Conflicts of Interest: Relying on a Wall Street Bank’s Safeguards

In October 2012 the Wall Street Journal reported, “the Financial Industry Regulatory Authority is examining how major investment banks and brokerage firms define and manage conflicts of interest between themselves and their clients.” Prime facie, defining and managing such conflicts between oneself and others can be regarded as itself a conflict of interest. It is perhaps a bit like the wolf negotiating with itself on its new job guarding the hen-house. I suspect that the regulators were going too far in attempting to translate “regulating” into managerial terms. The Journal goes on to ponder, “Will the first systematic look at conflicts on Wall Street in years make a difference for investors?” In my view, investors have good reason to be skeptical of the FIRA’s “manageralizing” approach.

The full essay is at Institutional Conflicts of Interest, available at Amazon.