Corporate Governance Policy

1. Scope of this Policy

This Corporate Governance Policy applies to Morningstar Australasia Pty Ltd (“Morningstar Australasia”) and Morningstar Investment Management Australia Ltd (“Morningstar Investment Management”) (together “Morningstar”) and their directors, and officers, and employees.

Morningstar is part of the Morningstar, Inc. group of companies. As such, this Policy is to be read together with Morningstar, Inc.’s various global policies and procedures, including but not limited to the Morningstar, Inc. Code of Ethics. To the extent that there are discrepancies between Morningstar, Inc.’s global policies and procedures and this Policy, this Policy will take precedence in relation to Morningstar.

This Corporate Governance Policy is available on Morningstar’s websites.

 

 2. Executive Summary

This Corporate Governance Policy outlines Morningstar’s commitment to establish and maintain corporate governance practices which reflect the requirements of the industry, the law and regulators, and meets the expectations of our clients and investors in Morningstar’s Managed Portfolios, Morningstar’s Managed Funds and in Morningstar Next. It sets out:

  • Information about who Morningstar is
  • An overview of the corporate governance framework including the code of ethics, risk and compliance frameworks and complaint handling and whistleblower protection procedures
  • Roles and responsibilities of the boards, committees and management
  • How directors are remunerated, how conflicts of interest are managed by directors and director training
  • Asset Stewardship Principles for Morningstar Investment Management

 

3. About Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Morningstar, Inc. is a publicly quoted company (NASDAQ:MORN). The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar, Inc. provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar, Inc. also offers investment management services through its investment advisory subsidiaries. The company has operations in 27 countries.

Morningstar Australasia is a subsidiary of Morningstar, Inc. and has been serving the Australian and New Zealand markets since 1999, with an office currently located in Sydney.  Morningstar Australasia operates on the belief that quality financial advice creates better outcomes for investors.  We have operations spread across equity and credit research, managed fund, ETF, and LIC research, data, software development, product and solutions, client service, sales, marketing, and corporate services.  While other companies may offer research, ratings, software, or data services, we are unique in delivering all of these specifically with the goal of helping investors achieve better outcomes. Because of our position of independence, Morningstar Australasia is able to provide truly objective information. We are always innovating, adding new data, analytics, metrics, and research methodologies that illuminate investing. The unique point of view represented in our research, paired with the way we use information design and technology to communicate complex financial information, sets us apart from other businesses in our space.

Morningstar Investment Management forms part of Morningstar, Inc.’s. global investment management business, a global leader in asset allocation, investment research and portfolio construction.  Guided by seven investment principles, Morningstar Investment Management is committed to focusing on its mission to design portfolios that help investors reach their financial goals. We put investors first; we’re independent-minded; we invest for the long term; we’re valuation-driven investors; we take a fundamental approach; we strive to minimise costs; and we build portfolios holistically. The group’s global investment management team works as one to apply its disciplined investment process to all strategies and portfolios, bringing together core capabilities in asset allocation, investment selection, and portfolio construction. This robust process integrates proprietary research and leading investment techniques. In addition to advisory services, the group’s investment professionals build and manage model portfolios for financial advisors Australia to create strategies that incorporate a wide variety of investment objectives.

 

4. Roles and Responsibilities

The Board of Directors of Morningstar Investment Management and Morningstar Australasia have ultimate accountability for the Corporate Governance Policy. In performing their responsibilities, the Boards of Morningstar Investment Management and Morningstar Australasia are supported by various committees and roles, which each have their own accountabilities. These are set out in Appendix 1 Roles and Responsibilities.

Morningstar Inc.’s General Counsel, with assistance from the local board chairperson(s) is responsible for the determining the appropriate Board composition and appointments. The General Counsel ensures the Boards are made up of competent executives who, as a group, have the necessary breadth of experience and diversity of skills to ensure that the boards can discharge its duties.

 

5. Corporate Governance Framework

Morningstar’s corporate governance framework, including this Corporate Governance Policy assists the Board of Directors for Morningstar Investment Management and Morningstar Australasia in supervising the management of the business and affairs of each company.

