chapter
Material interest
Pages 5

SIB Statement of Principle 6268 provides that a ‘firm should either avoid any conflict of interest arising or, where conflicts arise, should ensure fair treatment to all its customers by disclosure, internal rules of confidentiality, declining to act, or otherwise ...’. It goes on to provide that a ‘firm should not unfairly place its interests above those of its customer ...’. Ideally, therefore, a firm should avoid any conflict arising. If, however, this is impractical or impossible to avoid, the firm must ensure fair treatment to its customers and Principle 6 suggests a number of ways. The problem may be solved if the firm makes full disclosure to the potential customer before acting. If a customer decides in any event to proceed, he may find it hard to complain about the position subsequently. It may be sufficient if the firm has in place adequate internal rules of confidentiality, such as a ‘Chinese wall’ separating different parts of its business. If not, it may well be the best course of action for the firm to decline to act for the customer although, in some circumstances, this might itself cause problems for the firm269 in relation to existing customers.