FCA highlights failings in execution practices

Red tapeMany firms in the UK did not adequately control client costs when executing orders, according to a review by the Financial Conduct Authority (FCA)
, which highlights that most firms did not even understand the key elements of the rules. The review comes ahead of the introduction of enhanced EU-wide rules on best execution. The FCA, the UK regulator, says most of the 36 firms it reviewed, which are not named, and which have since made amends, lacked the capability to effectively monitor order execution or identify poor client outcomes. The firms were unable to demonstrate how they managed conflicts of interest when using connected parties or internal systems to deliver best execution for their clients. “These failings were compounded by insufficient managerial oversight or engagement from front office staff for delivering best execution,” the FCA says. Four firms attempted to evade FCA rules by changing the description of services they offered to clients, the regulator says, so they could continue to receive payment for order flow despite clear guidance on this practice. The review included retail banks, investment banks, wealth managers as well as providers and brokers of shares and options.  ©2014 funds europe

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