DFSA highlights shortcomings with conflicts of interest practices

The review examined practices across 710 authorised firms and revealed that, despite widespread acknowledgement of regulatory obligations, many firms fall short in implementing effective, risk-sensitive frameworks for managing conflicts of interest.

The DFSA found that while more than 90% of those firms maintain policies and procedures relating to conflicts of interest, these documents are often generic, unclear or insufficiently tailored to firms’ specific business models The findings indicated that 34.9% of firms had not conducted any such assessment, while others often incorrectly concluded that their operations posed no risk of exposure. The DFSA emphasised that without undertaking proper assessments, firms cannot meaningfully identify or manage inherent risks, and many firms demonstrated an incomplete understanding of the types of conflicts to which they might be exposed.

The review also found that many firms focused only on limited categories of conflicts, failing to consider the full range of situations in which conflicts may arise. The DFSA highlighted governance weaknesses, including inconsistent escalation processes and limited board-level oversight, and noted that numerous firms relied too heavily on employee disclosures instead of proactively identifying conflicts through structured assessments. Shortcomings in monitoring, record-keeping, training and reporting were also highlighted in the regulator’s report (23-page / 3.4MB PDF).

The DFSA also pointed to several examples of good practices it observed during the review period. These included detailed, business-specific conflicts of interest policies; regular reporting around conflicts of interest to the board and governance forums; independent testing of conflicts of interest controls; and the use of technology in the reporting, recording, assessment and monitoring of conflicts of interest.

“The DFSA expects authorised firms to review the findings and ensure their systems and controls on conflicts of interest are sufficiently robust, appropriately documented, and proportionate to the nature, scale, and complexity of their business,” the regulator said.

Dubai-based Marie Chowdhry, an expert in financial regulation at Pinsent Masons, said: “The DFSA’s findings serve as a timely reminder that conflicts of interest frameworks cannot be treated as a box‑ticking exercise. While many firms maintain policies on paper, the review makes clear that too few are taking the necessary steps to understand how conflicts manifest within the realities of their own business models. A generic approach is no longer sufficient under the DFSA’s regulatory framework”.

“Regulators expect firms to adopt a proactive, risk‑sensitive methodology – one that is grounded in meaningful assessment, informed governance, and robust, technology‑enabled monitoring,” she added.