ASK MAT: Do I Need a Register of Interests and a Conflicts of Interest Register for My JFSC/GFSC-Regulated Business?

ASK MAT: Do I Need a Register of Interests and a Conflicts of Interest Register for My JFSC/GFSC-Regulated Business? A regulator has asked for both.

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Both the Jersey Financial Services Commission (JFSC) and Guernsey Financial Services Commission (GFSC)  expect firms to proactively manage conflicts of interest, as outlined in their corporate governance and conduct of business rules (e.g., JFSC’s codes and guides or GFSC’s Finance Sector Code of Corporate Governance). However, neither the JFSC nor the GFSC explicitly requires a standalone “Register of Interests” under their Codes of Practice.

For example, in Jersey, the codes say (TCB code used below)  

• Source  https://www.jerseyfsc.org/industry/codes-of-practice/trust-company-business-code-of-practice/

The problem is the lack of definitions and guidance regarding the above rule's expectations.

REALITY

• Most first maintain a conflicts of interest register showing either possible future or crystallised conflicts.  The firms that are doing this are supporting a Register of Interests and a Conflicts of Interest

How They Work Together

• The Conflicts of Interest Register and Register of Interests are related but distinct tools for managing transparency and ethical conduct, particularly in professional or governance settings.

How They Work Together

1. An individual submits their Register of Interests to declare all relevant personal interests.
2. When a specific decision or situation arises (e.g., a board vote, contract award), the organisation checks the Register of Interests to identify potential conflicts.
3. If a conflict is identified, it’s recorded in the Conflicts of Interest Register with details of the situation and its management (e.g., recusal, disclosure).

HERE’S A CLEAR EXPLANATION OF THE DIFFERENCES, ALONG WITH EXAMPLES:

1. Register of Interests

• Definition: A comprehensive record of an individual’s personal interests, affiliations, relationships, or financial holdings that could potentially lead to a conflict of interest. It’s a broad declaration of anything that might influence (or be perceived to influence) their impartiality in their professional role.
• Purpose: To promote transparency by documenting all relevant interests, whether or not they currently result in a conflict. This allows organisations to identify potential risks early.
• Scope: Broad and proactive. It includes all interests, even if no specific conflict has arisen.
• Example:
• A board member of a nonprofit declares in the Register of Interests that they:
• Own shares in a pharmaceutical company.
• Are married to a senior employee at a supplier company.
• Serve as a trustee for another charity in a similar sector.
• These interests are recorded even if no decisions involving these entities are currently on the table. The register ensures transparency in case these interests could influence future decisions (e.g., awarding contracts or approving partnerships).

2. Conflicts of Interest Register

• Definition: A record of specific situations where an individual’s declared interests (from the Register of Interests or elsewhere) actually or potentially conflict with their professional duties or decisions. It focuses on active or imminent conflicts.
• Purpose: To document and manage situations where a conflict has been identified, including steps to mitigate or resolve it (e.g., recusal, divestment, or disclosure).
• Scope: It is narrower and reactive. It only includes situations where a conflict is relevant to a specific decision or duty.
• Example:
• The same board member from above is involved in a decision to award a contract to a supplier. Their spouse works at one of the bidding companies, creating a potential conflict. This specific situation is recorded in the Conflicts of Interest Register, noting:
• The nature of the conflict (spouse’s employment).
• The decision context (contract award).
• Mitigation (e.g., the board member recuses themselves from the vote).
• Another example: The board member’s shares in the pharmaceutical company become relevant when the nonprofit partners with that company. This specific conflict is logged in the Conflicts of Interest Register.

Practical Approach

A well-maintained register demonstrates to regulators that your business is transparent and committed to mitigating conflicts that could affect client trust or decision-making.

To meet regulatory expectations while keeping processes manageable:

• Single Register Option:
• A single Conflict of Interest Register may suffice if it comprehensively documents active conflicts and potential interests.
• Ensure it captures all relevant details to satisfy JFSC/GFSC scrutiny.
• Dual Register Approach:
• Maintaining a Register of Interests and a Conflicts of Interest Register can enhance transparency.
• The Register of Interests proactively identifies risks, while the Conflicts of Interest Register addresses specific issues as they arise.
• Best Practices:
• Regularly update registers to reflect changes in personal or business interests.
• Ensure all relevant staff, especially senior management and board members, disclose their interests.
• Review registers during compliance audits to align with regulatory expectations.

Need Further Guidance?

1. Navigating JFSC and GFSC requirements can be complex.
2. Consult a regulatory expert or legal advisor familiar with Jersey and Guernsey’s frameworks for tailored advice.
3. Firms like COMSURE can provide specialised guidance to ensure your business remains compliant. Have you implemented a conflicts register in your business? 

References

• Conflicts of interest requirements under Principle 2 of the Code of Practice for Investment Business https://www.jerseyfsc.org/industry/guidance-and-policy/conflicts-of-interests-requirements-under-principle-2-the-code-of-practice-for-investment-business/
•  Supplementary Guidance on Conflicts of Interests - Government of Jersey https://www.gov.je/SiteCollectionDocuments/Government and administration/Supplementary Guidance Code of Conduct Conflicts of Interest.pdf
•  The Conflict of Interest vs Register of Personal Interests https://www.opendeclare.com/the-conflict-of-interest-vs-register-of-personal-interests/
• Declaration of Interests and Register of Interests Policy https://www.qaa.ac.uk/docs/qaa/about-us/declaration-of-interests-and-register-of-interests-policy.pdf?sfvrsn=2102f681_6
• https://www.gfsc.gg/industry-sectors/investment/ongoing-supervision-thematic-reviews/licensees