Australian financial services licensees will for the first time be required to show they have adequate safeguards against conflict of interest.

Australian Securities and Investments Commission (ASIC) policy statement 181 under CLERP 9 (Corporate Law and Economic Reform Package) – Licensing: Managing conflicts of interest – will require licensees to control, disclose and, where necessary, avoid conflict of interest.

ASIC Deputy Executive Director FSR Pamela McAlister says managing conflict of interest is an important part of a licensee’s general obligations under the Financial Services Reform Act.

Licensees need to have a written record of conflict of interest and how they manage it. ASIC says the legislation applies to services for retail and wholesale clients, but it recognises that disclosure for wholesale clients will less detailed.

The regulator says it’s important that licensees realise that consumers expect licensees to manage conflict of interest issues well. The legislation will take effect on 1 January 2005. The policy is available at www.asic.gov.au.