The FCA has published a web page stating that it is concerned to find that most investment managers have failed to take on board the findings of its thematic review on best execution and payment for order flow (Thematic Review 14/13: Best execution and payment for order flow (TR14/13)).
The FCA states that it expects investment managers to consider the findings of the thematic review and the recent asset management market study.
In particular the FCA has found that many investment managers have not conducted a robust gap analysis since 2014 and therefore much of the poor practice the FCA previously outlined in the thematic review has not been addressed.
The FCA states that it expects investment managers to consider the following as part of its review:
- Who would the FCA hold responsible if the firm fails in its obligation to ensure it consistently achieves best execution?
- Does the firm have a comprehensive strategy for overseeing best execution?
- Has the firm tested that funds and client portfolios are not paying too much for execution? Where the firm has identified that they have paid too much did it compensate the investors?
- Does the firm’s order execution policy accurately reflect the firm’s business model rather than being a generic policy?
- What trades or trends have been identified as deficient through the firm’s regular monitoring?
- Is the firm’s gift and entertainment policy in line with the guidance set out in TR14/13 and the FSA’s 2012 Dear CEO letter; and
- Has the firm’s staff been adequately trained to ensure they understand what best execution means and its consequences? How can it evidence this to the FCA?
The FCA states that it will be re-visiting best execution this year to see what steps investment managers have taken to assess gaps in their approach to achieving best execution and how they can evidence that funds and client portfolios are not paying too much for execution. If it finds that firms are still not fulfilling their best execution obligations, it will consider appropriate action, including more detailed investigations into specific firms, individuals or practices.
View FCA highlights concerns about investment managers and best execution, 3 March 2017
