JFSC Dear Chief Executive Conflicts of Interest (Oct 2010) – On the 22nd October the JFSC advised all trust company businesses to undertake a review of their internal controls in respect of conflicts.

The CEO letter suggested such a review should encompass, but not be limited to, ensuring that policies and procedures are sufficiently robust so as to capture the following types of conflicts:

1. • Acceptance of a gift from a client structure, or from a client, by an employee of the trust company (or, a relative of the employee);
2. • Retrocession fee arrangements (including shared fee/commission arrangements) entered into by the trust company;
3. • Acting as director/trustee of two or more structures in circumstances where a dispute arises between clients;
4. • An employee of the trust company (or, relative of the employee) securing a personal loan, or financing of any description, from a client structure, or, from a client;
5. • A trust company, or an employee of the trust company (or, relative of the employee) arranging to make a loan, or to arrange financing of any description, to a client structure, or, to a client;
6. • An employee of the trust company (or, relative of the employee) co-investing with a client structure, or, with a client; or
7. • An employee of the trust company providing a service to a client structure, or, to a client, in a private capacity that is not associated with, or, connected to, the trust company.

With the exception of gifts offered to trust company employees that have a relatively small value, the Commission would expect the Board and senior management of the trust company to implement adequate controls so as to:

1. • Be made aware of, and to authorise, all arrangements or transactions that may be regarded as representing a conflict;
2. • Ensure the conflict is adequately recorded and minuted;
3. • Ensure the conflict is managed appropriately in accordance with the trust company’s policies and procedures;
4. • Ensure that the Compliance Officer is made aware of the conflicts;
5. • Where appropriate, introduce bespoke measures to mitigate risks represented by the conflict; and
6. • Ensure adequate training is given to all staff for the purpose of identifying and managing the conflicts.

As a result of the review, in the event that any deficiencies and/ or omissions are identified, a Board should take immediate steps to remedy the shortcomings.

The JFSC advised whilst that the management of conflicts will become a routine topic that we will examine during our on-site examination programme.

http://www.jerseyfsc.org/pdf/CEO_Ltr_re_Conflicts_of_Interest_October_2010.pdf