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SYSC 10 - Conflicts of Interest

This requires firms to take all reasonable steps to identify any conflicts of interest between the firm / an employee / any associate of the firm, and any of its clients or conflict of interest between one client of the firm and another.

A 'conflict of interest' is a situation which may prevent services being provided to clients in an
independent or impartial manner. A firm should have in place an appropriate conflicts of interest policy as such firms may wish to produce such a document to evidence the measures it uses to effectively manage conflicts of interest. An example document is provided with this Bulletin Below are examples of a 'conflict of interest', which a firm may identify. A firm, or a relevant person, or a person directly or indirectly linked to the firm:

• is likely to make a financial gain, or avoid a
• financial loss, at the expense of a client.
• has an interest in the outcome of a service
• provided to a client.
• has an interest in the outcome of a transaction carried out on behalf of a client.
• has a financial or other incentive to favour the interest of a client or group of clients over the interests of another client.
• carries on the same business as a client.
• receives, or will receive from a person, other than a client an inducement in relation to a service provided to a client, in the form of monies, goods or services, other than the standard commission or fee for that service.

A firm should also look to retain and regularly update a record of the kinds of service or activity carried on, which has caused a conflict of interest. SYSC 10.2 also covers the establishment of "Chinese Walls" or restrictions on passing information between different parts of a firm as a means of managing conflicts of interest. Conflicts may not generally arise in a typical IFA practice, and the provisions may be more relevant for financial groups or investment managers, but nonetheless, firms should be aware of any conflicts that may apply
in their circumstances, and take appropriate measures.

(Source: Financial Services Authority)

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Submitted by {Douglas Martin Associates on Monday 11th May 2009