Conflicts of Interest – uppermost in the minds of regulators!
Conflicts come in all shapes and sizes, with some such as independent verification of values for sale/transfer of investments or properties, the payment of commissions very obvious. Others, perhaps less so, the payment of fees to the Trustee/administrator on a time spent basis, the use of available cash in preference to other debtors etc.. The list goes on.
Ensuring that conflicts of interest, whether actual, potential or perceived; direct or indirect, are properly managed is central in regulatory regimes to the underpinning principal of integrity and treating customers fairly.
A recent UK case, FCA v Arch Financial Products Ltd, provides a good foundation of the courts expectations around the identification and understanding of conflicts, their management and effective record keeping. Simply disclosing a potential conflict is not sufficient, you must evidence the thought processes, decision-making responsibilities and rationale. As well as establishing a clear audit trail, it provides for a reliable ‘corporate memory’. Whilst a case in the English courts, the principle will be followed in other similar based systems.
A fundamental expectation is that your system and controls are robust and appropriate, but much more importantly, that they underpin a culture that has your staff alert to the issues raised and a mind-set of treating customers fairly.
Some simple steps to ensure compliance:
- Have a Conflict of Interest policy and procedures in line with applicable rules and regulations.
- Regularly train and educate team members to ensure you have a culture that thinks about the issues, does not just follow procedures to treat clients fairly and with integrity.
- Implement technologies that help you identify and manage conflicts of interest and your other governance risks.
At Aspida, our team of professionals have practical experience of managing these and other regulatory risks.
Contact us for an informal chat on how we can assist, from governance reviews, training, health checks and outsourced support to our innovative GRC platform, Resolver by Aspida.