Regulation is often viewed as a four-letter word in the financial services industry, but the Australian Securities and Investments Commission (ASIC) has some good news: further regulations for managing conflicts of interest are unlikely.

ASIC Deputy Chair Jeremy Cooper told a Securities and Derivatives Industry Association conference last week that managing conflicts is “much more of an art than a science and certainly cannot be left to endless prescriptions from the regulator”.

The industry agrees. It has openly criticised the Financial Services Reform Act, which came into action in 2004 with a host of overly prescriptive regulations. Initially the Act was regarded as “principles-based”, but the industry says numerous ASIC changes turned it into a piece of rigid legislation.

Mr Cooper says developing legislation for the industry isn’t easy for the regulator.

“You have to be able to get it, to recognise a conflict or a potential conflict when it arises; a bit like knowing the difference between a zebra and a horse with black and white stripes painted on it – very easy, but try writing a set of rules for an organisation to follow to arrive at the right answer.”

He described the handling of conflicts of interest as “a risk management exercise”, and said if people are “relying on a Chinese wall, you must accept the risk and consequences of its failure and you must be able to prove that risk into your decisions about when to rely on the wall and when to avoid the conflict altogether”.