stinging rebuke, the watchdog said most of the 17 asset managers
it visited were falling short of its best practice
recommendations for dealing commission, which is worth 3 billion
pounds ($3.67 billion) a year to the asset management industry
The FCA's criticisms follow an in-depth review of the 5.7
trillion pound funds industry, which is part of a wider effort
by the watchdog to improve value for money for customers of
"More work needs to be done by investment management firms to
ensure they spend their customers’ money with as much care and
attention as if it were their own," the FCA said.
Several firms could not demonstrate meaningful improvements in
terms of how they spend their customers' money through their
dealing commission arrangements, the FCA said.
"Where we identify breaches of our rules, we will consider
further action, including referring firms for further
investigation," it said.
The watchdog said most asset managers that it surveyed did not
have proper checks on "best execution" to show they were
obtaining the best deal for a customer's stock or bond order.
The FCA's findings are a warning shot to the industry ahead of
new European Union "MiFID II" rules from next January which
reinforce obligations to find a customer the best market price,
and to "unbundle" the cost of dealing from research and avoid an
opaque lump sum fee.
"We found instances where compliance staff were not empowered by
senior management in order to provide effective challenge to the
front office on execution quality," the FCA said.
For some firms, checking on best execution was no more than a
"tick box" exercise, it said.
The FCA will revisit the issue of best execution later this year
to see what evidence asset managers have that they customers are
not paying too much for execution.
"If we find that firms are still not fulfilling their best
execution obligations, we will consider appropriate action,
including more detailed investigations into specific firms,
individuals or practices," the FCA said.
(Reporting by Carolyn Cohn, Huw Jones and Maiya Keidan. Editing
by Jane Merriman)
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