FCA warns private-market firms over patchy conflict controls after Oct. 23 review

The Financial Conduct Authority said Friday that private-market firms show wide variation in how they manage conflicts of interest, with some failing to keep their controls up to date as the sector has grown larger and more complex.

The warning came in a press release and a same-day multi-firm review, both published Oct. 23, and reflects a supervisory push by the U.K. financial regulator rather than an enforcement action. The review looked across private equity, private credit and real estate, and called on firms to strengthen governance and investor protections.

Private markets are investments in companies, assets or debt that are not listed on public exchanges. They have grown quickly and now play a bigger role in financing businesses and generating returns for investors, making questions around governance and conflicts more significant.

The FCA said it carried out the review in two phases: first, a questionnaire sent to a sample of private-market firms, then on-site visits to selected firms to test how conflicts were handled in practice. It said some firms showed good practice, including strong governance arrangements, effective oversight and independent challenge.

But the regulator said standards varied considerably across the sector. In some cases, firms were not identifying conflicts adequately or updating their controls as private markets and firms’ own business models became more complex.

The FCA highlighted recurring weaknesses in several areas, including cross-fund transfers and continuation transactions, where assets are moved between funds or held for longer in new vehicles; multi-party or connected transactions; gifts and entertainment; and information barriers designed to prevent sensitive information from being misused.

The regulator said firms must be able to identify, record, manage and disclose conflicts effectively, and demonstrate that investors are being treated fairly. That matters particularly in private markets, where investors often rely heavily on firms’ judgment, governance and internal controls when assets are hard to value and deals are negotiated privately.

“We expect firms to consider the findings from this review to identify gaps in their approach…” the FCA said in the review.

The FCA did not announce fines, sanctions or named enforcement cases, and it did not identify any firms in the report. Instead, the message was a public warning to the sector as part of the regulator’s wider supervisory focus on private markets and investor outcomes.

“Firms need to ensure their management of conflicts of interest keeps pace with growth in their size and complexity,” Michelle Beck, director of wholesale buy-side at the FCA, said in the press release.

The sector’s growth helps explain the regulator’s focus. UK Private Capital reported that U.K.-managed funds raised 58.7 billion pounds in 2025, while private capital investment into U.K. businesses reached 25.0 billion pounds that year. Against that backdrop, the FCA said it is also separately examining governance and conflicts concerns linked to the use of private credit to fund consumer litigation claims, which it said could pose significant risks of harm to investors, consumers and markets.