Wake-up call from the FSA on conflicts of interest in investment

Asset managers sometimes act in ways that is not in their clients’ best interest. This will not come as a surprise to many people. That this is the conclusion of Financial Services Authority (FSA) research into how asset management firms manage conflicts of interest is probably slightly more unexpected.

The key finding of the research is quite startling:

We identified that many firms had failed to establish an adequate framework for managing conflicts of interests. We also identified breaches of our detailed rules governing the use of customers’ commissions and the fair allocation of trades between customers. We concluded that most of the firms visited could not demonstrate that customers avoid inappropriate costs and have fair access to all sustainable investment opportunities.

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