The Jones Bank Ltd has two departments.
a) a pension fund department, which invests money on behalf of clients and customers, by investing in bonds, shares and so on.
b) a merchant bank department, one of whose clients is the prestigious and dynamic Sampson and Brown Ltd, which is to offer a new tranche of shares to the investment community.
Required: Identify the potential conflict of interest.
DISCUSSION In times of recession, it is the banks who ultimately decide whether a particular business survives or fails. There is a widespread view that banks should support small businesses come what may, as not to do so would be socially irresponsible. Give reasons for and against this view

The Jones Bank Ltd. is expected to provide aid to those in need as per the guidelines of corporate social responsibility. These same guidelines should be taken into account when addressing the conflict of interests at play.

The corporate social responsibilities guidelines state that all decisions made by a large corporation should be made to benefit:

Customers
Board members
Society as a whole
The ecosystem
Those in need.

Though these are for the most part, not legal responsibilities, they should be taken into account during all decisions, such is the case when deciding which companies to help in times of recession when the banks should choose to help the small businesses most in need.

The two departments of the bank create a clear conflict of interest given that one part makes investment decisions on behalf of the customers whilst the other half looks for potential investors on behalf of Sampson and Brown Ltd.

This creates a biased system that is prone to make decisions based solely on the economic gains of the bank and its prestigious clients rather than the best interest of the customers.

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