FCA Unveils Findings Of Latest Review On Smaller Asset Management Firms
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The Financial Conduct Authority (FCA) has disclosed the outcome of its most recent review of smaller asset management and alternative investment firms. This review formed part of a supervisory strategy introduced to detect business models that may expose consumers to harm.
Although no specific financial products were identified, the findings carry particular weight for firms dealing in leveraged derivatives such as contracts for difference (CFDs). These instruments are classified as high-risk and are typically directed at retail clients under strict regulatory oversight.
The FCA Aims To Promote Fair Practices Among Smaller Firms
While most firms assessed had systems to identify high-risk investments, some only had partial frameworks in place. Others lacked sufficient measures to ensure that such products are offered exclusively to suitable investors.
The Authority said this gap continues to be a concern in the CFD sector, where businesses are expected to classify clients accurately and provide clear, effective risk disclosures.
The review covered 410 firms, each managing less than £1 billion in assets, with a combined total of approximately £220 billion. The assessment focused on high-risk investments, conflicts of interest, and compliance with the Consumer Duty.
The FCA stated that deficiencies were found in how some organisations manage conflicts of interest, particularly smaller firms where senior personnel often hold multiple roles. This overlap, the review noted, can weaken governance, especially for CFD providers with vertically integrated business models.
According to The FCA, progress has been observed in implementing the Consumer Duty; however, a number of smaller firms have yet to fully adopt the standards. The regulator reiterated that the duty requires businesses to act in good faith, prevent foreseeable harm, and help customers achieve financial outcomes.
The FCA Wants To Boost Market Confidence Through Innovation And Global Inclusion
New regulatory initiatives are being advanced to attract international firms and support the UK’s global financial position. As outlined at the Innovate Finance Global Summit, Jessica Rusu presented planned reforms that include changes to the wholesale market structure.
She also introduced the Pre-Application Support Service (PASS), designed to assist cryptoasset, payments, and wholesale firms. A separate initiative, AI Live Testing, was also announced to support responsible use of artificial intelligence in consumer services.
The FCA operates independently from the United Kingdom Government and funds its work through levies on financial services firms. It is responsible for supervising entities that serve consumers and upholding the integrity of the country’s financial markets.
It regulates both retail and wholesale firms, continuing the legacy of the former Financial Services Authority. Structurally, it is set up as a company limited by guarantee and collaborates with the Prudential Regulation Authority and the Financial Policy Committee to define industry standards.
Roughly 58,000 firms fall under its remit, employing over 2 million individuals and contributing approximately £65.6 billion to public revenue annually.
The current framework was established by the Financial Services Act, which consolidated financial stability responsibilities within the Bank of England and dissolved the previous regulator. In addition, regulated firms were reminded that the use of premium-rate customer service numbers is prohibited under existing rules.
