ZAS Conflicts Management Framework
Document Issued By
Document Originator
Review of Document due by
Version Date
Version Number
LG/16/009991
HDOS-011665-2016
General Counsel
Corporate Governance
August 2017
2 August 2016
V 2.2
Summary of the ZAS Conflicts Management Framework
What is the purpose of this
document?
Zurich Australian Superannuation Pty Ltd (‘ZAS’) is part of the Zurich
Australia Group of companies and is the trustee of the Zurich Master
Superannuation Fund (‘the Fund’). Under APRA Prudential Standard SPS 521
Conflicts of Interest (‘the Standard’), ZAS as a Registrable Superannuation
Entity (‘RSE’) licensee must have in place a framework that provides
reasonable assurance that conflicts of interest and conflicts of duties
mentioned in the Standard (referred to in this document as ‘conflicts’) are
being clearly identified, avoided or prudently managed. This document sets
out the key elements of ZAS’s conflicts management framework.
What does this
document cover?
This document sets out:
•
•
•
•
Other relevant documents not
listed in the conflicts
management framework
Review and changes
•
•
•
•
•
•
the types of conflicts covered in the Standard
the various policies and procedures that are in place within the
Zurich Australia Group to manage conflicts
the roles and responsibilities in relation to the conflicts
management framework
the review process to ensure the conflicts management framework
remains appropriate and effective
List of ZAS Responsible Persons
ZAL ZAS Services Deed
ZAL ZAS Insurance Services Deed
ZFSA Resources Deed
ZAS Governance Framework
ZAS Insurance Framework and Strategy
ZMSF Investment Governance Framework ZFSA
Outsourcing Policy
Annually – the Standard requires that ZAS review its conflicts
management framework and report the results to the ZAS Board every year.
Three Yearly - the Standard requires that the appropriateness,
effectiveness and adequacy of this conflicts management framework must
be comprehensively reviewed by Internal Audit at least every three years.
Material changes to this framework must be approved by the ZAS
Board.
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A. Overview of the ZAS Conflicts Management Framework
1. Why is a conflicts management framework necessary?
The Superannuation Industry (Supervision) Act 1993 (‘SIS Act’) requires an RSE licensee to undertake its business
operations in the best interests of beneficiaries, consistent with the retirement purposes of superannuation. In support of
this, an RSE licensee and each individual director of an RSE licensee must comply with covenants set out in the SIS Act to
act honestly, to exercise a required degree of care, skill and diligence and to perform their duties and powers in the best
interests of beneficiaries.
Under sections 52(2)(d) and 52A(2)(d) of the SIS Act (the conflicts of interest covenants), an RSE licensee is required to
ensure that, where a conflict arises and has not been avoided, the duties to, and interests of, beneficiaries receive priority
over any duties to, and interests of, other persons.
A conflict has the potential to prevent ZAS from performing its duties as an RSE licensee by placing it in a position where it
may deliberately or inadvertently prefer the interests of another party to those of its beneficiaries. Alternatively, a person or
firm undertaking a material business activity for, or otherwise advising, ZAS may have a conflict that could affect the nature
or quality of the advice given or service provided.
2. Conflicts management as part of Zurich Australia’s overall risk culture
The Zurich Australia Group is committed to maintaining a strong conflicts management culture as part of its risk culture.
ZAS is a member of the Zurich Australia Group and utilises Zurich Australia Group policies and functions and must ensure
that these policies and functions continue to give appropriate regard to ZAS’s business operations and specific
requirements.
Zurich Australia has developed a mature framework to support a conflicts management culture that encourages:
•
openness, where requirements to disclose relevant duties and interests are understood, accepted and followed;
•
policies that highlight the importance of initial and ongoing disclosure of relevant interests and duties
and resulting potential and actual conflicts;
•
promotion of the value of proactive disclosure of relevant duties and interests and resulting potential and
actual conflicts; and
•
reporting of improper conduct through ‘good faith’ reporting.
3. What are the types of conflicts?
Under the Standard, the conflicts that ZAS must identify and avoid or properly manage are those between:
a. the duties ZAS or a ZAS responsible person owe to beneficiaries and the duties they owe to any other person;
b. the interests of beneficiaries and the duties ZAS or a ZAS responsible person owe to any other person;
c.
an interest of ZAS, an associate of ZAS, or of a ZAS responsible person or employee, and
ZAS’s duties to beneficiaries; and
d. an interest of ZAS, an associate of ZAS, or of a ZAS responsible person or employee and
the interests of beneficiaries.
