CHINESE WALLS: A DEVICE NOT A SOLUTION
| Date | 01 January 1993 |
| DOI | https://doi.org/10.1108/eb024779 |
| Published date | 01 January 1993 |
| Pages | 314-316 |
| Author | LYNN COUNSELL |
| Subject Matter | Accounting & finance |
CHINESE WALLS: A DEVICE NOT A SOLUTION
Received: 16th November, 1992
LYNN COUNSELL
LYNN COUNSELL
HAS BEEN IN PRACTICE AS A BARRISTER SINCE
1988
AND HOLDS A BA(HONS) IN HISTORY
FROM LONDON UNIVERSITY AND A DIP. LAW
FROM CITY UNIVERSITY. SHE IS COAUTHOR
WITH MICHAEL ASHE OF 'INSIDER TRADING'
(1990),
FORMAT PUBLISHING, AUTHOR OF
'ATKINS COURT FORMS ON THE FINANCIAL
SERVICES ACT 1986' (1990) BUTTERWORTHS,
AND COAUTHOR AGAIN WITH MICHAEL ASHE
OF
THE REQUIREMENTS OF INVESTMENT
BUSINESS' IN BUTTERWORTH COMPANY LAW
GUIDE'
(1990).
ABSTRACT
Recent discussion regarding the protection
of investors has focused on the funda-
mental issue of
conflict
of
interest
facing
practitioners in the financial services
industry. The
imposition
of
Chinese
walls
might
be seen
as a way of
avoiding
such
conflict. The author argues that rather
than being a solution to the problem
Chinese walls should merely
be
seen
as part
of the normal
structure
of securities firms.
The establishment of the Financial
Services Act 1986 (FSA 1986), the
publicity surrounding insider deal-
ing cases in recent years and the
growth of large multi-service finance
houses have sharply brought into
focus the issue of conflict of interest
in securities transactions.1 A key
aspect of this problem is the use and
purpose of Chinese walls.
A Chinese wall has previously
been defined as
'an established arrangement
whereby information known to
persons involved in one part of a
business is not available (directly
or indirectly) to those involved in
another part'of the business and
it is accepted that in each of the
parts of the business so divided
decisions will be taken without
reference to any interest which
any other such part or any person
in any other such part of the
business may have in the matter'.2
Such arrangements can take a
number of forms including surveil-
lance techniques, use of code words
and special lists, procedural rules
restricting access to documents and
computers, and actual physical
segregation of departments. Physical
segregation of different departments
is perhaps the most effective method
314
To continue reading
Request your trial