Conflicts of Interests in the Provision of Investment Services and of Collective Management Services under Italian Law

The article summarizes the most recent issues that have emerged with respect to the conflicts of interests in the performance of investment services under Italian Law. Although it might be said that it is “normal” for an investment firm that performs investment services to find itself in situations of potential conflict of interest, it is nevertheless crucial to provide clients with the suitable tools needed to protect themselves. In order to avoid that conflicts of interests affect the clients, it would be possible to propose a drastic solution: to prohibit the investment firms from providing services to the client in such cases. In the 1980s (and, to a certain extent, at the beginning of the 1990s), Italian legislation and case law were construed in the sense that operations carried out in a situation of conflict of interest were forbidden. In the course of the 1990s, however, the Italian legislator made a completely different choice: no more prohibition, but supervision and organisational rules intended at identifying potential conflict of interest and minimize their negative impact upon clients. With that respect, the main strategy set up by the Italian legislator consisted of imposing on investment firms the obligation to provide the client with all the information relevant to the potential conflicting transaction they are involved in. This latter choice has nonetheless showed some problems. The main one is that financial markets require promptness and cannot tolerate bureaucratic excesses.