An ‘associate’ is essentially:
3
•
a ZAS related body corporate (ie Zurich Financial Services Australia Limited (‘ZFSA’), Zurich Australia Limited
(‘ZAL’), Zurich Australian Insurance Limited (‘ZAIL’) and Associated Marine and Insurers Agents Pty Limited
(‘AMIA’); and
•
directors and company secretaries of those companies.
In addition to identifying, avoiding or managing presently existing conflicts, it is also important to recognise, and
implement strategies to deal with, situations that:
•
•
have the potential to create a conflict at some time in the future; or
may be perceived by others as presently or potentially involving a conflict even though this perception may be
considered to be incorrect.
Appendix 2 includes some examples.
Fundamental to the conflicts management framework is the early identification and monitoring of potential and
perceived conflicts, at both the entity and personal level, so that appropriate controls (such as independent reporting lines
and appropriate information barriers) are set up as needed to avoid or mitigate their adverse impacts . Conflicts can arise
unexpectedly and it is not possible to be immunised entirely from them. Therefore, the policies and processes that
comprise the Conflicts Management Framework need to be flexible and adaptable enough to identify and then address a
conflict as soon as it is identified. It is also important to identify any potentially unmanageable conflicts that could arise
where avoidance is the only appropriate control.
Appendix 2 includes some examples.
Service providers
It is recognised that there is a potential for conflicts to arise in relation to service providers. Under the Standard, ZAS is
required to undertake regular and thorough enquiry to identify all conflicts arising from:
•
•
its relationship, or
the relationship of a Responsible Person or employee,
with an existing or prospective service provider or adviser, including those conflicts that have the
potential to affect the service provider’s performance in respect of the obligations undertaken for
ZAS’s business operations.
ZAS satisfies this requirement through the following processes:
•
obtaining annual assurances from its external service providers that the service provider is free of any conflict
that has the potential to affect the performance of their services to ZAS; 1
•
relying on the obligation on all employees to disclose conflicts annually. Responsible Persons are required to
update the Register of Relevant Interests and Relevant Duties every quarter;
•
the maintenance of entity conflicts registers which contain quarterly conflicts declarations;
•
the requirement in the Insurance Services Deed and the Services Deed for ZAL to report to ZAS any conflicts
of interest that ZAL identifies in relation to ZAS
•
the requirement in document execution process to consider conflicts if a transaction involves a material
1
For PwC see the PwC annual declaration. For Mercers see the declaration in the initial engagement documentation
and at each annual review of the Investment Governance Framework.
4
outsource.
4. Recording relevant interests and relevant duties in a register
Under the Standard, in addition to identifying and avoiding or prudently managing conflicts, certain kinds of interests
and duties need to be recorded in a register. These are called ‘relevant interests’ and ‘relevant duties’.
•
a ‘relevant duty’ is any duty that ZAS, or a ZAS responsible person, owes to beneficiaries or to any other person;
and
•
a ‘relevant interest’ of ZAS, a ZAS associate or a ZAS responsible person refers to any interest, gift,
emolument or benefit, whether pecuniary or non-pecuniary, directly or indirectly held by ZAS, the ZAS
associate or the ZAS responsible person
that ZAS has determined to be relevant1 in the sense that it is:
‘one that might reasonably be considered to have the potential to have a significant impact on the capacity
of ZAS, the ZAS associate or the ZAS responsible person with the relevant duty or holding the relevant
2
interest, to act in a manner that is consistent with the best interests of beneficiaries’. (emphasis added)
5. What are the relationships between ZAS and its related bodies corporate ZFSA and
ZAL that may cause a conflict?
ZAS currently invests assets of the Fund in investment life policies issued by ZAL, which manages the investments.
ZAS also currently obtains individual life insurance policies from ZAL covering each individual member of the Fund
who has elected to be covered. ZAL also provides fund administration services pursuant to a Services Deed
entered into between ZAL and ZAS. ZAS obtains resources from its parent entity ZFSA to monitor and review the
services and insurance cover that ZAL provides. This is depicted in the following diagram.
