FCA concerned on best execution

FCA has warned investment managers it may take further action after finding that they have failed to meet expectations on securing best execution for their clients. FCA is concerned the majority of firms have not taken proper note of its thematic review on the topic in 2014. Many firms had not conducted a good gap analysis since the report and, as a result, had not addressed much of the poor practice FCA identified both then and in the recent asset management market study.  Although FCA saw some areas of improvement and good practice, it wants firms to review their best execution procedures and will be revisiting the topic this year to see what steps investment management firms have taken to assess gaps in their approach. If firms continue to fail to meet expectations, FCA will consider appropriate action, including more detailed investigations into specific firms, individuals or practices. Questions it expects firms to address include who is accountable if the firm does not consistently achieve best execution, has the firm tested that funds and client portfolios are not paying too much for execution, and have staff been properly trained.

FCA notes that  MiFID 2 places a specific obligation on firms to check the fairness of prices proposed to clients when executing orders or taking decisions to deal in OTC products. So  firms will need to improve current practices to comply with MiFID 2 and the relevant FCA rules.


FIN. Team