UK Watchdog Closes Net on Transition Managers

(May 9, 2013) — The Financial Conduct Authority (FCA), the UK’s new financial regulator, has begun probing London’s biggest custody banks as part of its investigation into transparency and the market conduct among transition management participants.

Having originally announced its intentions to start its inquiry two months ago, aiCIO understands the watchdog has hit the street to knock on the doors of investment banks and custodians in the past few days.

In particular, the FCA is concerned about the unclear fee structures, and complex legal and pre/post-transition documentation typical of many of the market’s players.

The FCA is already investigating allegations that State Street’s transition management unit overcharged several pension funds, including Ireland’s state pension fund as well as those for the Royal Mail and supermarket J Sainsbury but as of yet, no formal enforcement proceedings have been brought.

The review into transition management and custody banks is part of a wider plan to investigate a number of thematic issues within financial services.

Other areas for future investigation include financial incentives, conflicts of interest, financial promotions, and fair treatment of mortgage borrowers experiencing financial difficulty.

Regular readers of aiCIO will be familiar with the magazine’s extensive coverage of the biggest crisis of confidence to hit the sector in living memory.

Having broken the news that Ross McLellan and Edward Pennings had left State Street following the Royal Mail Pension Fund’s inquiries into fixed-income trading costs during a transition, aiCIO has continued to be at the forefront of this ongoing saga.

Now we need your help: please take 10 minutes to fill out our transition management survey and help us to provide some meaningful hard data on the key component of our industry.