A Tale of Two Cities

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness”.  This is only a snippet of the first sentence of Charles Dickens’ bestselling novel “A Tale of Two Cities”. 

I thought of this quote recently as I was reading news stories about the troubles engulfing the NRL (National Rugby League) with regards to player managers.

Written in 1859, “A Tale of Two Cities” is set in London and Paris before and during the French Revolution. The novel tells the story of the French Doctor, Manette, his 18-year-long imprisonment in the Bastille in Paris and his release to live in London with his daughter Lucie, whom he had never met. The book shows contrasts in life and situations.

Issues have arisen in rugby league, which in my opinion have been there for a while, where there are player managers who are representing both players and coaches in the same clubs and allegedly causing interference in the day to day of the clubs.

As I read these stories it led me to reflect on Financial Services and how there is a constant flux regarding conflicts of interest and how they are managed.

The Australian Securities and Investments Commission’s (ASIC) Regulatory Guide (RG) 181 outlines the Regulator’s approach to compliance with the legislative obligation to manage conflicts of interest under s912A(1)(aa) of the Corporations Act 2001 (Corps Act).

In financial services, conflicts of interest have been a hot topic for many years.  And more so since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

If we look back at history though, coming out of the Global Financial Crisis, there was ongoing concern with conflicts of interest, specifically arising out of financial advisers recommending agricultural investments and geared investments which had large commissions associated with them.  It was this behaviour which led to s961J being inserted into the Corps Act under the Future of Financial Advice reforms in 2013.

s961J is what is deemed as the “Conflicts Priority Rule”, it states that where an adviser, or licensee, knows about a conflict between the interests of the client and themselves, that the client must be put first.

The conflicts priority rule also ties back to RG181 in which it states that there are three mechanisms that Australian Financial Services Licensees (AFSLs) would generally use to manage conflicts of interest.  They are control, avoid and disclose.                     

Seems pretty simple doesn’t it?

If you can’t control a conflict, avoid it.  If your disclosure of a conflict isn’t sufficient, avoid it.  And above all else, if you can’t manage a conflict, avoid it.

What does this have to with the player managers in the NRL?

It seems to me that player managers could learn a thing or two from study of the Corps Act and associated Regulatory Guides when it comes to financial services. 

By studying these documents, they might actually learn a couple of things:

  1. If there is a conflict between the priorities of the client and the manager (e.g. a coach wants to make changes week to week which affects one of the manager’s clients), then the manager needs to understand how to prioritise the conflict; and
  2. If the manager cannot manage the conflict which arises from representing players and coaches, some of whom are on the same team, then they must, for the sake of the integrity of the game, avoid the conflict.

Conflicts of Interest are something that, in most cases, can be controlled through proper disclosure.  In our industry, the conflicts that are hardest to control are those relating to product and advice where the product is owned, and operated, by an associated entity.

Our team can help you with policies and processes to manage and document conflicts of interest. 

If this is something you need, contact us.