5
1
Although ZAIL and AMIA are technically associates of ZAS, they have no business connection with ZAS or its beneficiaries.
Accordingly, on 27 March 2013 the ZAS Board resolved that ZAIL and AMIA and their directors and company secretaries do not
hold a relevant interest for the purposes of the Standard.
2
Paragraph 16 of Prudential Standard SPS 521 Conflicts of Interest
6
6. How are these relationships managed to avoid conflicts?
Other Framework documents
The ZAS Insurance Framework and Strategy document sets out the ZAS insurance strategy and insurance
management framework to manage making insured benefits available to members of the Fund. The ZMSF
Investment Governance Framework document describes the investment governance framework that assists ZAS
to manage investments to protect the interests, and meet the reasonable expectations, of Fund members. These
documents acknowledge the potential conflicts inherent in the relationships between ZAS and ZAL. This
Conflicts Management Framework document explains how these conflicts are managed.
Deeds, policies and processes
ZAS has access to the resources it needs to properly conduct its business under a Resources Deed between ZAS
and ZFSA. These resources include legal, compliance, and finance personnel from ZFSA to manage the relationship
with ZAL and to monitor and review the Fund’s insurance. ZFSA must meet certain service standards in the supply
of these resources. Under the Resources Deed, ZAS has the right to request a variation of the resources and can, if
necessary, decide to obtain them elsewhere if it is not satisfied with its current arrangements with ZFSA. If ZAS
decides to do so, it has the benefit of transition arrangements in the Deed under which ZFSA must give ZAS all
necessary assistance to find a replacement provider and must also continue to provide the resources until
alternative arrangements are in place. ZAS can also seek independent advice where there is a conflict between its
interests and those of ZFSA.
Under a Services Deed between ZAS and ZAL, ZAL agrees to provide ZAS with a range of services particularised in
the Deed to enable ZAS to conduct its trustee business together with other services which either:
•
•
ZAL reasonably considers necessary or appropriate; or
ZAS reasonably requests because it considers them necessary or appropriate.
ZAL must meet certain service standards in providing these services. Under the Deed, ZAS has the right to ask ZAL to
vary the quality of the services. If ZAS and ZAL are unable to agree upon any variation of services and ZAS forms the
reasonable view that this compromises the effective conduct of ZAS’s business in a material respect, ZAS can terminate
ZAL’s services by terminating the Deed. If ZAS decides to do so, it has the benefit of transition arrangements in the
Deed under which ZAL must give ZAS all necessary assistance to find a replacement provider and must also
continue to provide the services until alternative arrangements are in place.
Under and Insurance Services Deed between ZAL and ZAS, ZAL agrees to meet certain service standards in
underwriting and administering the insurance policies to which the Deed relates, including exercising due care,
skill and diligence and ensuring it has sufficient staff and other resources necessary to meet its obligations. The
Insurance Services Deed sets out the obligations ZAL assumes in relation to aspects of the insurance cover
provided. It also requires ZAL to maintain a dispute resolution process for review of underwriting decisions, policy
administration issues and claims decisions and obliges ZAL to maintain a claims review panel.
These provisions enable ZAS to deal with ZAL at arms length. The arrangements between ZAL and ZAS are further
managed in accordance with the ZFSA Outsourcing Policy which applies to any material outsource arrangement
whether between Zurich Australia Group companies or externally. In particular:
•
Outsourcing Agreements: Outsourcing agreements must comply with the requirements of the ZFSA
Outsourcing Policy and contain the required provisions
7
•
Reporting: Each of the services that ZAL provides is reported on at each ZAS Board meeting
•
Monitoring: The services are monitored by the Trustee Services department (which is under a separate
reporting line to those performing the services) through regular reports covering each aspect of ZAL’s
services. ZAS also engages an external investment consultant to provide independent review of the
performance of the Fund’s investments and advice as required.
•
Benchmarking: The services are regularly reviewed against industry benchmarks through independent
third parties such as Mercers and SuperChoice, and the review of ZAL’s ratings from independent rating
houses.
The above approach to managing the relationship with ZAL is consistent with superannuation law which states
that, despite any provision in the trust deed to the contrary, ZAS is not bound to use any particular service
provider and accordingly is not bound to have these services provided by ZAL alone.
