Key Points
- Fund promoters may lose their fund business without
compensation.
- The best defence is to manage and to be seen to manage
conflicts arising from related party agreements.
In good times, many legal questions may be academic. But when
there is a crisis, whether basic legal principles have been
followed becomes a vital question.
The Australian consequences of the sub-prime crisis are still
unfolding. Nonetheless, we know from previous financial crises
(both here and overseas) that when people lose money and lawyers
and regulators get involved, the focus inevitably will turn to
conflicts of interest. Conflicts are inevitable within financial
conglomerate groups and related party contracts are the norm. So
from a legal and regulatory perspective it is important to ensure
these related party contracts were initially entered into, and
continue to be managed, in conformity with the legal principles
which govern the issue.
