Investment Term For The Day - Chinese Wall
Aug 2, 2021 ·
3m
The term Chinese wall, as it is used in the business world, describes a virtual barrier intended to block the exchange of information between departments if it might result in...
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The term Chinese wall, as it is used in the business world, describes a virtual barrier intended to block the exchange of information between departments if it might result in business activities that are ethically or legally questionable. In the United States, corporations, brokerage firms, investment banks, and retail banks have used Chinese walls to describe situations where there is a need to maintain confidentiality in order to prevent conflicts of interest.
Over the years, large financial institutions have used Chinese wall policies as a means to self-regulate their business dealings by creating ethical boundaries between departments. However, these efforts have not always been effective. Thus, the Securities and Exchange Commission (SEC) has enacted regulations governing how financial institutions share information.
The SEC has implemented fines, penalties, and legal consequences for companies that break these regulations.
The need for a Chinese wall in the financial industry became more critical after the enactment of the Gramm-Leach-Bliley Act of 1999. The law repealed federal regulations prohibiting companies from providing any combination of banking, investing, and insurance services.
The GLBA reversed restrictions on such combinations that had been in place since the Great Depression. The GLBA also enabled the creation of today's financial giants such as Citigroup and JPMorgan Chase.
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Over the years, large financial institutions have used Chinese wall policies as a means to self-regulate their business dealings by creating ethical boundaries between departments. However, these efforts have not always been effective. Thus, the Securities and Exchange Commission (SEC) has enacted regulations governing how financial institutions share information.
The SEC has implemented fines, penalties, and legal consequences for companies that break these regulations.
The need for a Chinese wall in the financial industry became more critical after the enactment of the Gramm-Leach-Bliley Act of 1999. The law repealed federal regulations prohibiting companies from providing any combination of banking, investing, and insurance services.
The GLBA reversed restrictions on such combinations that had been in place since the Great Depression. The GLBA also enabled the creation of today's financial giants such as Citigroup and JPMorgan Chase.
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