Training and the DFSA’s Approach to Conduct Principles

Where a firm is seeking authorisation for an individual to perform a Licensed Function who is already performing a Licensed Function for another firm, the firm must be satisfied that the individual can perform the proposed Licensed Function effectively and that there are no conflicts of interest, or that any actual or potential conflicts of interest are appropriately managed.

Firms will need to consider the nature, scale, and complexity of the Authorised Firm’s business and the individual’s current and proposed duties and capacity when considering these matters. 9. The DFSA will be focusing as a priority on firms’ approaches to assessing the fitness and propriety of individuals performing Licensed Functions, and where it sees insufficient practices, it will hold firms accountable for the robustness of their assessments.

Firms are recommended to conduct a review of their processes and their compliance with relevant Rules and regulatory expectations.

The DFSA proposed amending its approach to Licenced Functions and Authorised Individuals in its March 2025 Consultation Paper 165, highlighting the importance of targeted training and the need for staff to understand what the Conduct Principles “mean for them in the context of their roles.”

The DFSA has just released its Feedback Statement on CP 165, confirming many of the suggested changes to the rules and announcing the implementation date for its new Conduct Principles as 1 July 2026.

In this article, Peter Haines, Director of GRC Training at CCL Academy, discusses the key changes in the Conduct Principles and the different ways firms can train staff under this new approach.

What is the DFSA proposing?

The DFSA proposes to create two layers of staff to whom the newly termed “Conduct Principles” apply. These are:

1. Authorised Individuals, who have been authorised by the DFSA to perform one or more Licensed Functions for an Authorised Firm, for example, the Senior Executive Officer, Compliance Officer, Finance Officer, Senior Manager and the MLRO.
2. All other staff, with the possible exception of ancillary staff. These staff are referred to as “Relevant Employees”.

These two groups are referred to as “Relevant Individuals”. Examples of ancillary staff include audiovisual technicians, cleaners, human resources administrators and personal assistants or secretaries.

The Six Core Principles

There are currently six Core Principles for any member of staff occupying a Licenced Function.

The DFSA has proposed that these should apply very differently. The first four of the Core Principles will apply to all staff, except for ancillary staff. These include principles of integrity, due skill care and diligence, proper market conduct and openness with the DFSA.

The two further principles, relating to control of the firm’s business and compliance with the firm’s regulatory obligations, will apply to Authorised Individuals only - each according to the scope of their specific management responsibilities. A further Conduct Principle has been added by the DFSA. This Principle 7 applies to Authorised Individuals and relates to the need to disclose to the DFSA anything of which the regulator would reasonably expect notice.

These represent major changes by the regulator and also reflect similar changes made by other international regulators in the context of individual accountability.

In particular, we have seen similar changes made in the UK for banks (since 2016) and investment firms (since 2019).

“We would also expect firms to ensure that staff in scope of the Conduct Principles are trained in, and understand, what the Principles mean for them in the context of their roles.” - DFSA

Individual Accountability

One clear implication of this revised approach to the accountability of individuals is that it makes most of the firm’s staff subject to specific principles of conduct for the first time.

Senior Management in the DIFC have been used to such accountability for many years now, as have key control functions such as the Compliance Officer and MLRO. This new approach brings fund managers, traders, brokers, bankers, operational and support staff into far more direct regulation by the DFSA than previously.

One of the challenges posed by this approach to the regulation of individuals has been how firms should train individuals in their responsibilities.

Conduct Principles Training

The DFSA has stated that “we would also expect firms to ensure that staff in scope of the Conduct Principles are trained in, and understand, what the Principles mean for them in the context of their roles.”

We have been training staff on compliance with the Conduct Rules in the UK since 2016 and we see many parallels between best practice in the UK and a reasonable and pragmatic approach to training on the Conduct Principles in the DIFC.

That said, training staff on the Conduct Principles will not be completely straightforward. The key words contained in CP165 are that relevant staff are “trained in, and understand, what the Principles mean for them in the context of their roles”.

In other words, a simple training session which simply recites the four Conduct Principles (or seven for Authorised Individuals) and then simply asks if there are any questions will not suffice. The fact that training must lead staff to understand how the Conduct Principles apply in the context of their roles implies specific case studies tailored to the responsibilities of impacted staff.

For example, let’s look at Conduct Principle 3, which states that “a Relevant Individual must observe proper standards of conduct in financial markets”.

This training would have to be very different for a trader, salesperson or research analyst, as opposed to other staff who might not be so directly involved in the markets as part of their day-to-day duties for the firm.

These other staff should nevertheless be made aware of their general duties with regard to insider dealing and other forms of market misconduct. The same can be said for Principles 1 and 2, which relate to integrity and due skill, care and diligence. These apply to all relevant individuals, but in a very different way for bankers addressing a conflict of interest as opposed to, for example, an operations officer handling a nostro reconciliation.  

