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  • BC-B.6 BC-B.6 Principle 6: Conflicts of Interest and of Duty

    • BC-B.6.1

      An Islamic bank licensee must recognise the conflicts of interest between itself and its clients that arise from the type of products it offers, and either avoid them, or disclose and manage them, bearing in mind its fiduciary duties to investment account holders (IAH) as well as shareholders. See Section BC-9.12.

      Added: July 2015

    • BC-B.6.2

      In addressing the issue of conflicts of interest, this principle stresses the importance of Islamic bank licensees doing their best to avoid conflicts of interest, and when they cannot be avoided, the need to ensure that stakeholders are fairly treated. This principle recognises that conflicts of interest should be managed, and that proper management to ensure fair treatment of stakeholders may require disclosure of certain facts or information, internal rules of confidentiality, or other appropriate methods or combinations of methods. Conflicts of interest may arise in fund management which requires proper management so as to achieve honesty and fairness in accordance with Principle 1 (BC-B.1).

      Added: July 2015

    • BC-B.6.3

      In Islamic bank licensees, conflicts of duty may occur since their management is required to act in the best interests of two categories of stakeholders who may have differing interests, such as shareholders and IAH. Hence, conflicts of interest between two categories of stakeholders are translated into conflicts of duty for the board of directors and management of the Islamic bank licensee. In this connection, the fiduciary duties of an Islamic bank licensee to stakeholders, including IAH, are crucial.

      Added: July 2015

    • BC-B.6.4

      Good business practice is linked to good governance, particularly with regard to the proper management of conflicts of interest and of duty. The existence of such conflicts must not be hidden, but Islamic bank licensees must be transparent about them while making clear what mechanisms are in place to manage them properly.

      Added: July 2015

    • BC-B.6.5

      Islamic bank licensees must ensure that their systems of remuneration and compensation do not provide perverse incentives to their management, staff, agents or other representatives that could lead to conflicts of interest.

      Added: July 2015