Not adequately managing conflict of interests (CoI) is a breach of AFS Licence obligations &, in the more serious cases, can lead to individuals being banned or disqualified by ASIC & or civil/criminal penalties.
𝙒𝙝𝙖𝙩 𝙞𝙨 𝙖 𝙘𝙤𝙣𝙛𝙡𝙞𝙘𝙩 𝙤𝙛 𝙞𝙣𝙩𝙚𝙧𝙚𝙨𝙩 𝙞𝙣 𝙂𝙄?
A CoI occurs when your Interests (direct or indirect), or a duty you owe to a person (such as a broker to a client), conflicts, or may reasonably be thought to conflict, with the proper performance of your functions & duties at your company or to the client.
Licensee’s obligations extend to the conduct of employees, Directors & Authorised Reps.
I use the term employee however the examples also relate to ARs & Directors
Typical GI examples are:
– an employee is employed by or gains remuneration from a competitor or supplier (such as a claims service supplier)
– an employee receives gifts or entertainment from other companies who the licensee does business with (such as a broker being entertained by an insurer at an event)
– an employee having interests or investments in competitors, customers or suppliers (such as insurers or brokers in underwriting agencies)
– engaging in transactions where a personal relationship exists. Such as managing the claim of a family member
– conducting business with a related company
– making use of confidential information. Such as an underwriter being advised of a potential M&A for an insured & using that information to trade shares on the ASX (or telling others who then trade)
– bribery, inducements etc especially where to gain a business advantage
– an employee having multiple roles in the licensee – Director, shareholder, Responsible Manager, CRO etc
𝙈𝙖𝙣𝙖𝙜𝙞𝙣𝙜 𝙘𝙤𝙣𝙛𝙡𝙞𝙘𝙩𝙨 𝙤𝙛 𝙞𝙣𝙩𝙚𝙧𝙚𝙨𝙩
The 3 mechanisms for managing CoI are:
– disclosing the conflict
– controlling the conflict &
– avoiding the conflict
Disclosure should be clear & transparent & not just hidden in a FSG
𝘾𝙤𝙢𝙥𝙡𝙞𝙖𝙣𝙘𝙚 𝙖𝙧𝙧𝙖𝙣𝙜𝙚𝙢𝙚𝙣𝙩𝙨
At a minimum, a Licensee should implement:
– due diligence for new employees, companies etc
– a tailored CoI policy (including gifts & entertainment, bribery, insider trading)
– a CoI register
– CoI training
– Monthly attestations
– Monitoring
Contact me for assistance in reviewing your approach to adequately managing Conflict of interests.