In a speech last Friday, Jeremy Cooper, deputy chair of ASIC, made the strongest indication yet that further regulations for the financial services industry to manage conflicts of interest are unlikely.

Speaking at a Securities and Derivatives Industry Association conference in Melbourne last week, Cooper said ASIC managing conflicts of interest was “much more of an art than a science and certainly cannot be left to endless prescriptions from the regulator” and required “feel” as well as robust systems and processes. “You have to be able to ‘get it’, to recognise a conflict or a potential conflict when it arises; a bit like knowing the difference between a zebra and a horse with black and white stripes painted on it – very easy, but try writing a set of rules for an organisation to follow to arrive at the right answer,” Cooper told the SIDA delegates. The regulator has faced calls from consumer groups and other observers to ban certain practices in the industry following its ‘shadow shopper’ report earlier this year which showed financial planners who had a conflict of interest were more likely to give poor advice. However, Cooper said while smaller boutique financial services operations were more able to avoid conflicts of interest, larger organisations face the risk of reputational damage if they don’t act in their clients’ best interests. “Handling conflicts is really a risk management exercise. If you are relying on a Chinese wall, you must accept the risk and consequences of its failure and you must be able to price that risk into your decisions about when to rely on the wall and when to avoid the conflict altogether,” he said.

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