Mifid II  

Intermediaries 'failing to share data with fund firms': FCA

Intermediaries 'failing to share data with fund firms': FCA

The Financial Conduct Authority has criticised the lack of data sharing between fund managers and intermediaries.

This morning the regulator published its review into how firms were coping with Mifid II's product governance rules, finding some asset managers were not meeting the FCA's expectations.

The FCA warned this would ultimately increase the risk of investor harm.

This review looked at product governance in a sample of eight fund firms, with assets under management ranging from £2bn to over £100bn.

It examined how these firms, as product providers, take Mifid II’s product governance rules into account, particularly the interests of the end clients.

As part of its research, the FCA found all asset managers faced challenges in getting end-client data from intermediaries - including advisers - even when they specifically asked for this information. 

In particular, asset managers felt unable to push for this information due to the sensitivity of the data requests.

The FCA said asset managers needed to do more to push for this information, and document this, to build a better relationship.

However the regulator did acknowledge this issue was most problematic in the execution-only market.

The Mifid II product governance rules aim to ensure that financial product manufacturers (asset managers) and distributors - which include advisers and platforms are acting in the best interests of investors throughout the process.

As part of this, fund managers need to tailor their products toward 'target markets', assessments advisers must take into account when they recommend the products.

Advisers need to share with fund managers which client segments they are recommending their products to, so as to make sure products are being created, marketed and recommended to the correct target markets.

As part of its review, the FCA also found the due diligence which fund managers carried out on firms distributing their products was "variable".

The FCA stated: “Due diligence means asset managers can establish whether their chosen distributors are fit for purpose in client onboarding and if a distributor’s intended product recipient matches the product’s target market. 

“Failing to do so increases the risk that products end up in the hands of consumers for whom they are not appropriate, which could cause harm to investors.”

The FCA said it will now undertake further work on this subject to see whether it needs to make any changes to Prod rules and guidance for both asset managers and advisers.

The regulator stated: “We expect firms to ensure their activities prioritise good customer outcomes and that they comply with the relevant regulatory rules and requirements. 

“Where we identify potential breaches of our rules, we will consider whether we need to take action, which may include opening investigations or other appropriate measures.”


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