Conflicts: a battle ahead for some

From 1 November 2007, all European financial services firms that carry on investment business must comply with new rules on conflicts of interest. These rules, introduced by the EU’s Markets in Financial Instruments Directive (MiFID), have greater depth and reach than some firms may realise. Aaron Caplan and Adrian Jackson of PricewaterhouseCoopers LLP examine the implications of this new regime and set out a practical approach to compliance with it.

Aaron Caplan, Manager, Risk Assurance Services, PricewaterhouseCoopers LLP may be contact on tel: +44 (0) 20 780 45279; email: aaron.caplan@uk.pwc.com. Adrian Jackson, Consultant, Performance Improvement Consulting, PricewaterhouseCoopers LLP can be reached via tel: +44 (0) 161 245 2060; email: adrian.m.jackson@uk.pwc.com

It is no longer enough for financial services firms to disclose actual or potential conflicts of interest. In under eight months’ time a firm must be able to prove, through documentation, that it has a conflicts of interest policy, that the policy is implemented throughout the entire business, and that it works. This is central to the change imposed by MiFID and the phrase “Don’t just tell me, show me”, aptly sums it up. However, proving that a working policy exists is not the only new and significant departure from the familiar: there is also MiFID’s recommendation that a documented group-wide policy should be put in place.