In short, the training must provide staff with a basic knowledge of all of the rules that apply to them, together with a deeper understanding of how the rules apply to their day-to-day roles with the firm.

Training Solutions for Conduct Principles and Key Questions to Consider

Experience in the UK has shown that firms need to answer several questions about their training on the Conduct Principles:

• Do staff understand the Conduct Principles that apply?
• Have we tailored the training sufficiently to the staff’s roles with the firm?
• Have we applied the training to all levels of staff? It is important not to forget Senior Management in this. Principles 5-7 apply to Authorised Individuals, and such senior staff are not exempt from the training requirement.
• Do staff both collectively and individually know what a Conduct Principles breach looks like in the context of their firm?
• Do staff know what to do if they are unsure as to how to proceed in any given circumstance?

There are various solutions designed to address these questions.

• Training should be interactive and use realistic scenarios. Conduct Principles training should not simply focus on transmitting information. It should utilise case studies and other practical scenarios to engage the attendees.
• Examples and scenarios should draw out the nuances of how the rules apply to each type of role. Note that there are two important points here: the need to focus the content to the individual’s role, but also for the examples used to reflect some of the complexities associated with making the right ethical decisions.

In other words, training should not be based on the use of simplistic case studies, where the ‘correct’ behaviour is obvious, as these types of examples rarely add value.

Rather, firms must use scenarios which reflect the complexities of ethical decision-making, which are sometimes termed ‘grey’ scenarios.

Using this type of scenario presents its own challenges and, indeed, some people find the lack of a clear ‘right’ answer unsettling. But remember our goal – to help employees have a deeper understanding of the practical application of the specific rules which are relevant to their work. Grey scenarios, which bring out the nuances of applying the rules in different circumstances in an engaging format, are a useful tool in meeting this objective.

Navigating the Challenges

To conclude, here are some tips to help you navigate the challenges highlighted above:

• At the outset, it is important to think about who you need to train. Don’t neglect the need to train the most senior people in your organisation.
• Additionally, although ancillary staff can be exempt from the requirements, many firms may include them nevertheless. After all, the administrative assistant to your SEO should probably be just as central to your firm’s conduct as many other staff who are apparently more senior.
• Consider temporary staff, agency staff and key contractors to the firm, staff at key outsourcing suppliers and overseas staff (for example at head office) who have a major impact on the DFSA-regulated firm.
• Think about how you are training your staff. There are many different options from eLearning to live training courses. Each have their own pros and cons and, in recognition of this, firms are increasingly using a blended approach. When referring to the need to train all levels of staff and using a blended approach to learning, we refer to this as our 360 approach. You can find more details here.
• Whichever route you chose, keep in mind the primary objective - at the end of the training, staff are not only expected to know what the Conduct Principles They also need to understand what they mean for their day-to-day work.
• When considering the training content, think about your training broadly. Don’t forget that the practical application of the Conduct Principles may be covered across a range of different courses. For example, Conduct Principle 3, which covers market conduct, may be covered in your targeted training programme on market abuse.
• Consider who to involve in training design and delivery. It may be helpful to have input from Senior Managers or line managers, as these individuals can help to design relevant case studies – perhaps drawing on real issues that the firm has experienced. Senior Management can also be useful in embedding the messages contained in the training, perhaps via follow up communications or briefings.
• And finally, don’t forget that you need to collect appropriate management information to provide assurance that staff have both attended and understood the training.

We believe that the DFSA’s expectations will be high.

The DFSA has explicitly stated that “by applying the Principles to all Relevant Individuals directly, we are seeking to promote and reinforce expressly our regulatory expectations and enhance awareness of the expected standards of individual behaviour and accountability in financial services. This should help enhance positive behaviours that actively support the proper functioning of the financial market in and from the DIFC.”

It isn’t easy to deliver training which is interactive and uses realistic scenarios which draw out nuances of how the rules apply to each type of role, but it’s an important step in not only meeting our regulatory obligations, but also embedding the Conduct Principles within our firms.

Our range of courses include:

• Conduct Principles eLearning for your front and back office staff
• Live, in-house Conduct Principles briefing for Senior Management & The Board
• Live, in-house Conduct Principles training for All Staff

To find out more about these courses and how we can support your firm with training on the new Conduct Principles, complete the form below.

Peter has over 35 years’ experience in the field of regulation and compliance. A chartered accountant, Peter spent 6 years working with the UK’s SFA (now the FCA) and has headed up regional and global compliance functions at Paribas, UBS Investment Bank and Bank of America.

Since 2006, Peter has specialised in training, focusing on boards, senior management and assisting the next generation of compliance officers. His coverage includes most areas of compliance and financial crime, corporate governance and risk management. His style is inclusive, interactive and based on practicalities, not just rules.

As Director of GRC Training, he works closely with our clients to ensure that our programmes are tailored to their exact needs and meet, or surpass, their expectations.