A term used to describe the partitioning of a business organization, usually by conduct rules and potentially physical separation, to limit the flow of information between various employees or sections of the organization, done to avoid conflicts of interest or other legal problems that might result from a party having access to specific information or influence on advice, opinions or decisions. The term ethical wall is also used today.
The origin of ‘Chinese Wall’ is unknown, but it initially came into widespread use after the 1929 stock market crash when the U.S. government sought to separate investment bankers and brokerage firms in order to avoid the conflict of interest between the brokers’ advice to their share-purchasing customers and the bankers’ desire to place sufficient shares to make their stock offerings successful. The resulting regulations became known as the ‘Chinese Wall’ because they were meant to create a barrier as effective as the Great Wall of China between the two types of business operation co-existing in the same institutions. The term has since come into widespread use.
Cynicism about the effectiveness of Chinese Walls leads many western observers to regard them as offering the effective privacy to shōji screens and walls, i.e., light lattice frame walls and screens covered with stretched washi or rice paper, i.e., a privacy wall driven by social convention and not actual impermeability.