Conflicts of Interest

Question 1

what are the 2 types of conflicts of interest?

Answer 1

(1) own interest conflicts

(2) conflicts of interests between your client

–> you must not act

Question 2

what is an own interest conflict?

Answer 2

any situation where your duty to act in the best interests of any client in relation to a matter conflicts or there is a significant risk that it may conflict with your own interests in relation to that or a related matter

Question 3

examples of an own-interest conflict

Answer 3

• A financial interest of yours or someone close to you: for example, a client asks you to carry out due diligence on a company you or your spouse/partner own shares in.
• A personal or business relationship of yours: for example, you are asked to advise on a claim against a relative, a friend, or someone you are involved with in financial or business enterprise.
• Your role as an employee: for example, a client asks for advice in relation to a dispute involving your employer or a fellow employee.
• Your own conduct as a firm or individual: for example, where the wrong advice has been given to a client or a wrong action taken on their behalf.

Question 4

what are the exceptions allowing you to act where there is an own interest conflict?

Answer 4

there are NO exceptions - you must NOT act where there is, or there is a significant risk of, an own interest conflict

Question 5

what is a conflict of interest?

Answer 5

a situation where your separate duties to act in the best interests of two or more clients in the same matter or related matter conflict

Question 6

what are the exceptions allowing you to act when there is a conflict of interest? (2)

Answer 6

exceptions:

(1) Substantially common interest

(2) Competing for the same objective

but 3 conditions must be satisfied for either exception

Question 7

what conditions must be satisfied for either exception to the prohibition on acting where there is a conflict of interest? (3)

Answer 7

(1) all clients gave informed consent in writing to you acting, and

(2) you put in place effective safeguards to protect your client’s confidential information, and

(3) you are satisfied that it is reasonable for you to act for all the clients - considering:

• if one client is more vulnerable than the other
• how much negotiation is needed between the clients
• particular benefits in acting for both clients (speed, specialist knowledge, lower cost)

Question 8

what is the substantially common interest exception?

Answer 8

you can act for two clients where there is a clear common purpose between the clients and a strong consensus on how this is to be achieved

requires:
a) clear common purpose
b) strong consensus (little to no negotiation needed)

if parties’ interests differ then negotiation is needed and there is no exception available

Question 9

what is the competing for the same objective exception?

Answer 9

Where 2 or more clients are competing for an objective which, if attained by one client, would make the objective unattainable to other clients

Example is an auction, tender, or bidding process (NOT public takeover) – sophisticated clients