The Riffle
The Dubai Financial Services Authority (DFSA) has released its Thematic Review on Conflicts of Interest (2026), following a cross-sector assessment of how Authorised Firms in the DIFC identify, manage, and mitigate conflicts of interest.
Conducted in two phases — a survey of 710 Authorised Firms and on-site reviews of 25 firms — the review highlights a clear regulatory concern: while most firms have conflicts of interest policies in place, their practical effectiveness remains weak. Significant gaps were observed across governance, identification, monitoring, record-keeping, and training frameworks, raising questions around whether conflicts are being genuinely managed or merely documented on paper .
Key Highlights from the DFSA Review
1. Governance and Risk Assessment: Policies Without Depth
Over 90% of firms had conflicts of interest policies, yet many were generic, high-level, and not tailored to the firm’s business model.
34.9% of firms had not conducted any formal assessment of their exposure to conflicts of interest.
Board-level oversight was inconsistent, with limited evidence of challenge even where no conflicts had been reported for years — a red flag in itself .
2. Identification & Reporting: The “No Conflicts” Illusion
Three-quarters of firms reported zero conflicts over a 24-month period.
The DFSA noted heavy reliance on passive employee declarations, with limited proactive reviews of:
Client relationships
Third-party arrangements
Business activities and inducements
Most firms focused only on actual conflicts, overlooking potential and perceived conflicts, contrary to DFSA expectations .
3. Management of Conflicts: Controls Exist, But Only After Identification
Where conflicts were identified, mitigation measures such as segregation of duties and information barriers were generally satisfactory.
However, 36% of firms stated they would disclose only actual conflicts, not potential ones — undermining transparency and client protection.
Several controls referenced in policies were not fully implemented in practice .
4. Monitoring & Independent Oversight: A Weak Second and Third Line
Almost 50% of firms required improvement in monitoring arrangements.
Over 20% of firms could not confirm when conflicts were last reviewed by internal audit.
In many cases, conflicts of interest were never included in audit or compliance monitoring plans .
5. Record-Keeping: Registers That Tell No Story
Conflicts of interest registers were frequently:
Blank
Incomplete
Not updated for long periods
Many firms recorded only actual conflicts, failing to document potential or perceived conflicts, risk assessments, mitigation actions, or approvals — limiting meaningful oversight by senior management .
6. Inducements: Policies Exist, Oversight Lags
While most firms claimed they neither give nor receive inducements, the DFSA observed:
High-level and restrictive inducement policies
Limited monitoring beyond annual declarations
Registers lacking sufficient detail to assess client impact
Nearly one-third of firms required improvements in inducement controls .
7. Training & Awareness: The Most Critical Gap
Training was identified as one of the weakest areas across the review.
Several firms required employees to attest to policy understanding without providing formal training.
Where training existed, it was often:
Generic
Not role-specific
Limited to onboarding, with no periodic refreshers
In some cases no conflicts training existed at all .
What Firms Should Be Doing Now
The DFSA’s findings reinforce the need for firms to move beyond policy formalities and focus on operational effectiveness. Key steps include:
Conducting business-model-specific conflict risk assessments
Expanding definitions to include potential and perceived conflicts
Strengthening Board and senior management oversight
Embedding conflicts testing into compliance monitoring and internal audit
Maintaining robust, up-to-date registers capturing the full conflict lifecycle
Delivering scenario-based, role-specific training with documented attendance and outcomes.
Why This Matters
Conflicts of interest strike at the heart of market integrity and client trust. The DFSA’s review makes it clear that a “no conflicts identified” narrative is no longer acceptable without robust evidence. Firms that fail to address these weaknesses risk not only supervisory scrutiny but also reputational damage and regulatory enforcement.
For DIFC Authorised Firms, this thematic review serves as both a warning and a roadmap — highlighting where regulators are looking and what good practice now demands.
Read the full briefing document presented by 10 Leaves here -
