FCA Thematic Review 14/1 – Transition Management

The FCA recently undertook a thematic review of the transition management (“TM”) industry which sought to better understand the TM market, explore potential weaknesses in managing conflicts of interest and examine senior managers’ understandings of client requirements and the strength of controls.

Key findings of the review published in February 2014 were:

  1. TM is an important service which helps clients move portfolios between managers or markets, while managing market risk and reducing transaction costs;
  2. Over £165bn of assets were transitioned in the UK annually between 2010-2013 by 13 TM providers;
  3. TM can be complex, needs careful management and clients can be unfamiliar with the TM process and the potential conflicts inherent in the relationship as it is not carried out often;
  4. Improved transparency in relation to clarifying the role of the TM provider is required;
  5. Providers should focus on improving oversight and governance of TM services; and
  6. There is scope for improvement with client reporting on a pre and post-implementation basis.

Whilst the FCA found that the FCA rules and guidance establish an appropriate standard, and are fit for purpose, they will keep the conduct of firms under review as they carry out their normal supervisory activities with the focus on:

  1. Management of conflict of interest
  2. Oversight, governance and controls at TM firms;
  3. Transparency and communication; and
  4. Client understanding.

For the full report go to: http://www.fca.org.uk/static/documents/thematic-reviews/tr14-01.pdf

Should you require any advice or information on transition management, Cleveland & Co, your external in-house counsel, are here to help.

 

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