In addition to this Corporate Governance Policy, Morningstar’s corporate governance framework includes the following elements:

Board and Committee Charters

  • Sets out the procedural and operational framework for the establishment and operation of each Board and Committee

Code of Ethics

  • All employees are expected to incorporate ethics into their daily work. All employees are required to read the Morningstar, Inc. Code of Ethics carefully and attest they have complied with it annually.
  • Any employee who suspects that the Code of Ethics has been or may have been violated should immediately notify the Global Chief Compliance Officer, the regional Chief Compliance Officer or the legal department. When in doubt about the appropriateness of any conduct, staff are encouraged to discuss with their manager or a member of the human resources team or an officer of Morningstar, Inc. to seek guidance before taking any action.
  • If staff are not comfortable speaking to someone directly, we have established a confidential Ethics hotline which can be used to express concerns anonymously.

Compliance Program

  • Morningstar has implemented a Compliance program that applies to all employees. The Compliance program incorporates several policies and a compliance handbook and is an important resource for employees. The goal and objective of the Compliance program is to ensure that Morningstar complies with its obligations arising from laws and regulations, internal policies and procedures, and contractual arrangements.
  • The Compliance team is responsible for administering, maintaining and improving the Compliance program as well as providing guidance to the business teams on compliance matters. Key compliance obligations identified by Compliance are allocated to individual managers and monitored on a quarterly basis. The Compliance team reports to the respective Boards and the Morningstar Investment Management Compliance Committee on a quarterly basis.
  • Key compliance obligations also include:
    • Personal trading requirements – such as a prohibition on trading securities that appear on a restricted list or during blackout periods, no front running or scalping, not to derive any advantage personally from information that is not generally available and obtained during the course of employment, to obtain pre-approval for participation in an initial public offering and to ensure personal trading does not contravene any legal requirements including laws concerning insider trading, price manipulation, false trading, market rigging and short selling. Employees are required to provide holdings reports, transactions reports, and quarterly policy declarations to Compliance.
    • Conflicts of Interest considerations – ensuring conflicts of interest are addressed, evaluated and appropriately managed in accordance with our Conflicts of Interest Policy. Among other things, our compliance framework includes steps to prevent personal profit, direct or indirect, from knowledge about pending or currently considered securities transactions or unpublished investment research. Employees are also prohibited from accepting or offering any gift, entertainment, meal, or favour that would influence or potentially influence their conduct, or that could reasonably be viewed by an outside observer as affecting their judgment or actions in the performance of their duties on behalf of Morningstar. We maintain registers that record all conflicts identified and reported to the Compliance team, as well as gifts and entertainment received and given by Morningstar.
    • Operation errors management – Our Compliance program documents the framework and governance steps to be followed by staff when identifying and reporting errors and operational incidents. Once an incident is recorded, appropriate action is taken to rectify the incident and appropriate measures are implemented to prevent recurrence. There are no minimum thresholds or maximum limits embedded within our procedures and each incident is recorded by Compliance irrespective of impact caused.

Risk Management Framework

  • The Risk Management Framework comprises a Risk Management Policy, a Risk Appetite Statement and the Risk Assessment process which includes risk profiling and assessments, monitoring and reporting. Our risk appetite guides our decision making and assists with prioritisation of risk mitigation strategies (including allocation of resources) for those risks beyond our Risk Appetite. Key risks identified by the Risk Management Committee are included in the business’ risk register, are monitored by the risk owners in the business and by Compliance & Risk.

Remuneration policy

  • We attract and retain staff through a market competitive remuneration structure and career development programs. The remuneration structure typically includes a fixed salary component based on skills and experience and variable components linked to key performance criteria and/or company performance. Deferred equity may be awarded to high performing staff to encourage long-term thinking and to align with the interests of clients and shareholders.

