Conflicts of Interest in Institutional Asset Management: Is the EU Regulatory Approach Adequate?

Ghent University Financial Law Institute Working Paper No. 2005-07

58 Pages Posted: 27 Dec 2005

See all articles by Marc Kruithof

Marc Kruithof

Ghent University Law School; Ghent University, Department of Interdisciplinary Study of Law, Private Law and Business Law

Date Written: December 2005

Abstract

This article seeks to contribute to the discussion concerning the adequacy of the legal responses to conflicts of interest in institutional asset management. After defining the legal concept of a conflict of interest in general, the insights of economic theory, especially agency theory, are called upon to pinpoint the reason why such conflicts are a problem that warrants special legal attention. Possible conflicts of interest faced by professional asset managers are identified and the reasons why the problems caused by these conflicts warrant specific government intervention are discussed. The article then describes what the legal responses to conflicts of interests problems in asset management have been, in particular in the new European Market in Financial Instruments Directive (MiFID). These responses are then analysed taking into account the elements that economic theory show to be the key characteristics of the conflicts of interests problem and conclude that these legal responses address the problem from the wrong perspective and hence are lacking in certain critical respects.

Keywords: asset management, conflicts of interest, financial markets, financial regulation, MiFID, UCITS

JEL Classification: G18, G21, G23, G28, G29, K20, K22, K29

Suggested Citation

Kruithof, Marc, Conflicts of Interest in Institutional Asset Management: Is the EU Regulatory Approach Adequate? (December 2005). Ghent University Financial Law Institute Working Paper No. 2005-07, Available at SSRN: https://ssrn.com/abstract=871178 or http://dx.doi.org/10.2139/ssrn.871178

Marc Kruithof (Contact Author)

Ghent University Law School ( email )

Universiteitstraat 4
Gent, B-9000
Belgium

Ghent University, Department of Interdisciplinary Study of Law, Private Law and Business Law ( email )

Universiteitstraat 4
Gent, B-9000
Belgium

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