Disclosure of conflicts of interest 

WHAT are conflicts of interest? And more importantly, why do they matter? Conflicts of interest may arise when an individual stands to benefit from decisions made in his or her official capacity. For instance, in Singapore, a manager who is contemplating selling a US office building for the S-Reit she works for may accept a lower-than-fair-valuation on the property should the buyer turn out to be a family member of the manager. If this were the case, the manager’s employer and unit holders would be shortchanged.

Nevertheless, conflicts of interest are sometimes not avoidable, or at least impractical to avert. In the case of the depressed office sector in the US, there may be practically no alternative buyer in the market. So, for the transaction to take place, there must be safeguards. One such safeguard is disclosure of conflicts of interest to employers, retail investors and stakeholders, which finance professionals must adhere to.

The Disclosure of Conflicts Standard 

CFA Institute is a not-for-profit organisation and the world’s largest association of investment professionals. The organisation’s goal is to create an environment where investors’ interests come first, markets function at their best, and economies grow. As such, the institute has laid down the Disclosure of Conflicts Standard to guide finance professionals for the benefit of society.