Understanding the Clawback Feature in Portfolio Management

In portfolio management, the clawback feature is a critical mechanism designed to protect the interests of both organizations and employees. It allows for the recovery of assets, shares, or payments under specific circumstances, ensuring that the original terms of an agreement are upheld, even after an asset has been transferred.

What is Clawback?

Clawback refers to the ability to reclaim funds or assets that have been distributed or transferred, typically under specific conditions outlined in a Deed of Transfer, Trust Conditions, or Statutory Articles. These documents often include provisions that allow an organization to recover assets if certain criteria are met, ensuring that both parties adhere to the agreed-upon terms.

For example, a common clause that might trigger a clawback is the "bad-leaver" clause. This clause usually stipulates that if an employee leaves the company under conditions deemed unfavorable (such as resignation or termination for cause), the company has the right to reclaim shares or other assets that were granted as part of the employment package.

When Can Clawback Be Applied?

There are both obvious and less obvious situations where clawback might be applicable:

1. Obvious Situations:
   • Bad-Leaver Clause: As mentioned, this is a common scenario where an employee leaving under unfavorable circumstances may trigger a clawback.
   • Breach of Contract: If the employee or recipient of the transfer violates the terms of the agreement, the organization may invoke the clawback provision.
2. Less Obvious Situations:
   • Incorrect Transfer Amount: If an error is made during the transfer process, such as transferring the wrong amount, the organization may need to reclaim the excess funds.
   • Lost Contact with the Owner: If the organization is unable to locate the recipient or owner of the transferred assets, they may need to claw back the assets for safekeeping.
   • Portfolio Mergers: When portfolios need to be merged for business or technical reasons, it might be necessary to claw back certain assets to facilitate the merger.
   • Technical Adjustments: Sometimes, technical reasons within the portfolio management system necessitate a clawback to correct discrepancies or to align with new configurations.

How to Activate the Clawback Feature

Activating the clawback feature in your portfolio management system is a straightforward process. This feature allows you to easily manage and execute clawback actions when necessary, providing you with the flexibility to maintain control over your assets.

To activate the clawback feature, follow these steps:

1. Access the Portfolio Settings:

   • Navigate to the portfolio settings within your management system.

2. Locate the Access and Visibility Tab:

   • Within the settings menu, find the "Access and Visibility" tab. This section controls who has access to various features and data within your portfolio.

3. Activate the Clawback Toggle:

   • In the "Access and Visibility" tab, locate the toggle switch for the clawback feature. Toggle it on to enable the feature.
     
4. Activate the AutoSign Toggle

• • It is important to mention that the AutoSign feature in the new transaction sidebar must be enabled; otherwise, the participant who is selling back the asset needs to sign.
    

Once activated, the clawback feature will allow you to manage the reclamation of assets efficiently, ensuring that your portfolio remains aligned with your strategic goals and contractual obligations.