SYSC 10 Conflicts of Interest — Compliance Questions

The Financial Conduct Authority (FCA) outlines requirements for managing conflicts of interest in SYSC 10 of its Systems and Controls section. Ensuring effective management of conflicts of interest is essential for maintaining the integrity of financial markets and protecting the interests of clients. Here are 30 compliance questions designed to assess adherence to FCA SYSC 10 and related conflicts of interest requirements:

Policy and Identification

1. Does the firm have a formal conflicts of interest policy?
2. How does the firm identify potential conflicts of interest between itself, its employees, and its clients?
3. Are there specific examples of conflicts of interest provided in the policy to guide staff?
4. How is the conflicts of interest policy communicated to all relevant staff?

Management and Mitigation

1. What measures are in place to manage or mitigate identified conflicts of interest?
2. How does the firm ensure that business lines and processes are designed to prevent conflicts from adversely affecting clients?
3. What controls are in place to monitor transactions and activities for potential conflicts of interest?
4. Are there specific arrangements for the independent review of transactions that may involve conflicts of interest?

Disclosure

1. Under what circumstances does the firm disclose conflicts of interest to clients?
2. How are disclosures made to ensure they are clear, fair, and not misleading?
3. Does the firm have a process for obtaining client consent where necessary after disclosing a conflict of interest?

Record-Keeping

1. How does the firm document and maintain records of conflicts of interest?
2. Are records of how identified conflicts are managed accessible for review by management and regulators?
3. What is the retention period for records related to conflicts of interest?

Independence

1. How does the firm ensure the independence of employees involved in different services or activities where a conflict might arise?
2. Are there specific measures, such as physical barriers or separate reporting lines, to ensure independence?
3. How are conflicts of interest considered in the performance assessment and compensation of staff?

Training and Awareness

1. What training is provided to staff on identifying and managing conflicts of interest?
2. How often is conflicts of interest training updated?
3. Are there mechanisms in place to reinforce the importance of managing conflicts of interest, such as regular communications or reminders?

Monitoring and Review

1. How frequently does the firm review its conflicts of interest policy and procedures?
2. What triggers a review of the conflicts of interest policy outside of the regular review schedule?
3. How are changes to the conflicts of interest policy communicated to staff?

Reporting

1. What is the process for employees to report conflicts of interest internally?
2. How are reported conflicts of interest evaluated and resolved?
3. Are there specific reporting lines for conflicts of interest, including to senior management or the board?

Outsourcing

1. How does the firm manage conflicts of interest when outsourcing functions or services?
2. Are conflicts of interest considered in the selection and ongoing management of third-party service providers?

Client Interests

1. How does the firm ensure that client interests are prioritized in situations where conflicts of interest arise?
2. What mechanisms are in place to prevent or limit any detriment to clients as a result of conflicts of interest?

By thoroughly addressing these questions, compliance officers can ensure that their firm’s management of conflicts of interest is comprehensive, effective, and in line with FCA SYSC 10 requirements. This not only helps in maintaining regulatory compliance but also supports the firm in upholding high ethical standards and trust with clients.

Disclaimer: The information provided herein is solely for informational purposes and represents my own personal views. It should not be construed as legal or regulatory advice. For advice specific to your circumstances, please consult a qualified professional. Additionally, the opinions expressed are my own and do not reflect the views of my employer.