11 Conflict of interest policy for staff

Without prejudice to Article 23 of Directive 2014/65/EU and Section 3 of the Chapter 2 of the Commission Delegated Regulation (EU) No 2017/565, the management body should be responsible for establishing, approving and overseeing the implementation and maintenance of effective policies to identify, assess, manage and mitigate or prevent actual and potential conflicts between the interests of the investment firm and the private interests of staff, including members of the management body, which could adversely influence the performance of their duties and responsibilities. A Union parent undertaking should consider interests within a group-wide conflict of interest policy on a consolidated basis.

The policy should aim to identify conflicts of interest of staff, including the interests of their closest family members. Investment firms should take into consideration that conflicts of interest may arise not only from present but also from past personal or professional relationships. Where conflicts of interest arise, investment firms should assess their materiality and decide on and implement mitigating measures as appropriate.

Regarding conflicts of interest that may result from past relationships, investment firms should set an appropriate timeframe for which they want staff to report such conflicts of interest, on the basis that these may still have an impact on staff ’ s behaviour and participation in decision-making.

The policy should cover at least the following situations or relationships where conflicts of interest may arise:

• a. economic interests (e.g. shares, other ownership rights and memberships, financial holdings and other economic interests in commercial customers, intellectual property rights, membership of a body or ownership of a body or entity with conflicting interests);
• b. personal or professional relationships with the owners of qualifying holdings in the investment firms;
• c. personal or professional relationships with staff of the investment firms or entities included within the scope of prudential consolidation (e.g. family relationships);
• d. other employment and previous employment within the recent past (e.g. five years);
• e. personal or professional relationships with relevant external stakeholders (e.g. being associated with material suppliers, consultancies or other service providers); and
• f. political influence or political relationships.

Notwithstanding the above, investment firms should take into consideration that being a shareholder of an investment firm or using other services of an investment firm should not lead to a situation where staff are considered to have a conflict of interest if they stay within an appropriate de minimis threshold.

The policy should set out the processes for reporting and communication to the function responsible under the policy. Staff should have the duty to promptly disclose internally any matter that may result, or has already resulted, in a conflict of interest.

The policy should differentiate between conflicts of interest that persist and need to be managed permanently and conflicts of interest that occur unexpectedly with regard to a single event (e.g. a transaction or the selection of a service provider, etc.) and can usually be managed with a one-off measure. In all circumstances, the interests of the investment firm should be central to the decisions taken.

The policy should set out procedures, measures, documentation requirements and responsibilities for the identification and prevention of conflicts of interest, for the assessment of their materiality and for taking mitigating measures. Such procedures, requirements, responsibilities and measures should include:

• a. entrusting conflicting activities or transactions to different persons;
• b. preventing staff who are also active outside the investment firm from having inappropriate influence within the investment firm regarding those other activities;
• c. establishing the responsibility of the members of the management body to abstain from voting on any matter where a member has or may have a conflict of interest or where the member’s objectivity or ability to properly fulfil his or her duties to the investment firm may be otherwise compromised;
• d. preventing members of the management body from holding directorships in competing investment firms.

The policy should specifically cover the risk of conflicts of interest at the level of the management body and provide sufficient guidance on the identification and management of conflicts of interest that may impede the ability of members of the management body to take objective and impartial decisions that aim to fulfil the best interests of the investment firms. Investment firms should take into consideration that conflicts of interest can have an impact on the independence of mind of members of the management body³⁰ .

³⁰ See also the joint ESMA and EBA guidelines on the assessment of the suitability of members of the management body and key function holders under Directive 2013/36/EU and Directive 2014/65/EU.

When mitigating identified conflicts of interest of members of the management body, investment firms should document the measures taken, including the reasoning on how such measures are effective in ensuring objective decision-making.

Actual or potential conflicts of interest that have been disclosed to the responsible function within the investment firm should be appropriately assessed and managed. If a conflict of interest of staff is identified, the investment firm should document the decision taken, in particular if the conflict of interest and the related risks have been accepted; and if it has been accepted, how this conflict of interest has been satisfactorily mitigated or remedied.

All actual and potential conflicts of interest at the management body level, individually and collectively, should be adequately documented, communicated to the management body and discussed, decided on and duly managed by the management body.