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LATEST UPDATE:
- Position Paper: Why Are There Conflicts Of Interest In The Securities Business? - November 2004
BACKGROUND
The securities industry is highly diverse, with firms in a wide range of businesses, serving many different types of clients and offering many different types of products. This diversity is good for investors, since it provides them with a range of products and services that is unprecedented, and offers them one-stop shopping for a variety of services in an efficient manner and at potentially lower cost.
In any service business, ranging from financial services to healthcare, the service provider will often face a conflict between meeting the customer's best interest and being paid for rendering the service. In addition, many businesses including financial services face the possibility that the interests of different clients will sometimes diverge, as will the aims of different business arms of a firm.
The particular types of conflict that may arise will vary a great deal from firm to firm: there is no "one size fits all" method of describing or managing conflicts of interest, in the financial services industry or any other complex industry. These issues must be analyzed and managed individually and thoughtfully. While there are many regulatory requirements dealing with conflicts of interest, the SEC has also called on firms to go beyond the letter of the law in assessing and addressing conflicts of interest that may affect customers.
Financial services firms cannot exist without the trust and confidence of their customers. The trust and confidence of investors is the core asset of every reputable firm, and without it our markets could not function. For this reason, it is good business to go beyond the letter of the law in anticipating and fully addressing possible conflicts of interest that may concern customers. Neither firms nor their customers should assume that a potential conflict of interest need not concern them because "everybody does it."
