FSA warns on conflicts of interest in asset management

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The FSA is to take action after finding a number of issues over conflicts of interest in the asset management industry, as it reminded companies of their responsibilities to clients.

In a “Dear CEO letter, the regulator revealed it had carried out a number of thematic reviews between June 2011 and February 2012 assessing the conflict of interest management arrangements for asset managers.

The regulator is considering enforcement action against firms who failed to comply with relevant principles or rules in the most serious cases.

The FSA has already begun planning a second round of thematic visits on conflict of interests.

The regulator was prompted into action by evidence that asset managers no longer saw conflicts as a source of detriment to consumers and had relaxed controls.

It wrote: “We concluded that most of the firms visited could not demonstrate that customers avoid inappropriate costs and have fair access to all suitable investment opportunities.”

In most cases, the regulator wrote, senior management had failed to show they understood a sense of duty to customers.

In the letter, the regulator says asset managers “must always act in customers’ best interests and put customers’ interest ahead of their own”.