A conflict of interest occurs when a trustee has a duty to act in the best interests of a particular party but also has either a personal interest or a duty to act in the best interests of another party. If not managed properly, conflicts of interest can lead to inappropriate or even invalid decisions.
Let’s consider a couple of examples:
Trustees who are also directors of the sponsoring employer have additional responsibilities under the Companies Act 2006. This should be discussed with legal advisers.
Whilst all conflicts should be noted, the majority can be easily managed. It should be remembered that in a lot of cases it is the “perceived” conflict that needs to be considered.
The Pension Regulator’s view is that conflicts of interest should be “embraced” rather than ignored. Its view is that the following three stage process should be used to deal with them:
Our view is that the chairman and/or scheme secretary should consider potential conflicts as part of their preparation for a meeting. This means they can speak to the relevant people ahead of the meeting and discuss how best to proceed.
The Regulator has published guidance on conflicts of interest which contains a number of important principles. By way of example, it believes that trustees should:
If a conflict is identified it can be managed in various different ways. Options include:
The most appropriate course of action will vary depending on the situation.
The Bribery Act 2010 formally classes bribery as a statutory offence and failure to prevent bribery can have significant consequences. The Ministry of Justice has produced guidance on the Bribery Act which can be found at www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf. Trustees may face little or no risk of bribery but it is important to have adequate procedures in place to prevent bribery and in order to protect them. As a consequence a register of gifts and entertainment provided by advisers and other parties should be maintained.