Conflicts of Interest of Financial Intermediaries - Towards a Global Common Core in Conflicts of Interest Regulation

29 Pages Posted: 15 Apr 2008

See all articles by Christoph Kumpan

Christoph Kumpan

Bucerius Law School

Patrick C. Leyens

University of Bremen; Erasmus University Rotterdam (EUR) - Rotterdam Institute of Law and Economics; European Corporate Governance Institute (ECGI)

Abstract

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

Kumpan, Christoph and Leyens, Patrick C., Conflicts of Interest of Financial Intermediaries - Towards a Global Common Core in Conflicts of Interest Regulation. European Company and Financial Law Review, Vol. 4, No. 1, pp. 72-100, 2008, Available at SSRN: https://ssrn.com/abstract=1119546

Christoph Kumpan (Contact Author)

Bucerius Law School ( email )

Jungiusstr. 6
Hamburg, 20355
Germany

Patrick C. Leyens

University of Bremen ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany

Erasmus University Rotterdam (EUR) - Rotterdam Institute of Law and Economics ( email )

Burgemeester Oudlaan 50
PO box 1738
Rotterdam, 3000 DR
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
Brussels
Belgium

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