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FSA writes to fund group CEOs over conflicts of interest
by Emma Dunkley on Nov 09, 2012 at 13:03
The Financial Services Authority has written to the chief executives of fund groups over potential conflicts of interest between asset managers and clients, warning it could take action.
In its latest review, the watchdog found that in most cases senior management failed to show they understood the issue of conflicts of interest and did not communicate this sense of duty to customers.
The FSA said: ‘In these firms, employees too often lacked awareness of situations where short-term business goals conflicted with the long-term interests of customers.’
The watchdog said it has given feedback to firms visited during the project and where firms have not complied with its rules on conflicts of interest, has asked them to justify their approach or take remedial action.
It said in more serious cases, it is considering enforcement action against firms.
‘We have concluded that the findings from this thematic review need to be communicated to the wider asset management sector,’ the regulator said.
‘We have also concluded that the seriousness of the issues identified requires us to take action to ensure firms comply with the various FSA rules relating to conflicts of interest.
'We therefore expect the board of each asset management firm to discuss this document and each firm’s CEO to complete and return the ‘attestation’… by 28 February 2013.
‘We plan a second round of thematic visits on conflicts of interest and will use the responses received to inform our selection of firms for follow up assessment visits.’
The review was prompted by evidence that some firms ‘no longer saw conflicts of interest as a key source of potential detriment to their customers’ interests' and had therefore ‘relaxed controls’ that the FSA has considered to be ‘market norms.’
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