Conflicts of Interest (3.28 - 3.36) 

CLARIFICATION OF SCOPE

Payment Services and Electronic Money


Where regulated entities are providing payment services and/or issuing electronic money, only Provisions 3.1, 3.17 to 3.23 and 3.28 to 3.45 apply

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CONFLICTS OF INTEREST (3.28-3.36)

3.28
A regulated entity must have in place and operate in accordance with a written conflicts of interest policy appropriate to the nature, scale and complexity of the regulated activities carried out by the regulated entity.  The conflicts of interest policy must: 
       

  1. identify, with reference to the regulated activities carried out by or on behalf of the regulated entity, the circumstances which constitute or may give rise to a conflict of interest entailing a risk of damage to the interests of its customers who are consumers; and
  2. specify procedures to be followed, and measures to be adopted, in order to manage such conflicts.

 

3.29 
Where conflicts of interest arise and cannot be reasonably avoided, a regulated entity must: 

  1. disclose the general nature and/or source of the conflicts of interest to the consumer.  A regulated entity may only undertake business with or on behalf of a consumer where there is directly or indirectly a conflicting interest, where that consumer has acknowledged, on paper or on another durable medium, that he or she is aware of the conflict of interest and still wants to proceed; and 
  2. ensure that the conflict does not result in damage to the interests of the consumer.


3.30

Where a regulated entity distributes its products to consumers through an intermediary, the regulated entity must not require the intermediary to introduce a specified level of business from consumers in order to retain an appointment from that regulated entity

3.31
Where a product producer distributes its products to consumers through an intermediary and pays commission to an intermediary based on levels of business introduced, the product producer must be able to demonstrate that these arrangements:    

  1. do not impair the intermediary’s duty to act in the best interests of consumers; and
  2. do not give rise to a conflict of interest between the intermediary and the consumer.


3.32
A regulated entity must ensure that its remuneration arrangements with employees in respect of providing, arranging or recommending a product or service to a consumer, are not structured in such a way as to have the potential to impair the regulated entity's obligations:  

  1. to act in the best interests of consumers; and 
  2. to satisfy the suitability requirements set out in Chapter 5 of this Code.


3.33

A regulated entity must ensure that there are effective Chinese walls in place between the different business areas of the regulated entity, and between the regulated entity and its connected parties, in relation to information which could potentially give rise to a conflict of interest or be open to abuse. 

3.34
A regulated entity must ensure it has written procedures in place relating to the maintenance of Chinese walls, and the consequences of breaches of Chinese walls. These procedures must be notified to all relevant officers and employees of the regulated entity

3.35         
A regulated entity must take reasonable steps to ensure that it or any of its officers or employees does not offer, give, solicit or accept any gifts or rewards (monetary or otherwise) likely to conflict with any duties of the recipient in relation to his or her activities in the regulated entity, or the regulated entity

3.36
A regulated entity must not enter into a soft commission agreement unless such agreement is on paper or on another durable medium.  Where a soft commission agreement is in place, the following conditions apply:

  1. any business transacted under a soft commission agreement must not conflict with the best interests of consumers;  
  2. where a regulated entity considers that a consumer may be affected by the soft commission agreement, the consumer must be made aware of the soft commission agreement and of how the soft commission agreement may affect them; 
  3. a copy of the soft commission agreement must be made available to the consumer on request;
  4. goods or services received by a regulated entity under a soft commission agreement must be used to assist in the provision of services to consumers; and
  5. a regulated entity must provide to any affected consumer details of any changes in its policy on soft commission agreements promptly after implementation of any such changes.