FSA to Crack Down on Conflicts of Interest and Share Allocation

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Byline: Sophie Brodie

The Financial Services Authority (FSA), the UK regulator, has told senior managers at integrated investment banks that they will be held accountable for managing conflicts of interest relating to their UK research and investment banking businesses.Following its investigation into the issue, known as CP171, the UK regulator wants managers who claim to issue independent equity and fixed income research to publish a policy explaining how they manage potential conflicts. It has issued principles for them to follow rather than inflexible rules to avoid managers just ticking boxes.

Gay Huey Evans, director of the markets and exchanges division of the FSA warned: "Senior managers will have to be able to demonstrate to us that their procedures are up to scratch. Flexibility is not the easy option."

As part of the policy statement, managers will be obliged to prevent analysts from attending roadshows promoting share issues to investors and issuing research during deals that could be construed as marketing.

The FSA's approach would allow firms to let analysts attend roadshows in certain cases where investors need research on a company which has little or no coverage. However, they would not be allowed to claim the analysts were independent. …