The issue of conflict of interest has long been examined across various fields of domestic and EU law. Investment activity conducted by Alternative Investment Companies (ASI) is no exception and raises numerous concerns regarding potential conflicts between the interests of investors and other parties involved in transactions executed by ASI and its manager (ZASI).
Although the Act on Investment Funds and Management of Investment Funds introduces significant regulatory simplifications for ASI managers operating under a registry entry — exempting them from many internal governance requirements, including those related to conflict of interest — this does not relieve ZASI of the obligation to identify, avoid, and manage events that may give rise to such conflicts.
As a financial market entity entrusted with investors’ assets (channeled through ASI for investment purposes), ZASI must apply all available measures to protect investor capital. The investor’s interest — namely, the pursuit of profit — is the driving force behind ASI’s investment activity and the reason such activity is undertaken in the first place.
ZASI should also adhere to best market practices (even if not formally codified for ASI and ZASI), which have become a conventional part of the investment culture in Poland’s financial sector.
ZASI’s obligation to act in the best interest of investors is reflected primarily in its duty to properly identify all circumstances surrounding transactions executed by ASI. This verification should reveal whether a given investment creates a conflict of interest between parties involved in ASI management, investors and their affiliates, and the counterparty. If a conflict is identified, internal procedures must be triggered and the investor informed — typically by providing a transaction audit report — so they may protect their capital by exiting the investment if necessary.
Effective conflict of interest management should be a core responsibility of ZASI and regulated within the internal documentation of both ZASI and ASI. Proper risk management is usually defined in a conflict of interest policy, which outlines methods for identifying conflict-triggering events and actions to avoid or manage them.
Failure to detect a conflict of interest may be raised by any person or entity with a legitimate legal interest. In such cases, ZASI may become subject to review by the Polish Financial Supervision Authority (KNF). The Commission will assess ZASI’s conduct in terms of acting in the best interest of clients and any potential breaches — including conflicts of interest — and ZASI will bear the burden of proving its compliance.
It is worth emphasizing that proper conflict of interest management, as an inherent part of best market practices, should be the responsibility of ZASI, but due to its importance, these principles should be implemented by all members of the ASI and ZASI teams.
To identify an event as giving rise to a conflict of interest, it must first be properly defined. A conflict of interest refers primarily to circumstances that may lead to a contradiction between the interests of investors and those of ASI, ZASI, or other individuals serving on the governing bodies of ASI and ZASI, employees, collaborators involved in their operations, and affiliated entities.
The above framework for conflict of interest management serves as a foundational tool for identifying such events. Each case must be assessed individually, and even similar circumstances may yield different conclusions. However, the guiding principle must always be the primacy of the investor’s interest.
