The FCA has told property fund managers to improve their practices after finding they "did not adequately plan" for the series of fund suspensions implemented last summer.
Announcing the findings of its review into open-ended property funds following the suspensions seen across the sector in July 2016, the regulator said fund firms did not have clear policies for valuing portfolios in difficult market conditions.
It added that some firms did not consider the impact of their actions on distributors, and said providers could also "improve their communications to platform providers" in order to aid end investors.
The regulator acknowledged that the actions taken by fund groups last July were effective in preventing market uncertainty from escalating, but said a selection of the more than 60 businesses it assessed must remedy their approach.
"In general, AFMs did not adequately plan, or have clear policies and procedures, for valuing their property portfolios under stressed market conditions," the FCA said.
It added: "We expect all firms that were affected by either the suspension of property funds or the application of FVP [fair value pricing] adjustments will review how they dealt with this event.
"In some cases, individual firms will have to implement remediation measures to ensure they comply with our expectations and requirements."
One of the main areas of concern for the watchdog was providers' use of fair value price adjustments. Several funds shifted from offer to bid pricing in the run-up to the fund suspensions, and then made additional negative pricing adjustments in a bid to deter redemptions and account for falling valuations.
This culminated in Aberdeen making a 17 per cent negative adjustment to its £2.3bn UK Property fund instead of gating investors like its peers.
The FCA said: "For some firms within the value chain, applying FVP adjustments raised as many issues as the suspension of the funds."
Platforms were also criticised for cancelling redemption and payment instructions from investors once open-ended funds had shut. The FCA said in future instructions should be temporarily suspended rather than needing to be resubmitted.
The FCA also praised wealth managers and advisers for being "well prepared" for the fund suspensions. However, it noted that not all firms had considered the impact on model portfolios, as reported by Investment Adviser at the time.
Today's (July 20) findings sit alongside the regulator's February discussion paper on liquidity risks and open-ended funds. The paper closed to responses in May. The FCA said today it would provide a feedback statement "in due course", and take into account the findings of the property fund review.
The discussion paper initially suggested retail investors and discretionary managers could be moved into separate share classes in order to protect long-term investors at times of market stress.
This idea was given little air time among fund groups and distributors, who maintained that gating, price shifts and value adjustments adequately protected investors.