FSA writes to fund group CEOs over conflicts of interest

The FSA has also flagged up the need for firms to ensure customers have ‘equal access to all suitable investment opportunities,’ adding that ‘some firms do not allocate trades between different clients in an equitable manner.’

Although most firms were found to have satisfactory procedures, conducting transactions on behalf of several clients in the same security at the same time, the watchdog said in one instance, ‘a firm exempted various senior fund managers from trading through the central dealing desk, and allowed them to delay allocating trades until several hours after execution.’

The FSA said: ‘When challenged to justify this practice, the firm implemented a review, which found evidence that late allocation of trades allowed fund managers to favour some customers over others.’

In response to the FSA’s paper, Daniel Godfrey, chief executive-designate of the Investment Management Association said: ‘The integrity of the management of conflicts of interest is at the heart of trust in asset management and the FSA has clearly identified important issues of concern. 

‘One of the most important guiding principles of asset management is the need to act on behalf of customers and to ensure that business and investment decisions are driven by putting their interests first.’