The FCA’s message to private markets firms is simple: having a conflicts policy is not the same as managing conflicts. On 23 October 2026, the FCA published its multi-firm review of conflicts of interest and fair customer treatment in private markets. It covers private equity, private credit and real estate managers, AIFMs and advisers operating in the UK.
The 60-second version:
- Every firm had a conflicts register. That was not the problem. The problem was proving the controls work in practice.
- Continuation vehicles and cross-fund transfers are “elevated conflict-risk events”. Weak governance here drew the sharpest criticism.
- Side letters, MFNs and disclosure are conflicts issues too, not just legal drafting.
- Only 52% of firms surveyed said internal audit reviewed their conflicts framework.
- No deadline, but follow-up is coming. The FCA will carry out targeted follow-up work where appropriate.
WHY THE FCA IS LOOKING AT PRIVATE MARKETS CONFLICTS NOW
Private markets have grown fast, and so has their complexity. Managers now run multiple funds, joint ventures and strategies across the capital structure. A broader range of investors can also access private market products.
More funds, more strategies and more investor types mean more points where interests collide. The FCA’s starting point is blunt: “Conflicts are inherent to private markets asset management and advisory activities.”
How the review worked:
- Phase 1: a questionnaire to a sample of firms on business models, asset classes, ownership, delegation and size.
- Phase 2: on-site visits to test how firms identify, monitor and manage conflicts in practice.
The headline finding is that standards “varied considerably”. Some firms with complex models did not run proportionately stronger governance. The scope was private equity, private credit and real estate, but the FCA says the lessons apply across private markets.
CONFLICTS OF INTEREST: WHERE FIRMS FELL SHORT
The gap the FCA found was between policy and practice. Some documentation existed “primarily to meet a regulatory expectation”. Some group policies were re-used without tailoring to private markets.
The FCA compared stronger and weaker firms across the investment lifecycle:
PRESSURE POINT | WEAKER PRACTICE | STRONGER PRACTICE |
|---|---|---|
Deal origination | Relied on investment professionals’ judgement | Conflict screens run before NDAs are signed |
Information barriers | Training, informal team zoning, little monitoring | Physical, organisational and system barriers, chaperones |
Deal allocation | Deal teams given broad discretion | Predefined criteria and pro-rata allocation |
Connected transactions | Third-party valuation used as the main control | Separate decision-making teams on each side |
Investor alignment | Alignment asserted | Meaningful GP commitments |
Systems and records | Manual records and spreadsheets | Integrated systems with full audit trails |
KEY WARNINGS FOR CONTINUATION VEHICLES
Continuation vehicles and cross-fund transfers are “elevated conflict-risk events”. In one case, a firm sold an asset to an internal fund at NAV, despite external interest. It “was unable to explain to us why.” If you cannot explain a GP-led deal to the regulator, you cannot defend it to your LPs.
SUBSTANCE OVER LEGAL FORM
Some firms treated their UK entity as advisory-only because investment decisions were taken offshore. Their UK conflicts frameworks were then “often more narrowly scoped”. Yet UK staff were often involved in significant parts of the deal lifecycle. The FCA expects frameworks to reflect what you actually do, not how you are structured.
PERSONAL CONFLICTS AND OVERSIGHT
Personal account dealing controls were generally in place. Gifts and entertainment were weaker. Some hospitality, such as air travel and high-value sporting events, went beyond public market norms. On oversight, firms should not rely on LPAC consultation as the main way to manage material conflicts. And only 52% of firms said internal audit reviewed the conflicts framework.
FAIR TREATMENT OF INVESTORS: SIDE LETTS, MFNS AND DISCLOSURE
The FCA links conflicts directly to outcomes: “Effective management of conflicts of interest is fundamental to delivering fair outcomes for consumers.” Two areas stood out.
Side letters and MFN clauses. Stronger firms treated them as part of their conflicts and investor-fairness frameworks. Weaker firms relied on disclosure in fund documents. They did not assess the cumulative impact of preferential terms across their investor base.
Disclosure. Stronger firms treated disclosure as “a supplementary control rather than a substitute for conflict management”. Weaker firms waited for quarterly reporting instead of telling investors when a conflict arose. Telling investors late, or telling them instead of managing the conflict, does not count as control.
OUR VIEW
This review is not new regulation, as SYSC 10 has required firms to identify and manage conflicts for years. What has changed is the standard of evidence expected from the regulator. The FCA wants firms to show “controls are not only documented in policies and procedures but are operating effectively in practice.”
That shifts the question from “do we have a policy?” to “can we prove it worked on our last continuation deal?” Firms that answer the second question well will spend less time defending themselves later.
We see three opportunities in the review:
- Design conflicts out. The FCA asks firms to consider whether conflicts can be “reduced or avoided through the design of business models, structures and processes.” Prevention is cheaper than mitigation.
- Treat conflicts as a capability. The FCA calls it “a dynamic capability that develops alongside their business, rather than a static compliance framework.” Every new fund, strategy or acquisition should trigger a conflicts reassessment.
- Turn good governance into a selling point. LPs run due diligence on conflicts. A firm that can show its audit trail on a GP-led secondary has an advantage in fundraising.
YOUR 7-POINT ACTION CHECKLIST
- Run a gap analysis against the review’s findings and expectations.
- Map conflicts to substance, not legal form. Include UK staff who support offshore decision-makers.
- Screen at origination. Run conflict checks before NDAs are signed, with triggers at each deal stage.
- Stress-test your continuation vehicle process. Check for separate decision-makers, independent valuations and a documented rationale.
- Review side letters and MFNs together and assess their cumulative effect on all investors.
- Move from quarterly to event-driven disclosure for material conflicts.
- Bring internal audit in. Test whether controls work, not just whether they exist.
HOW COSEGIC CAN HELP
Cosegic has supported regulated firms since 2003. Our consultants work in private markets every day. We pair that experience and expertise with technology, so you can design the right framework and prove it works.
What that looks like in practice:
- Valuation and conflicts governance: policies, independence and conflicts frameworks aligned with the FCA’s focus on private markets.
- Compliance monitoring: risk-based programmes that test whether your controls work in practice.
- Compliance operating partner: a retained team that knows your firm, your funds and your portfolio.
- Record and evidence, built in: our services are supported by MyCosegic, our Compliance Operating System. Gifts and entertainment, personal account dealing, staff attestations and policy management all sit in one place with auditable records, so the proof the FCA wants is captured as you work.
