1 Obligations under the regulations
Principle 8 requires a firm to manage conflicts of interest fairly, between itself and its customers and between one customer and another. For insurance distribution, the detail sits in SYSC 10 and, for insurance distribution activities, SYSC 3.3.
Take all appropriate steps to identify conflicts between the firm — including managers, employees and persons linked by control — and its clients, or between clients. Maintain a written conflicts policy proportionate to the business. Where your arrangements are not enough to prevent the risk of damage, disclose the general nature or sources of the conflict before you conclude the contract, in enough detail for the customer to make an informed decision. Disclosure is not a substitute for managing the conflict.
Insurance intermediaries must keep and regularly update a record of the kinds of service or activity in which a conflict entailing a material risk of damage to a client has arisen, or may arise. SYSC schedule 1 sets a five-year retention period for that record. The conflicts policy for insurance distribution must also include a gifts and benefits policy — see gifts and hospitality.
Remuneration, volume targets, binder authority and appointed-representative oversight are common sources. A conflict that pushes a customer toward a product that is not in their best interests is also a Consumer Duty issue.
2 What do I need to do
Write the policy once, then run a live register. A conflict that only exists in someone’s head is not managed.
1. Identify where conflicts can arise
Map the situations that recur: placing with a capacity provider that pays higher commission, a director with an interest in a supplier, an underwriter who also brokers, staff who sit on both sides of a claim. Include conflicts between customers, not only between the firm and a customer. Regzact can assist: record each potential conflict on a Conflicts of Interest register, linked to the people and organisations involved.
2. Classify the risk of damage
Say whose interest is affected, whether the conflict is actual or potential, and whether it is ongoing. A one-off introduction and a standing remuneration arrangement need different treatment. Regzact can assist: categorise the entry and assign an owner.
3. Prevent or manage, then disclose only if that is not enough
Change the process where you can: separate duties, decline the business, change targets, or put an information barrier in place. If a residual risk of damage remains, disclose it clearly before the contract is concluded and record that the customer could take an informed decision. Regzact can assist: track the mitigation, the disclosure, and the tasks raised to close the gap.
4. Review the register and report it
Update the record when a conflict arises or drops away. Senior management should see new conflicts, overdue mitigations and repeat themes — not a static policy PDF. Regzact can assist: keep the register current and export it for management reporting.
3 What records do I need to keep
The SYSC record is of situations, not only of a policy. Keep enough on each entry to show how you identified and dealt with the risk.
- The service or activity, and whether the conflict is actual, potential or ongoing
- Who is involved — staff, group companies, suppliers, capacity providers or customers
- The interest that could damage a client, and which client or class of client
- The measures taken to prevent or manage it, and who approved them
- Any disclosure given, when it was given, and the wording used
- Declined business or changed remuneration where that was the control
- Review dates and the senior-management report
Keep the conflicts record for at least five years, in line with SYSC schedule 1, and longer if a complaint, claim or enforcement matter is open.
4 Using AI to streamline the process
Judgement on whether a conflict risks damage to a client stays with the firm. AI can help you find and describe the situations:
- Suggest a category from a staff declaration or a free-text description
- Compare a new entry with conflicts already on the register
- Draft a disclosure note for a person to approve before it goes to a customer
- Highlight entries with no recorded mitigation or an overdue review
Do not let a model decide that disclosure is enough, or that a remuneration arrangement is acceptable. Use it to prepare the file; keep the decision with compliance.
5 How Regzact can help
Regzact offers a Conflicts of Interest register to record potential conflicts between your staff and other organisations, and to track how each one is managed.
- Structured capture of actual and potential conflicts, with the people and organisations involved
- Classification, owners and tasks for the mitigation you put in place
- A record of disclosure and of the decision to proceed, decline or change the arrangement
- Reporting and file export for senior management and audit
Gifts and hospitality, staff SM&CR records and partner profiles sit on the same platform, so a conflict is not held in a separate spreadsheet.
This is a practical how-to for compliance managers. It is not legal advice. Always check the current text of the regulations and your own policies before you act.