TR14/1 – Transition Management Review

We expect firms to act in the best interests of their customers at all times when moving investment portfolios between managers and markets.

Our review

Our review looked at how firms move investment portfolios between different managers and markets for asset owners (such as pension funds).

We explored the size of the market and the business models carried on within it. And we looked at the levels of oversight, governance and controls within the firms conducting transition management.

TR14/1 – Transition Management Review[2]

Our findings

• Scale of TM industry – Transition management is an important service for asset owners – over £165bn of assets is moved annually via around 700 mandates.
• Complexity of TM – It can be a complex and fast-paced form of business and that complexity (including potential conflicts of interest) needs careful management.
• Regulatory obligations are clear – our existing rules and guidance (particularly SYSC 10 and COBS 2 and 11) set a high standard and no changes are necessary.
• Oversight and governance can be limited – Transition management is often a small part of a firm’s business and can sometimes be overlooked by control functions and senior management.
• Transparency – We found deficiencies in transparency and communication at some firms.

Next steps

We expect firms:

• To be vigilant in monitoring the application of controls to meet their obligations.
• To ensure all potential conflicts of interest are understood, managed and mitigated.
• Senior management teams to ensure appropriate controls and oversight of transition management.
• To review and ensure communications with customers are clear, fair and not misleading.
• To work with customers to ensure communication requirements are understood.

We will follow up with individual firms to ensure ongoing compliance with regulatory obligations.