2025 conflicts of interest examination feedback
2025 conflicts of interest examination feedbackExecutive summary
Adequate and effective systems and controls to identify and manage conflicts of interest helps a registered person evidence integrity in decision making and the fair treatment of its customers.
Overview of the thematic examination
In September 2024 we issued a thematic questionnaire to forty registered persons from a cross-section of industry. The questionnaire covered:
- policies and procedures in place to identify and manage conflicts of interest
- disclosing conflicts and keeping records
- consideration of conflicts in the compliance risk assessment
- compliance monitoring and testing the effectiveness of conflict management controls
- staff training
From the results of this questionnaire, we selected ten firms for inclusion in the thematic examination. Our selection was based on the answers provided as well as supervisory data held in relation to conflicts of interest.
The scope of the thematic examination focussed on testing the ten firms’ compliance with obligations in relation to:
- the adequacy of policies and procedures for identifying and managing conflicts of interest
- the accuracy of the records maintained
- the firm’s understanding of conflict risk in their business
- the board’s oversight of the compliance function and the effectiveness of managing conflict risk
- the independence of the key persons
- staff awareness of their responsibilities to disclose and manage conflicts of interest
A desk-based review of policies, procedures and other supporting documentation was conducted prior to onsite examinations during which we interviewed key persons, board and other staff members. All ten firms received direct feedback. Where deficiencies were identified, firms were required to submit formal remediation plans, outlining their remediation.
Key findings
Overall, our thematic examination highlighted varying levels of compliance with the applicable obligations. This is a summary of the key findings under the following categories:
- identification and management of conflicts of interest: instances of undisclosed conflicts, inadequate measures to manage unavoidable conflicts, incomplete registers and a lack of training for staff
- internal systems and controls: instances of inadequate policies and procedures and failures to comply with policies and procedures
- independence of the key persons: instances where the independence of the compliance function was undermined as compliance and business development activities were performed by the same individual, without implementing adequate mitigants
When systems and controls for identifying and managing conflicts of interest are inadequate, it heightens the risk that registered persons are exposed to situations where personal interests may improperly influence professional judgement, leading to regulatory breaches, reputational damage, or compromised customer outcomes.