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B. Elements of the ZAS Conflicts Management Framework
The key elements of the Zurich Australia conflicts management framework are:
1. Director Conflicts Policy – This policy includes a Schedule to cover specifically the requirements of the
Standard which requires directors of ZAS, ZFSA and ZAL to disclose their relevant interests and relevant duties
(including gifts and other benefits);
2. Conflicts of Interest and External Engagements Local Standard for Australia and New Zealand
– This Local Standard includes a similar Schedule to the Directors Conflicts Policy Schedule, covering
Responsible Persons of ZAS and Company Secretaries of ZFSA and ZAL. It also contains guidance on the
management of conflicts between Zurich Australia Group entities including an Entity Conflicts of Interest
Register to record conflicts that may exist between Zurich Australia Group companies. A flowchart explaining
the conflicts escalation process is attached as Appendix 1;
3. Register of Conflicts of Interest and Conflicts of Duties - A Register of Relevant Interests (for ZAS, ZAS
Responsible Persons and ZAS ‘associates’) and Relevant Duties (for ZAS and ZAS Responsible Persons) has been
implemented. Those individuals who need to disclose relevant interests and relevant duties in the Register of
Relevant Interests and Relevant Duties are asked on a quarterly basis to update their relevant interests and
relevant duties. The process by which ZAS determines whether an interest is a ‘relevant interest’ commences
with the definition of ‘relevant interest’ and guidance provided in the Director Conflicts Policy and the
Conflicts of Interest and External Engagements Local Standard for Australia and New Zealand,
and set out in the template Register. The Head of Governance and Trustee Services maintains the Register of
Relevant Interests and Relevant Duties for directors and the Senior Trustee Services Manager maintains it for the
other individuals who are obliged to make these disclosures. The Board notes the Register annually. The
Register is disclosed on the Fund’s public website;
4. Conflicts of Duty Protocol for Executives – This protocol sets out the process for Zurich Australia Group
executives to follow where they owe duties involving two different Zurich Australia Group companies and those
duties are, or may be, inconsistent or in conflict with each other. This Protocol will assist ZAS responsible
persons manage conflicts of duties arising in this way;
5. Board Renewal Policy – This Policy provides that the likelihood of any conflicts of interest or of duties must
be considered when reviewing the composition of the ZAS Board;
6. Annual conflicts declarations by all staff - Staff must make an annual declaration about any conflicts
they have and these declarations are retained in Group Employee Management System (GEMS) online system
by Human Resources;
7. Anti-Bribery/Anti-Corruption Including Gifts and Entertainment Local Standard for Zurich
Australia – This Policy deals with the payment and acceptance of gifts, entertainment and other advantages
and explains whether, and if so under what circumstances, these are acceptable. This Policy is supported by
mandatory training;
8. Zurich’s Code of Conduct - All employees are required to have annual training on Zurich’s Code of Conduct
‘Zurich Basics’ which includes a section on conflicts of interest;
9. ZFSA Remuneration Policy – This Policy requires ZAS to have regard to protecting the interests and meeting
the reasonable expectations of beneficiaries as one of the remuneration objectives of ZFSA’s remuneration
structure and practices;
10. ZFSA Background Screening and Fit and Proper Policy – This Policy sets out the policy for
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screening the backgrounds of employees and for appointing and assessing Responsible
Persons;
11. Outsourcing Policy - sets out ZAS’s (and ZAL’s) approach to the appointment and monitoring
of service providers such as the Fund Asset Consultant, as well as setting out how the Fund
complies with SPS 231 Outsourcing;
12. ZAL ZAS Insurance Services Deed – supports the individual life policy insurance arrangements
with ZAL;
13. ZFSA Resources Deed – details the resources that ZFSA has agreed to provide ZAS so that ZAS
is able to properly conduct its business, comply with relevant laws and perform day to day
