ESMA has announced a major regulatory initiative aimed at strengthening investor protection across the EU.
During 2026, the regulator will launch a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) to review how investment firms manage conflicts of interest under MiFID II.
Key focus areas include:
- Governance and controls: Ensuring firms have robust frameworks to identify, prevent, and mitigate conflicts effectively.
- Remuneration and inducements: Assessing whether staff incentives influence product recommendations, potentially prioritising firm profits over client interests.
- Distribution channels: Examining how online platforms and algorithms steer investor choices and whether these practices align with client best-interest principles.
Failure to Act Now Means Falling Behind Regulatory Standards
Retail participation in financial markets is growing, and ESMA is concerned that commercial incentives and digital targeting may compromise fair treatment of investors. This EU-wide review aims to harmonize supervisory standards and reinforce MiFID II obligations across jurisdictions.
This follows major FCA enforcement and ongoing thematic review work highlighting similar risks for fund managers. Firms that overlook these obligations face significant regulatory and reputational consequences.
Act Now to Prevent Conflicts
With regulators globally doubling down on conflicts of interest, firms should start reviewing their conflict-of-interest policies, remuneration structures, and digital engagement strategies now to ensure compliance ahead of ESMA’s 2026 sweep.
Key actions to take:
- Review and update your conflicts of interest policy.
- Ensure robust governance and oversight mechanisms.
- Conduct regular testing and staff training to identify and mitigate risks.
- Strengthen data and technology governance, especially around digital distribution channels.
- Consider an independent review by a trusted third party to validate your approach and identify gaps before regulators do.
A proactive, independent review can help firms stay ahead of regulatory expectations and avoid a costly misstep. Contact us to learn how ACA can support you in taking that step.
For a deeper dive into conflicts of interest, watch our recent webinars, Conflicts of Interest Under the FCA Microscope and Preparing for FCA Scrutiny on Private Markets Valuation.
Strengthen Your Regulatory Controls with ACA’s End-To-End Support
ACA offers a comprehensive suite of solutions to help firms identify, manage, and address compliance risks, including conflicts of interest across their operations:
- Market Abuse Risk Framework: ACA’s proprietary framework maps market abuse risks across asset classes and trading strategies. It includes surveillance system reviews, Suspicious Transaction and Order Reports (STOR) procedures, and guidance on maintaining regulator-ready documentation.
- Regulatory Technology: Through our ComplianceAlpha® platform, firms can automate conflict tracking, monitor political contributions, and integrate surveillance across trade and eComms. The platform supports real-time alerts, audit trails, and reporting to boards and regulators.
- Advisory Services: Our team of former regulators and industry practitioners provides expert-led reviews of governance frameworks, conflict registers, and allocation policies. We help firms assess independence, document oversight, and align practices with regulatory expectations.
Ready to move beyond health checks? Book a meeting with ACA to explore practical tools and gain expert insight that supports fair treatment, independent governance, and proactive conflict management.