FCA Calls on Private-Market Firms to Strengthen Conflict Controls

The Financial Conduct Authority has published findings from a review of how private-market firms identify, manage and disclose conflicts of interest. The review covered firms operating across private equity, private credit and real estate, and comes as private markets take a larger role in financing businesses and allocating investor capital.

The regulator said it found examples of strong governance, effective oversight and independent challenge. But it also found that standards varied, with some firms failing to identify conflicts adequately or to update controls as their businesses became larger and more complex. Recurring weaknesses included cross-fund transfers, multi-party transactions, gifts and entertainment, and information barriers.

The FCA said firms should be able to identify, record, manage and disclose conflicts effectively, and demonstrate fair treatment of investors where those investors rely heavily on a firm’s judgement, governance and controls. It also noted that it is examining governance and conflicts issues involving private credit used to fund consumer litigation claims, although that work was outside this review.

Why it matters

Private-market assets are generally not listed or traded on public exchanges, so investors may have less transparent pricing and fewer external reference points than in public markets. For traders and investors with exposure through funds, the review highlights the importance of understanding how a manager handles affiliated transactions, valuation-related decisions and information barriers. This is supervisory guidance from the FCA, not a new rule or a finding against a named firm.

What to watch next

Watch for firms updating conflict registers, governance processes and investor disclosures in response to the review. The FCA’s separate work on private-credit funding of consumer litigation claims could also produce more specific supervisory or policy developments.