Pensions Regulator Guidance - conflict of interest

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07 October 2008

A Checklist for Trustees

The Regulator's final version of the conflict of interest guidance has just been published. Our view is that this stresses the growing focus that the Regulator has in the areas of governance and conflicts. The Regulator comments:

"There should be a culture of openness – disclosure of conflicts should be embraced, not ignored, and we expect all conflicts of interest to be resolved sensibly. Where a conflict comes to the attention of the regulator, we may take action where appropriate.

When Can a Conflict Arise?

The Regulator's view is that:

A conflict of interest may arise when a trustee is required to take a decision where:

  1. 1. they are obliged to act in the best interests of their members;

and

  1. 2. at the same time they have or may have either:

  • a separate personal interest
  • another duty owed to another person or body giving rise to a possible conflict.

Richard Knight, partner in the Burges Salmon Pensions team comments:

"When looking at the Regulator's view its clear that most trustee boards will need to consider what processes should be put in place or updated to manage conflict. A starting point may be to consider the Regulator's new checklist at trustee board meetings".

Five Principles

The Regulator's guidance takes five high level principles and adds to them with detailed commentary and examples. The principles are: 

  • Understanding the importance of conflict
  • Identifying conflicts
  • Evaluating, managing and avoiding conflicts
  • Managing advisers' conflicts
  • Developing a policy on conflict


Checklists

The Regulator has also provided a useful checklist of questions. A selection of the checklist questions are:

Understanding Conflict

Have you debated and agreed the types of conflict that may arise in your specific circumstances?

Do your newly appointed trustee colleagues receive induction training on their roles and responsibilities?

Identifying Conflict

Do you have a process to identify new conflicts?

Do the minutes of meetings record when conflicts are either disclosed or identified and the action taken to address the conflict?

Do you have a means, eg a register, to record any interests or conflicts that are declared?

Have you considered the key decisions to be made in the future and whether there may be any conflicts that are likely to arise?

Evaluating and Managing Conflict

Do you have an agreed policy on how to decide whether or not a conflict should be managed?

Does your policy outline the options available to manage conflicts?

Adviser Conflicts

Does your conflict of interest policy or other procedures detail your procedures for ensuring adviser conflicts are identified and managed?

Does the letter of appointment to the adviser require disclosure of any conflicts that arise?

Conflict of Interest Policies

Do you have a documented conflicts of interest policy?

Are you familiar with the policy?

Does the policy have a process for monitoring compliance?

Does your policy have a process for its review?

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