UK watchdog tells private markets firms to tighten conflict-of-interest controls

what happened

The UK Financial Conduct Authority said some private markets groups have been too relaxed about gifts and hospitality, and it called on the sector to do more to prevent conflicts of interest. The regulator also flagged cross-fund transfers and informal sharing of confidential information inside firms as possible sources of conflict.

In a report published on Friday, the FCA said some firms were not identifying conflicts properly or updating their controls. It noted that in some cases gifts and entertainment were worth more than typically seen in public markets, including air travel and high-value sporting events. Michelle Beck, the FCA's director of wholesale buy-side, said, "Firms need to ensure their management of conflicts of interest keeps pace with growth in their size and complexity."

The Investment Association, the trade body for UK fund managers, welcomed the report. Its head of private markets, Namita Kain, said that maintaining strong governance and investor protection would be vital for responsible growth.

why it matters

Private credit and other private assets have grown quickly, drawing more scrutiny of how managers treat investors. The Wall Street Journal reported that fund managers have offered festivals, luxury hotel stays and Formula One tickets. For investors, tighter rules could raise compliance costs and change how the sector raises capital.

market impact

Private asset managers: tighter conflict rules may raise compliance costs and regulatory scrutiny of investor relations

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