FCA finds private market conflicts controls lagging behind business complexity
The FCA has published detailed findings from its multi-firm review of how private market firms identify, manage and disclose conflicts of interest. It covers asset managers, AIFMs and advisers in private equity, private credit and real estate, and sets out where governance and controls have failed to keep pace with growing business complexity. The regulator expects firms to close gaps and signals targeted follow-up work.
- The review assessed firms against SYSC 10, COLL 8.5.7, COBS 2.3A.8R, COBS 11.7 and COBS 11.7A, running in two phases: a questionnaire followed by on-site visits.
- On cross-fund transfers and continuation vehicles weaker frameworks relied more heavily on existing governance, disclosure or investor consent; on gifts and entertainment they relied on policy thresholds and generic approvals; and on information barriers they relied on staff training, judgement and informal safeguards.
- Only 52% of phase 1 firms said internal audit had a role in reviewing the conflicts framework and its application.
- The FCA criticised firms whose conflicts frameworks reflected the legal form of UK activities as advisory-only while UK staff were involved in significant, conflict-generating parts of the investment lifecycle.
- In one case a firm sold a fund asset to an internal fund at NAV rather than pursuing external buyer interest, and could not explain why or how the NAV price served the selling fund.