UK watchdog tells asset managers to improve market abuse controls

LONDON, Feb 18 (Reuters) - Many asset managers in Britain must improve how they control the risk of illegally profiting from confidential information, the Financial Conduct Authority (FCA) said on Wednesday.

The FCA published a review of how asset managers avoid abuses such as insider trading and manipulation of stock markets, finding that firms had put in place some practices and procedures.

They generally had effective policies for handling confidential information internally, but fell down when it came to dealing with inside information from external sources such as fund managers meeting with consultants.

The required risk controls were only comprehensive in a small number of firms, the FCA said. "In many firms further work is required to ensure these operate effectively and cover all material risks."

Asset managers also needed to improve surveillance of suspicious trades. "Only a minority of firms had appropriate controls for these matters," the FCA said.

The watchdog will contact firms it wants to make improvements, with follow ups during routine supervision.

Simon Morris of law firm CMS (HKSE: 0867-OL.HK - news) said while the FCA report noted many instances of good practice, asset managers will have to review their procedures and ensure that staff remain vigilant. (Reporting by Huw Jones; Editing by Mark Potter)