duties; and
14. ZAL ZAS Services Deed – details the services that ZAL has agreed to provide to ZAS.
There are other policies and procedures within Zurich that incorporate principles of conflict identification and
management. Listed below are those that are the most significant:
1. Standing Board and Committee agenda items - requires disclosure of conflicts and
material interests;
2. Officeholder appointments - ensures as far as possible within a Group structure that directors
and company secretaries of Group companies are not simultaneously officeholders on the boards
of, or privy to information about, other companies whose interests are likely to conflict with each
other;
3. Fit and Proper Application Form – collects the ‘relevant interests’ and ‘relevant duties’
disclosures before the initial ‘fit and proper’ assessments are made, and requiring ongoing disclosure
if individual circumstances change;
4. Board Paper template – the notes for authors highlight the types of conflicts outlined in
paragraph 7 of the Standard that authors need to bring to the attention of the ZAS Board;
5. ZFSA Employees Personal Investment Trading Policy – says that employees engaged in
personal investment trading must avoid, and be seen to avoid, actual or potential conflict between
their personal interests and the duty to Zurich clients and/or to Zurich;
6. Reporting of Improper Conduct and Concerns Australian Addendum - lists conflicts of
interest of a manager or of any other employee as an example of a concern that could be raised
through ‘good faith’ reporting;
7. Trustee Independent Advice – ZAS Directors are entitled to receive independent advice on any
matters they request. There are designated lawyers within the Zurich Australia legal team who
provide advice to ZAS and appropriate information barriers are set up as required. In addition there
is a designated ZAS investment advisor who provides advice on the performance of ZAS’s
investments and appropriateness of the investment strategy and objectives;
8. ZAS Claims Delegation – the ZAS Board has delegated to the Superannuation Administration
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Team the authority to assess insurance claims (within delegation limits) and determine that any
payment to a member is consistent with the conditions of release requirements under
Superannuation Industry Supervision Regulation Schedule 1; and
9. List of Responsible Persons - a list of Responsible Persons for ZAS is maintained.
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C. Roles and Responsibilities
While the board delegates responsibility to ZAS management (‘Trustee Services’), the Standard says that the
Board is ultimately responsible for the development and maintenance of ZAS’s conflicts management
framework.
Title
Role description – Key Responsibilities
ZAS (including the
Board)
Oversees the overall strategy and governance of the Fund.
Ensures the ZAS Conflicts Management Framework is developed and maintained and
reviews it annually.
•
•
•
•
•
ZAL
Makes recommendations on product and benefit design for the Fund
Fund administrator
Issuer of master investment policies into which ZAS invests
Implements the investment strategy as determined by ZAS
Provider of insurance
ZIM & external unit
trust managers
ZIM acts as Responsible Entity of the ZIM unit trusts into which ZAL invests and
selects Investment Managers for the ZIM unit trusts. ZIM is also responsible for
investing in assets in accordance with the investment strategies of the unit trusts.
Investment
consultant
Assists ZAS with all investment related matters as requested
Custodian
Not applicable – ZAS holds title to the ZAL life policies
Teams focused on providing dedicated services to ZAS:
Trustee Services
Assists ZAS in discharging its fiduciary obligations and acts in the best interests of
ZMSF members.
Superannuation
Administration
Team
SAT completes the following fund administration functions on behalf of ZAS:
Risk Management
Provides ZAS with independent second line oversight to determine the effectiveness of
risk management activities within the business, including the processes and tools used
to identify, evaluate, manage, monitor and report on new and changed risks. Risk
Management regularly reports Risk Management activities to the ZAS Board and
participates in the Risk Management Working Group.
•
•
•
•
•
•
Application + contribution processing
Arranging insurance
Fund enquiries + disclosures
Record keeping + reporting
Administering member accounts
Benefit & claims administration
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Title
Compliance
Role description – Key Responsibilities
Compliance is responsible for providing independent second line assurance of the
Conflicts of Interest and External Engagements Local Standard for
Australia and New Zealand requirements by:
•
Identifying exposed areas for conflicts of interest and external engagements,
prioritising and supporting the relevant business unit to plan mitigating actions
•
Advising the first line in the establishment of controls
•
Providing tools and templates to guide staff in the adequacy and appropriateness
of disclosure and management of personal conflicts of interest
•
Performing risk based monitoring to gain assurance that compliance controls
operate effectively, and overseeing remediation of non-compliant issues
•
Reporting on work undertaken and significant findings to the appropriate
executive(s) and / or governance committee(s)
•
Escalating conflicts which cannot be effectively managed by the BU Manager
through to the Head of Compliance and/or General Counsel as necessary.
Arranging training on conflicts of interest management, anti-bribery/anti-corruption,
Zurich Basics, reporting of improper conduct and other related topics as required
Audit
Audit is responsible for providing an independent third line challenge by conducting
periodic assessments and reviews of the conflicts of management process as a part of the
risk based audit plan.
