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Conflicts of interest in investment firms

04 July 2016

On 25 February 2016, the Central Bank issued a letter to investment firms highlighting the results of its themed inspection on the identification and management of conflicts of interest (COI).

The Bank noted that the inspection revealed a number of failings related to the management of COI, particularly a lack of board ownership regarding their identification and management. The Bank also noted the marked differences between what it termed best-in-class and worst-in-class firms, as regards the policies and procedures these firms had in place to identify and manage COI.

Referring to culture as a driver for behaviour, the Bank noted that its themed inspection confirmed that those firms with a strong compliance culture managed COI effectively. The letter contains a (non-exhaustive) list of identified trends and both good and poor practices with regard to COI management.

The Bank requires investment firms to:

  • Review all conflicts of interest policies and procedures to ensure they meet the relevant requirements
  • Consider all the practices listed by the Bank in the letter against the firm’s own conflicts of interest procedure
  • Review the existing list of identified conflicts of interest and ensure it remains current and relevant
  • Discuss, consider and minute accordingly, the contents of the letter at a board meeting before 30 June 2016.