14 October 2019: The FICC Markets Standards Board (FMSB) has today published the final version of a Statement of Good Practice on the issue of Conflicts of Interest.
This Statement of Good Practice aims to provide practical, working level guidance and examples for market participants to draw on, as they consider ways to prevent, manage and mitigate conflicts of interest that arise within their firms.
Conflicts of interest may arise between (i) clients; (ii) a firm and its client(s); and (iii) employees and a firm/client(s). These conflicts have the potential to be detrimental, not only to the firms involved, but to clients and the financial markets more generally. Dealing with them effectively is one way in which instances of this kind of market misconduct can be minimised.
The means of preventing, managing or mitigating conflicts of interest that are suggested in the Statement of Good Practice include periodic reviews within each business area to identify scenarios or situations that could potentially create a conflict, as well as ensuring the appropriate identification and escalation procedures for actual conflicts.
There are eight specific Good Practice Statements that firms should look to when considering their own working practice, including:
- having the necessary policies, procedures and training in place across a firm;
- having senior management provide oversight and governance around how conflicts of interest are identified and managed; and
- having controls in place to either prevent conflicts of interest from arising, as well as managing or mitigating those that do arise.
This Statement of Good Practice is being published as part of FMSB’s remit to improve conduct and raise standards in the wholesale Fixed Income, Currencies and Commodities markets. It was issued previously as a Transparency Draft and the final version takes account of comments and feedback received from market participants and Members.
All materials officially published by FMSB are available at www.fmsb.com.
Andy Donald or Sam Turvey
+44 207 379 5151
Notes to Editors
1) The Fixed Income, Currencies and Commodities (“FICC”) Markets Standards Board (“FMSB”) is an independent body set up by market practitioners to improve standards of conduct in wholesale FICC markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Ensuring that wholesale FICC markets are transparent, fair and effective is at the heart of the FMSB’s mission.
2) Setting up the FMSB was one of the main recommendations to emerge from the Fair and Effective Markets Review, which was conducted by HM Treasury, the Bank of England and the Financial Conduct Authority.
3) The FMSB has a Standards Board drawn from senior executives from across wholesale markets, from corporate clients, asset managers, sell side participants and intermediaries and infrastructure providers such as exchanges and custodians. Reporting to the Standards Board are standing sub-committees addressing Market Practices, Codes & Standards Convergence, Conduct & Ethics and Electronic Trading and Technology. The Market Practices sub-committees are split into 4 asset-class specific committees. There is also an Advisory Council representing the interests of Member firms.
4) The FMSB’s Members bring together sell side investment banks, buy side asset managers, market infrastructure providers and exchanges, custodians and users of the market such as corporates. This constitution is unique. The Member firms are:
- Australia and New Zealand Banking Group
- BAE Systems
- Bank of America Merrill Lynch
- BNP Paribas
- BNY Mellon
- Citadel Securities
- Citigroup Global Markets Limited
- Crédit Agricole CIB
- Credit Suisse
- Deutsche Bank
- Euronext FX Inc.
- Goldman Sachs
- J.P. Morgan
- Legal & General Investment Management
- Linklaters (Legal Advisor)
- Lloyds Banking Group
- London Stock Exchange Group
- M&G Investment Management Limited
- Morgan Stanley & Co. International plc
- National Australia Bank
- Rio Tinto
- Royal Bank of Canada
- Royal Dutch Shell
- Royal Mail Group
- Société Générale
- Standard Chartered
- Standard Life Aberdeen
- TP ICAP
- XTX Markets