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5.2.3 Conflict of Institution's Interest with Consumers

C 8/2020 STA Effective from 25/12/2020
  1. 5.2.3.1Licensed Financial Institutions must have in place and operate in accordance with a written Conflict of Interest policy appropriate to the nature, scale and complexity of the Licensed Financial Activities carried out by the Licensed Financial Institution. The conflicts of interest policy must:
    1. a.Identify the circumstances which constitute or may give rise to a Conflict of Interest entailing a risk of harm done to the interests of its Consumers; and
    2. b.Specify procedures to be followed, and measures to be adopted, in order to mitigate such conflicts and to address non-compliance.
  2. 5.2.3.2Where conflicts of interest arise and cannot be reasonably avoided, Licensed Financial Institutions must:
    1. a.Disclose the general nature and/or source of the conflicts of interest to the Consumer. Licensed Financial Institutions must only undertake those businesses with or on behalf of a Consumer where that Consumer has acknowledged in Writing that the Consumer is fully aware of the Conflict of Interest and agrees to proceed; and
    2. b.In case a Conflict of Interest cannot be avoided, Licensed Financial Institutions must put in place proper disclosure and controls to mitigate them.
  3. 5.2.3.3Where Licensed Financial Institutions distribute their Financial Products and/or Services to Consumers through an Authorized Agent and pay commission based on levels of business introduced, Licensed Financial Institutions must be able to demonstrate that these arrangements:
    1. a.Are disclosed to the Consumer;
    2. b.Confirm the agent’s duty to act in the best interests of Consumers;
    3. c.Do not give rise to a Conflict of Interest between the agent and the Consumer and controls are set in place to mitigate any Conflict of Interest which may arise; and
    4. d.Provide for effective monitoring for potential/actual abusive sales and disclosure practices.
  4. 5.2.3.4Licensed Financial Institutions must ensure that there are effective controls in place between the different business lines of the Licensed Financial Institution, and between the Licensed Financial Institution and its connected parties, in relation to access and the use of personal information that could potentially give rise to a Conflict of Interest or abuse of Consumers’ Personal Data.
  5. 5.2.3.5Licensed Financial Institutions must take reasonable steps to ensure that it or any of its Staff do not offer, give, solicit or accept any gifts or rewards (monetary or otherwise) that are likely to be perceived or are a potential conflict with any duties of the recipient in relation to his /her activities involving Consumers or/and the policies of the Licensed Financial Institution.
  6. 5.2.3.6The Board of Licensed Financial Institutions must have in place adequate control framework to ensure that any Outsourcing or insourcing arrangement does not create situations of Conflict of Interest. Any Outsourcing or insourcing arrangement must be subjected to appropriate due diligence, fit and proper approvals and ongoing monitoring in order to identify and mitigate risks of any Conflict of Interest.