The Financial Conduct Authority has called on private-market firms to strengthen conflict controls as their businesses grow more complex. Its 23 October 2026 review found good practice but also weaknesses in cross-fund transactions, information barriers and gifts and entertainment.[1]
The underlying review is more specific about the problem with transfers between funds managed by the same firm. Some buy-side and sell-side decisions relied on committees with substantially the same members and the same valuation, without persuasive independent challenge. In one example, a firm sold an asset internally at net asset value after receiving outside interest, but could not explain why it had not pursued that interest or why the price was fair to the selling fund.[2]
Control weaknesses and stronger practices observed
| Area | Weakness | Stronger approach |
|---|---|---|
| Cross-fund transfers | Overlapping decision-makers and limited challenge | Separate buy-side/sell-side decisions, independent valuations and documented scrutiny |
| Information barriers | Reliance on staff judgement | Access restrictions, monitoring and records |
| Hospitality | Generic justifications and unclear valuations | Documented rationale and assessment of patterns and conflicts |
| Side letters and MFN rights | Disclosure without assessing cumulative investor impact | Legal/compliance oversight and review of preferential rights |
| Disclosure | Late or routine reporting with little influence on decisions | Early engagement that allows meaningful investor challenge |
How the review was conducted
The FCA first surveyed firms across different business models, ownership structures and asset classes, then visited a selected group to test how controls worked in practice. The scope included fund management, portfolio management and advisory services involving private equity, private credit and real estate.[2]
The regulator expects firms to identify gaps and keep governance proportionate to the complexity of their activities. Disclosure remains a supporting control, rather than a replacement for managing the conflict itself. The FCA says it will carry out targeted follow-up where appropriate. Separately, it is examining private-credit financing of consumer litigation claims; that work was outside this review.[1][2]
Sources & further reading
- FCA calls on private market firms to manage conflicts of interest in line with rapid growth UK Financial Conduct Authority · 23 Oct 2026 · Accessed 26 Oct 2026
- Conflicts of interest and fair customer treatment in private markets UK Financial Conduct Authority · 23 Oct 2026 · Accessed 26 Oct 2026