Howard Davies Outlines Progress On Conflicts Of Interest

by Robin Pilgrim, LawAndTax-News.com, London

09 September 2003

Speaking at the Annual Dinner of the Confederation of British Industry in Scotland recently, Financial Services Authority (FSA) chairman, Sir Howard Davies outlined the watchdog's plans in light of responses to its CP 171 consultation paper on conflicts of interest in investment research.

Revealing that the FSA has received over 70 responses to its proposals, Sir Howard explained that:

'Most respondents accept that there needs to be an improvement in the way conflicts of interest are managed in investment banks. But there are differences of approach.'

'Global firms are looking for consistency with the approach adopted in the US. Domestic firms tend to favour solutions in tune with the traditionally non-prescriptive UK approach. So the challenge for the FSA is to find a solution which will be effective in our markets, yet in line with international standards.'

Confirming that the FSA's eventual approach to the issue is likely to be broadly in line with recommendations put forward by the International Organisation of Securities Commissions (IOSCO) and the Committee of European Securities Regulators (CESR), Sir Howard announced that:

'We are likely to confirm the approach that senior management should take responsibility for the appropriate management of conflicts of interest. We expect firms not to allow analysts to attend pitches and road shows, or to allow their compensation to be influenced by investment banking interests.'

He went on to add that:

'On disclosures of track records and the like we plan to fold those proposals into the implementation of the Market Abuse Directive next year. We are mindful of the need to avoid consultation overload and to ensure that we work in line with forthcoming European legislation.'

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