Training and development

  • Morningstar values the ongoing professional development of staff and encourages continuing education of staff in their chosen career paths. We also have compulsory compliance training requirements in areas critical to Morningstar’s business.
  • We encourage staff to be responsible for managing their career and will provide the support and tools to assist in this process. We offer a range of digital and in-person opportunities, events, and an annual stipend that supports employees in furthering their professional development both inside and outside of Morningstar. We cover the Certified Financial Analyst (CFA) exam and registration fees, have a Morningstar Scholar’s program for staff wishing to pursue a job-related degree, and host a program dedicated to advancing leaders.
  • Training is key to ensuring staff remain aware of the regulatory requirements and Morningstar’s expectations of them. Compliance training is provided in a number of forms, including face to face presentations and workshops, dissemination of written material, intranet communication and online training.

Complaints and dispute resolution

  • Morningstar aims to provide quality ongoing service and has established and documented procedures for dealing with service issues and complaints.
  • If a client has a complaint, they are encouraged to contact or to advise the business in the first instance. All complaints are registered in the Complaints register. All complaints received will be acknowledged within 3 business days of receipt. The business teams, with guidance from Compliance as necessary, will work with the client to arrive at a satisfactory resolution. Every effort is made to resolve the complaint within 21 days of receipt. In any event, we will finalise our response no later than 45 days after receipt.
  • If a client is still not satisfied, they may refer the matter to the Australian Financial Complaints Authority (AFCA) which is an independent dispute resolution body whose services are free to complainants. Morningstar Investment Management and Morningstar Australasia are each members of AFCA.

Morningstar Investment Management has also implemented Asset Stewardship Principles which outlines its approach to effective asset stewardship for investors which can be found at Appendix 2 Asset Stewardship Principles.

 

6. Board Remuneration

Executive Directors do not receive additional remuneration for their executive director roles and are remunerated in accordance with their employment agreements.

 

7. Board Committees

The company constitutions enable the Board to delegate certain functions to relevant committees and management. the roles and responsibilities delegated to the Board Committees are captured in the charters of each of the four established committees namely:

  • Morningstar Risk Management Committee
  • Morningstar Investment Management Compliance Committee
  • Morningstar Investment Management Due Diligence Committee
  • Morningstar Investment Management Asia Pacific Investment Policy Committee

A summary of each committee’s responsibilities is set out in Appendix 1 Roles and Responsibilities.

 

8. Managing Conflicts of Interest – Directors and Officers

Directors must ensure that they comply with their legal obligations to disclose any material personal interest that they have in a matter that relates to the affairs of the company. As there is no legal definition of what constitutes a material personal interest, Morningstar considers that a matter may be material where the personal interests of a director or officer could interfere with, or could reasonably be perceived to interfere with, the exercise of a director or officer’s unfettered and independent judgement. The law requires that Directors do not allow a conflict of interest to compromise their position as a director of the company. Morningstar has in place procedures that requires directors and officers to disclose a material personal interest in a matter that relates to the affairs of Morningstar as soon as practicable after the director or officer become aware of their interest in the matter.

 

9. Director Training

Upon appointment directors are provided with information about their duties and obligations as a director.

On an ongoing basis directors are expected to participate in continued professional development to maintain their professional skills and qualifications, and as required to meet any regulatory requirements. From time to time, Morningstar may provide dedicated training to directors and officers on an as needed basis.

 

10. Non-Compliance

If you become aware of any non-compliance or potential non-compliance with this policy, please report it immediately to the Compliance department.

If you are not comfortable speaking to someone directly, Morningstar has established a confidential hot-line called the Morningstar Ethics Hotline which you can use to express your concerns. The Morningstar Ethics Hotline is available 24 hours a day, seven days a week at https://www.integrity-helpline.com/morn.jsp or on the following telephone numbers if calling:

Australia

1800 14 1924

New Zealand

0800 450464

Breaches of this policy may lead to disciplinary action up to and including termination of employment.

 

11. Further Information and Advice 

If you have any questions about this Policy, please contact a member of the Compliance department.

For more information about the regulatory requirements applicable to this Policy please refer to:

 

12. Policy Review

As part of its commitment to ensuring its Corporate Governance program remains effective and current, the Boards will review this Policy on as needs basis. 

Any change in this Policy will be subject to approval by the Boards of Morningstar Investment Management and Morningstar Australia.

Version Number

Modified By

Modifications Made

Date Modified

Status

1.0

Fiona White

Initial Policy

December 2018

Final

 

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