Legal
Legal is responsible for providing independent legal advice in connection with the
management of actual and potential conflicts of interest.
Head of Governance and •
•
Trustee Services
•
Maintains the Register of Relevant Interests and Relevant Duties for directors
Maintains the board and committee meeting agendas, papers and board paper
template
Acts in consultation with General Counsel in relation to appointment of officeholders
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Trustee Services Manager •
•
•
•
Human Resources
Maintains the Register of Relevant Interests and Duties for individuals other than
directors
Provides the Directors Register of Relevant Interests and Duties at each ZAS Board
Provides the entire Register of Relevant Interests and Duties to the ZAS Board annually
Conducts annual reviews of conflicts management framework
The Human Resources function:
• Ensures disclosures of conflicts of interest and external engagements are logged in the
Global Employee Management System.
• Ensures that sufficient management information is available in order to assess whether
conflicts of interest and external engagements disclosures are recorded effectively.
• Ensures records of the disclosures are managed in accordance with the Group records
retention policy.
ZAS Product Management Provides ZAS with resources to ensure that the products provided to members meet their
expectations and that features, benefits, pricing and services are reviewed on a regular
basis.
Finance
Assists ZAS in ensuring that the financial management and financial reporting
obligations are completed in accordance with the various standards.
D. Framework Review
Annually – the Standard requires that ZAS review its conflicts management framework and report the
results to the ZAS Board every year.
Three Yearly - the Standard requires that the appropriateness, effectiveness and adequacy of this conflicts
management framework must be comprehensively reviewed by operationally independent, appropriately
trained and competent persons at least every three years.
Material changes to this framework must be approved by the ZAS Board. Trustee
Services is responsible for initiating the reviews.
The Standard says that the scope of the review of ZAS’s conflicts management framework must have regard
to the size, business mix and complexity of ZAS’s business operations, the extent of any change to those
operations and any changes to the external environment in which ZAS operates.
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Appendix 1 – Conflicts escalation process flow chart
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Appendix 2 – Examples of conflicts
a. Potential or perceived conflicts between related parties (entity to entity)
These are conflicts that could arise where a related entity has an interest or duty that could conflict with the
interests of the Fund or ZAS’s duty to the Fund.
Example 1:
ZAL proposes to introduce a new investment option onto the Zurich Superannuation Plan investment menu. This could
create a conflict between ZAL and ZAS if, for instance, the option proposed by ZAL was only suitable for investors with
particular characteristics and the ZAS membership does not have those characteristics. Because ZAL and ZAS are both
Zurich Australia Group companies, there could also be a perceived conflict if ZAS accepted this new investment option
without proper analysis of its suitability.
Example 2:
ZAL puts a proposal to ZAS on how to deal with members who hold legacy products. The proposal proferred by ZAL is
one which minimises the administrative burden on ZAL. Because ZAL and ZAS are both Zurich Australia Group
companies, there could be a perceived conflict if ZAS accepted this proposal without proper analysis of its
appropriateness.
b. Potential or perceived conflicts for Responsible Persons of ZAS
These are conflicts that could arise where a person has interests or duties (arising in a personal or business
context) in relation to another organisation that could conflict with their duties to the Fund.
Example 1:
One of the ZAS directors is on the board of a company that could become a direct competitor of ZAS
- for instance, a health insurer which subsequently decides to start up a public offer superannuation fund. Depending
on the circumstances, this may or may not create an existing conflict of duties for that director. However, holding these
two board positions does create the potential for there to be a conflict of duties for that director if the companies
become direct competitors with each other at some time. There is also the possibility that there may be an existing
perceived conflict if the director is on both boards depending, for example, on whether it would be reasonable to
believe the companies are already in direct competition with each other - for instance, if a person was an Responsible
Person for both ZAS and a small industry fund.
Example 2:
One of the ZAS directors is on the board of a company in an industry that has no connection whatsoever to financial
services, for example, a food retailer. It is extremely unlikely that the food retailer will become a direct competitor of ZAS.
