Conflicts of Interest Introduction
A bank that provides asset management services for clients may be required to
manage a variety of actual or potential conflicts of interest. Conflicts of
interest and self-dealing transactions normally arise whenever the bank’s ability
to act exclusively in the best interest of account beneficiaries or clients is
impaired. A fiduciary is required by a long history of case law to put the
interests of account beneficiaries before the interests of the bank. The fiduciary
owes its beneficiaries undivided loyalty and must administer each trust for the
exclusive benefit of account beneficiaries and the purposes for which the
account was created.
Conflicts of interest are not limited to instances in which the bank is acting as
a fiduciary. In fact, as the trust business increasingly becomes an asset
management business, the opportunities for a bank to find itself in a conflict of
interest increase. Asset management — the management of third-party assets
for a fee or commission — includes fiduciary services (personal, employee
benefits, and corporate), investment advisory services, the retail sales of
nondeposit investment products, and agency arrangements including custody of
assets. When a national bank provides these services, the best interests of the
client and the bank are not always the same.
This booklet provides guidance to examiners evaluating the risk management
practices banks have in place to control conflicts of interest and self-dealing.
The booklet’s introduction provides an overview of risks and controls
associated with conflicts of interest. The appendix contains a more in-depth
discussion of certain transactions that may result in conflicts of interest or selfdealing.
The procedures are designed to be used in large banks and, as needed,
in community banks. In community banks, the procedures supplement the
Comptroller’s Handbook booklet “Community Bank Fiduciary Activities
Supervision.” For additional information, see this booklet’s “References” page.
The Employee Retirement Income Security Act of 1974 (ERISA) views certain
transactions as conflicts of interest and self-dealing. This booklet does not
discuss those conflicts of interest in depth. Rather, it clarifies selected topics.
The planned Comptroller’s Handbook booklet “Retirement Plan Services” will
contain a comprehensive discussion of conflicts of interest and self-dealing
activities in accounts subject to ERISA. In the interim, examiners with
As of January 6, 2012, this guidance applies to federal savings associations in addition to national banks.*
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