnel) of any national, regional, or local non-United States government or of any department, agency, or instrumentality of a non-United States government. The FCPA’s prohibition is very broad and includes officers and employees of any commercial enterprise owned or controlled by any non-United States government or of any public international organization (e.g., the United Nations or the World Bank), as well as any person acting in an official capacity for or on behalf of any non-United States government or department, agency, or instrumentality, or for or on behalf of any public international organization. The FCPA also prohibits corrupt payments to non-United States political parties or party officials or any candidate for non-United States political office. This Policy refers collectively to all such persons described in this paragraph, including their family members and any person who will directly influence such person as a result of any corrupt inducement, as “Foreign Officials.”

B. Direct and Indirect Corrupt Payments Prohibited

The FCPA prohibits both direct and indirect corrupt offers, promises and payments. Accordingly, the Firm and K & C Personnel are potentially liable for any corrupt offers, promises or payments to any Foreign Official if they are made through a Third-Party Intermediary or any other person with the knowledge that a Foreign Official will be the ultimate recipient. “Knowledge” includes a conscious disregard for or deliberate ignorance of facts that indicate a high probability that the corrupt offer, promise or payment will occur. In other words, the Firm cannot do indirectly through a Third-Party Intermediary that which it cannot do directly itself.

C. Anything of Value

Corruptly providing anything of value can violate the FCPA and other anti-corruption laws. “Anything of value” includes cash and cash equivalents, but it also includes benefits such as travel, entertainment, meals, employment, employment of a Foreign Official’s family member, or any other benefit that is extended for the corrupt purpose of influencing a Foreign Official.

IV. Activities Requiring Enhanced Awareness and/or Procedures

The following is a non-exhaustive list of certain business activities requiring enhanced awareness of anti-corruption issues and/or prior approval:

A. Liability for Acts of Portfolio Companies

Where the Funds acquire a substantial equity interest in a portfolio company such that the Funds are able to direct or control the conduct of the portfolio company, special attention should be paid to the portfolio company’s anti-corruption policy and the portfolio company’s procedures for ensuring compliance with its policy. Recent Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) guidance has reinforced the notion that a parent company can be held liable for acts of its subsidiaries, as is customary in federal law and pursuant to traditional agency principles. The mere fact of ownership does not automatically render the subsidiary the parent’s agent, and the government will evaluate the nature of the relationship between a parent and subsidiary. However, even where a parent company lacks sufficient control over the subsidiary, or other circumstances prevent the DOJ from pursuing criminal violations against a parent for the actions of its subsidiary, the SEC may still be able to pursue civil enforcement of books and records violations against the parent company arising out of its subsidiary’s improper conduct.

K & C Personnel serving as directors (or in a similar capacity) of a portfolio company should make reasonable efforts to cause the board of directors or other governing body of such portfolio company to (1) direct management of the portfolio company to take all steps to ensure the portfolio company complies with anti-corruption laws and standards and adopts and abides by anti-corruption policies and practices that are appropriate to the business and (2) periodically monitor compliance with such anti-corruption policies and practices by the portfolio company.

B. Acquisitions

To the extent that the Firm or the Funds pursue the acquisition of any business entity with operations or activities outside the United States, the due diligence process associated with that acquisition shall include an appropriate review of the acquisition target’s compliance with the FCPA and any other applicable anti-corruption statutes.

C. Third-Party Intermediaries

Many anti-corruption problems result from improper conduct by Third-Party Intermediaries. Thus, engaging or contracting with third-party consultants, sales agents, lawyers, joint venture partners, or other intermediaries to act on behalf of the Firm or the Funds requires special care, particularly if the third party will be interacting with Foreign Officials. It is the policy of the Firm to contract only with reputable, non-corrupt consultants, sales agents, lawyers, joint-venture partners, and other intermediaries when conducting business in non-United States countries and never to utilize such intermediaries to make direct or indirect corrupt payments to Foreign Officials.