However, in time the food retailer decides to move
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into financial services by offering some financial services products. Although there would be no conflict of duties for the
ZAS director initially in serving as a director on the board of a food retailer whose operations were confined to food
retailing, a conflict, or potential conflict (depending on the circumstances) arises once the director becomes aware of
the food retailer’s plans to expand into financial services. There may also be a perceived conflict if the director is on
both boards depending, for example, on whether it would be reasonable to believe the companies are in direct
competition with each other.
Example 3:
A Responsible Person for ZAS has a personal financial interest in a service provider that is tendering to provide services
to ZAS - for instance, is a partner of an accounting firm providing accounting services. Depending on the nature of the
personal financial interest, and the role the Responsible Person performs in ZAS, the Responsible Person may have an
existing, or a potential, conflict between their interest in the service provider and their duty to ZAS. In addition, there
could reasonably be the perception that the Responsible Person has such a conflict, without knowing more about the
particular circumstances.
c. Unmanageable conflicts
Unmanageable conflicts are conflicts that, despite arrangements in place, cannot adequately be managed once
they have arisen such as where it is not possible simultaneously to perform the duty to ZAS and the duty to the
Fund as required. These conflicts can only be avoided.
Example 1:
One of the ZAS directors is on the board of another company and learns of something that will affect ZAS. This is an
example of a conflict of duty where the person owes a duty to both companies as a director. There has been judicial
1
decision that the duty of confidentiality owed to one company does not relieve a director from his or her duty to act
honestly with respect to the other company. This would mean that the ZAS director would be required to disclose the
relevant information to ZAS.
In situations where a conflict appears to be unmanageable the following process should be followed:
Step 1 - Discussion between the General Counsel and a non-conflicted Chairman to determine if
conflict is manageable
The Chairman of the Board where the conflict has come to light, provided the Chairman is not the conflicted party,
and, if so, either the Chairman of the ZFSA Board or the Chairman of the ZFSA Risk, Compliance and Audit Committee
(whomever is not the conflicted party), with the assistance of the General Counsel, will consider all the circumstances
of the conflict once it has been disclosed to the
1
1 Fitzsimmons v R (1997) per Parker J, (at ACSR 363 -4)
14
Board to determine whether, and if so how, the conflict can be managed appropriately. For example, the Chairman may
determine that a conflict is manageable by the director withdrawing from meetings when certain matters are discussed
or refraining from voting on certain resolutions.
Step 2A – Conflict is manageable
If the Chairman believes the conflict is manageable, the Chairman will discuss this with the conflicted director and
agree the strategy for managing the conflict. In the case where the conflict arises due to the director serving on more
than one ZFSA Group company board, the minimum conduct standards outlined in section 6.3 of the Director Conflicts
Policy will apply. The Chairman will report the agreed strategy to the relevant ZFSA Group company board (or boards as
the case may be).
The Chairman, with the assistance of the General Counsel if required, will continue to monitor any strategy
implemented to assist the director to manage his or her conflict to determine whether in fact the conflict is being
adequately managed and whether the director is able to continue to discharge his or her duties.
A summary of these discussions and decisions will be recorded in the relevant Conflicts Register.
STEP 2B – Conflict is unmanageable
If the Chairman, with the assistance of the General Counsel if required, determines at any stage that it appears that a
conflict cannot, or can no longer, be managed appropriately, the Chairman will refer the matter to the relevant ZFSA
Group board (or boards as the case may be) on which the director serves for a decision on how best to resolve it.
The board may determine that the view of the relevant holding company should be sought on how the conflict will be
removed, for example, by the holding company asking the conflicted director to resign from one or other of the board
positions that create the unmanageable conflict for the director.
The Chairman will discuss with the conflicted director the decision made in relation to how the conflict will be
removed and the conflicted director will take the steps necessary to ensure the conflict is removed.
A summary of these discussions and decisions will be recorded in the relevant Conflicts Register.
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Appendix 3 - Conflicts Management Framework Revision History
Version
Reason for amendment
Date approved by Board
1.
26 March 2014
1.1
APRA review recommendation and annual review
3 February 2015 (General
Counsel approved nonsubstantive changes)
2.0
Annual review
24 March 2015
2.1
Annual review and updates following gap analysis with APRA
Insight article titled ‘Conflicts of Interests Thematic Review’
3 May 2016 (General Counsel
approved non-substantive
changes)
2.2
PwC triennial review recommendations
2 August 2016 (General Counsel
approved changes)
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