However, clouds have been closing in on the eternal sunshine of this apparently spotless record. Quite aside from the well-worn debates over conflicts of interest in soft commissions and other inducements (for which MiFID II and other local regulation call for a change in approach), regulators have now begun to issue rather demeaning fines for misconduct. These fines – for misdemeanours such as fraudulent trade allocations (cherry-picking) or misleading retail advertisements, or neglecting to keep investors informed of changes to fund operations - are now becoming more frequent and more punitive. If you also consider the findings from the Fair and Effective Markets Review*1 calling for the extension of the Senior Managers Regime to cover buy-side firms as well as banks: it is the wake-up call to the industry’s "big sleep".
Firms are now responding, notably in the United Kingdom where the regulator was the first to lead the conduct agenda in the banking and insurance industries. The UK’s Financial Conduct Authority (FCA) has recently launched a market study, focused on the asset management industry, that questions whether institutional and retail investors get value for money when purchasing asset management services. There are implications not only for tighter compliance, but also for business models and overall strategy. Firms need to keep commercial aspirations a priority, whilst also being mindful of the constraints of the conduct agenda.
To understand these implications more clearly, we asked the Chairmen and CEOs of 15 leading asset managers in the UK to lend their support to their respective firm’s participation in our first conduct survey of the industry. The survey built on our extensive banking and insurance conduct experience, including our recent work with the G30 on banking conduct and culture*2. Our sample covered independently-owned firms, as well as firms owned by banks or insurers.
