Practice Note 3.9.1(6) — Conflicts of Interest
|Issue Date||Cross Reference||Enquiries|
|Added on 18 September 201218 September 2012.||Rule 3.9.1(6)||
Please contact Member Supervision:
Facsimile No : 6538 8273
E-Mail Address: email@example.com
1.1 This Practice Note provides guidance on how front office and back office functions of Clearing Members should be separated, in accordance with Rule 3.9.1(6).
2. Separation of Key Functions
2.1 The purpose of separating a Clearing Member's various key functions is to minimise and manage conflicts of interests among these functions.
2.2 Examples of proper separation include:—
(a) the setting and authorising credit limits on customers by senior management staff who are independent of sales and marketing functions, and are not related to the customer in question; and
(b) having adequate separation of management responsibilities e.g the heads of sales, dealing or marketing functions should not have responsibilities over the middle and back office functions of Clearing Members.
2.3 The basis for determining and amending credit limits should be properly documented. Adequate audit trail reports should be maintained to show all changes to credit limits, the date and time of the modifications and the authorised person who approved the changes. In addition, sufficient checks and procedures should be in place to ensure that all limits and parameters set and modified by the credit control administrator are accurate and have been approved.