Accordingly, when retaining any Third-Party Intermediary that is reasonably likely to interact with Foreign Officials on behalf of the Firm, this Policy requires (1) reasonable due diligence prior to engaging the Third-Party Intermediary; (2) appropriate anti-corruption representations and warranties in any contracts with the Third-Party Intermediary; (3) review by the Chief Compliance Officer of the due diligence performed; and (4) approval of the contract in accordance with then-existing Firm policies and procedures. Records of the due diligence performed and copies of the signed written contracts shall be maintained while the Third-Party Intermediary is active and for at least five years thereafter.

In addition, once a Third-Party Intermediary is retained, it is important to monitor the relationship and immediately address any signs of potential improper activity. An appropriate Firm employee, under the direction of the Chief Compliance Officer, shall be responsible for overseeing the Firm’s relationship with each Third-Party Intermediary that is dealing on behalf of the Firm and/or the Funds with any Foreign Official.

D. Meals, Gifts, Entertainment, Travel, and Other Business Courtesies

It is the policy of the Firm that business courtesies must always be reasonable, consistent with local law, and directly related to a legitimate business purpose. The following rules apply:

  • It is never permissible to provide excessive or lavish meals, gifts, entertainment, travel, or other business courtesies to Foreign Officials.
  • Various countries may restrict or prohibit Foreign Officials from receiving even modest benefits, such as routine lunches or dinners, from companies with which they interact. Personnel must know the legal requirements in the countries in which they conduct business and adhere to them.
  • It is never permissible to give cash or an item of significant value to any Foreign Official under any circumstance. Nominal gifts, such as a trinket with the Firm logo or a simple fruit basket at the holidays, are permissible if consistent with local law.
  • In certain limited circumstances directly related to: (a) the promotion, demonstration, or explanation of products or services; or (b) the execution or performance of a contract with a non-United States government, the Firm may pay for reasonable travel expenses of Foreign Officials. Such circumstances must be approved in writing in advance by the Chief Compliance Officer and satisfy certain guidelines.

E. Regulatory Matters: Import/Export, Permits, Licenses, and Taxes

The FCPA and other anti-corruption laws have been interpreted to apply to all interactions with Foreign Officials related to a company’s business, including any regulatory matters. The Firm’s Policy prohibits corrupt or illicit payments in any regulatory matters.

It is the policy of the Firm never to make corrupt payments to any Foreign Official for the purpose of avoiding or reducing any customs duties, import/export taxes, fees or other related costs, or legal requirements. Customs brokers and others acting on behalf of the Firm or the Funds to deal with these issues are Third-Party Intermediaries and must be treated as such.

It is the policy of the Firm never to make corrupt payments to any Foreign Official for the purpose of avoiding or reducing any fees, costs, or legal requirements related to required permits or licenses (e.g., construction permits or environmental permits) or for the purpose of avoiding or reducing any lawful taxes. Any parties acting on behalf of the Firm or the Funds to deal with these issues are Third-Party Intermediaries and must be treated as such.

F. Charitable Donations and Political Contributions

It is the policy of the Firm not to make any charitable donations or political contributions to any person or entity with the purpose of (1) corruptly influencing any official act or decision of any Foreign Official; (2) causing any specific action by a government, government-owned or -controlled entity, or government instrumentality (i.e., a quid pro quo); (3) securing any improper business advantage; or (4) corruptly obtaining or retaining business for, or otherwise directing business to, the Firm, the Funds or any other person or entity.

Purely private, personal charitable donations to legitimate philanthropic causes are not covered by this Policy if they have no connection to the Firm’s business. However, any charitable donation or political contribution made on behalf of the Firm or the Funds, or in connection with their respective businesses, must receive advance written approval from the Chief Compliance Officer.

V. Commercial Bribery and Solicitation or Receipt of Corrupt Payments

A. Commercial Bribery Prohibited

As stated above, this Policy prohibits, whether directly or through any Third-Party Intermediary, any bribes, kickbacks or other corrupt or illicit payments to any person, including employees or representatives of any company, business, or other organization whether or not connected to Foreign Officials. Such payments are unlawful in many parts of the world and can cause great reputational and business harm and expose individuals, the Firm and the Funds to criminal penalties.

