What is a defining factor in the separation of functions and personnel?

The defining factor in the separation of functions and personnel is prohibiting any discretion by a single person for different client types. This concept is critical in ensuring that conflicts of interest are minimized and that the advice and services provided to clients are impartial and appropriate for their specific situations. By having different individuals or teams handle various aspects of client servicing and advice, the potential for biased decision-making is reduced. This separation creates a system of checks and balances, promoting transparency and accountability within the firm.

In the context of compliance and regulatory requirements, this separation helps firms adhere to fiduciary duties and protects clients against potential exploitation or mismanagement. Properly delineating these responsibilities is integral to maintaining the integrity of the advisory process and upholding standards set by regulatory bodies.

While having advisers working in the same physical space, allowing open communication between departments, or implementing shared office responsibilities may facilitate collaboration and teamwork, they do not inherently create the necessary structure to prevent conflicts of interest or maintain checks and balances among personnel.