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Case Studies
Accepting reward without principal's permission
A relationship manager was responsible for managing the investment account of a client who was his former employer. Due to their close personal relationship, the relationship manager offered this acquainted client with first priority in providing latest investment information and executing investment transactions. Subsequently, the acquainted client made good investment gains and personally rewarded the relationship manager with monetary bonuses. The relationship manager pleasantly accepted the bonuses. When the market turned bad, the acquainted client suffered from heavy investment losses. He vented extreme comments to the relationship manager during a meeting. The relationship manager’s supervisor who joined the meeting became suspicious about their relationship and later reported the case. The relationship manager admitted that he had received advantage from the acquainted client.
Case Analysis
In this case, the relationship manager, an employee (agent) of the bank (the principal), without the permission of the bank, accepted monetary bonuses (advantages) from the acquainted client as a reward for his preferential service in managing the investment portfolio (an act in relation to the bank’s business). The relationship manager might violate Section 9(1) of the Prevention of Bribery Ordinance (POBO) for accepting bribes; whereas the acquainted client might contravene Section 9(2) of the POBO for offering bribes.
The personal relationship between the relationship manager and the acquainted client would give rise to conflict of interest, which was conducive to favouritism towards the customer, e.g. providing first priority in the investment portfolio management.
To prevent corruption and malpractices, banks should enhance the awareness of integrity among staff members and promote ethical culture by:
- disseminating a clear message by top management on commitment to business ethics and integrity, and zero-tolerance to unethical practices;
- specifying the integrity standard expected of all staff members in a Code of Conduct, in particular, the restrictions on acceptance of advantages from bank customers, and the requirement for staff to declare and avoid conflict of interest.
It is also necessary to conduct regular (induction, refresher) staff trainings on integrity and anti-corruption and to communicate with customers, including non-local customers, about the bank’s policies on anti-bribery and acceptance of advantages policy.