Conflicts of Interest of Financial Intermediaries - Towards a Global Common Core in Conflicts of Interest Regulation
29 Pages Posted: 15 Apr 2008
Conflicts of interest are a fundamental and pervasive issue of the modern service-oriented society. Current developments in the regulation of capital markets and elsewhere demonstrate the need for commonly accepted rules for dealing with conflicts of interest. Taking the conflicts of interest of financial intermediaries in securities offerings as a paradigm, the article sets out a definition of conflicts of interest and analyses the possible and appropriate legal strategies to address them. A conflict of interest arises when a person who has a duty to act in another party's interest has to decide how to act in the interest of that party and another interest interferes with his ability to decide according to his duty. Conflicts of interest can be addressed by organizational duties, disclosure duties or a duty to refrain from acting. Within groups of companies a group wide compliance structure and a policy of addressing conflicts facilitate the management of conflicts of interest. The findings of this article constitute a globally accepted common core of rules on conflicts of interest of financial intermediaries and hence provide a foundation for reliable transaction design, consistent supervisory standards and convergence in judicial application.
Keywords: Financial intermediaries, banks, finance, securities offerings, IPO, pricing, allocation, distribution, retail advice, inducement, Chinese wall, disclosure
JEL Classification: G21, G24, K22
Suggested Citation: Suggested Citation