B. Receiving or Soliciting Corrupt Pay- ments Prohibited

Consistent with our Code of Ethics, K & C Personnel must comply with anti-bribery statutes, and therefore are also strictly prohibited from taking, soliciting or receiving any bribe, kickback, or other corrupt inducement. Requests to or by any K & C Personnel to give or receive any such payments are to be reported promptly to the Chief Compliance Officer.

VI. Compliance with United States Anti-Corruption Law

The Firm strictly prohibits any corrupt activity anywhere in the world, including in the United States. The FCPA does not prohibit corrupt payments to United States officials or to completely private parties. However, other United States federal and state laws prohibit corrupt payments to United States federal, state, and local public officials and other government employees, and a variety of federal and state laws forbid corruption in purely commercial transactions.

VII. Accurate Books and Records

It is the policy of the Firm to make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect all payments, expenses, and transactions. K & C Personnel should take special care to ensure that any expenditure of funds related to any Foreign Official is accurately and completely documented, regardless of the amount of such transaction. Under no circumstances should false, misleading, incomplete, or artificial entries be made in the books and records of the Firm. No undisclosed or unrecorded funds, assets, or liabilities of the Firm shall be established for any purpose.

VIII. Avoiding the Appearance of Imp- ropriety

K & C Personnel must take care to ensure that their interactions with Foreign Officials do not create the appearance of impropriety. K & C Personnel therefore shall not accept or seek from a Foreign Official any improper benefit, such as confidential, competitively sensitive information about a bidding process, even if no improper benefit is offered. K & C Personnel shall also comply with all applicable local laws related to dealing with Foreign Officials and governments, including all procurement requirements.

IX. Facilitation Payments and Emer- gency Circumstances

The FCPA anti-bribery provisions contain a limited exception for certain small “Facilitation Payments” made for the purpose of expediting or securing the performance of particular “routine governmental actions” by a Foreign Official:

  • That are ordinarily and commonly performed by the Foreign Official; and
  • That do not involve the exercise of discretion. (“Routine governmental actions” do not include any decision by a Foreign Official to avoid taking the routine action or to award new business or continue business with a particular person or entity.) Facilitation Payments that are legal under the FCPA often are illegal under applicable local law. For this reason, and because of the very limited nature of what is a permissible Facilitation Payment under the FCPA, this Policy allows for Facilitation Payments only with advance written approval by the Chief Compliance Officer. Any Facilitation Payments that are made must be accurately recorded in the Firm’s books and records.

Examples of Facilitation Payments include:

  • Processing of work permits, licenses, and visas.
  • Providing police protection, power and water supply, cargo handling, or protection of perishable goods.
  • Scheduling inspections associated with contract performance or transit of goods across country.

X. Compliance and Discipline

A. Training

The Firm provides compliance training to all employees at least annually. Training on the FCPA and this Anti-Corruption Policy will generally be included as part of the annual compliance training.

B. Annual Certification

All employees are required annually to certify their compliance with Firm policies, including this Anti-Corruption Policy.

C. Reporting Potential Violations

K & C Personnel are responsible for recognizing, avoiding, and reporting any conduct that may violate this Policy. K & C Personnel should report promptly to the Chief Compliance Officer any (1) suspected or potential violation of this Policy; (2) solicitation from a Foreign Official for a bribe or illicit payment; and (3) discussion of a bribe or potential illicit payment or solicitation with a Third-Party Intermediary.

The Firm will not retaliate or allow retaliation against any employee who in good faith makes a report under this Policy.

D. Discipline

Individuals who violate the FCPA or other anti-corruption laws may be subject to severe criminal and civil penalties, including imprisonment and very substantial fines, which the Firm is not permitted to reimburse. In addition, K & C Personnel who violate the FCPA, other anti-corruption laws, or this Policy may be subject to discipline, up to and including termination of employment.

XI. Further Information

Any questions about this Policy or compliance with the FCPA or other anti-corruption laws should be directed to the Chief Compliance Officer.