A private markets firm received outside interest in an asset held by one of its funds, did not pursue it, and sold the asset to an internal fund at its net asset value instead. The Financial Conduct Authority said the firm could not explain why it did not pursue the external interest or how it concluded the price was in the selling fund's best interests. The case is one of the findings in the regulator's multi-firm review of conflicts of interest at private equity, private credit and real estate firms, published on 23 October 2026.
- Phase 1 firms saying internal audit reviews the conflicts framework52 %
- Review phases (questionnaire, then on-site visits)2 phases
- Asset classes reviewed3 asset classes
The FCA found good practice across the sector but said standards varied considerably. Only 52% of firms in the review's first phase, a questionnaire sent to a sample of firms, said internal audit had a role in reviewing their conflicts framework and its application. The second phase was on-site visits to a selected group of firms. The regulator said some firms were failing to identify conflicts adequately or keep their controls up to date, and that firms with the greatest inherent conflict risks were not always the best at managing them.
Where the FCA found weaknesses
- Cross-fund transfers and continuation transactions: weaker firms relied on existing governance, disclosure or investor consent, with limited evidence of how competing investor interests were balanced
- Gifts and entertainment: weaker firms relied on policy thresholds and generic approvals. Some gifts and entertainment, including air travel and high-value sporting events, exceeded what the FCA typically sees in public markets, and it expects firms to explain the rationale
- Information barriers: weaker controls leaned on staff training and informal safeguards, with limited monitoring
“Firms need to ensure their management of conflicts of interest keeps pace with growth in their size and complexity.”
The FCA said it will carry out targeted follow-up work where appropriate. Separately from the review, it said it is examining governance and conflicts concerns about the use of private credit to fund consumer litigation claims, including significant risks of harm to investors, consumers and markets.
- FCA, FCA calls on private market firms to manage conflicts of interest in line with rapid growth, 23 Oct 2026, 12:31 CEST
- FCA, Conflicts of interest and fair customer treatment in private markets (multi-firm review), 23 Oct 2026, 02:00 CEST