Thu, Mar 6, 2014

FCA announces discovery work in relation to "Conflicts of Interest: In-house Investments"

The FCA announced on 5 March 2014 that it will soon be commencing a review on conflicts of interest in Private Banking and Wealth Management firms.  The review is entitled ‘Conflicts of Interest:  in-house investments’ and is directed at firms that manufacture in-house products or who are members of a group that manufacture in-house products. 

The focus of the review is to determine whether firms are adequately identifying and managing the conflicts of interest which may arise when retail client’s investments are placed, either on a discretionary or advisory basis, into products that are manufactured in-house either by the firm or a member of the firm’s group.

The FCA are analyzing how firms ensure that client’s interests remain at the core of their business and inform investment decisions where the firm both manufactures and distributes products.

The review will analyze:

  • the effectiveness of the controls in place to identify and manage conflicts of interest which may arise from the relationship between the in-house manufacturer and the investment manager/adviser;

  • whether firms are monitoring the performance of in-house products and alternative third party products on a consistent basis such that they have a robust process in place to ensure that client investment in-house products are in the best interests of the client; and

  • whether clients are sufficiently informed of the relationship between the manufacturer and the investment manager/adviser, including the use of in-house products held in their portfolios.

The FCA will initially request high level information from a sample of firms and will then use this information to identify a smaller sample of firms which will be assessed in greater detail. Following the findings of this review, the FCA will schedule visits with firms in order to gain a greater understanding of how firms meet their conflicts of interest obligations.

Financial Services Compliance and Regulation

End-to-end governance, advisory and monitorship solutions to detect, mitigate, drive efficiencies and remediate operational, legal, compliance and regulatory risk.