Growth without governance by investment firms poses heightened risk to investors, says the U.K.’s Financial Conduct Authority (FCA) in a report detailing the results of a review of fast-growing firms.
On Monday, the regulator published the results of a review of 15 firms in the asset and wealth management sector that participated in a pilot program to support high-growth firms between July 2025 and March 2026.
The review found that firms that grow rapidly can benefit both investors and the economy by innovating, enhancing competition, and boosting job creation and investment — but that growth that outpaces governance and controls increases the risk of harm too.
With weaker governance arrangements, the FCA said firms “lacked sufficient independent challenge, with responsibilities concentrated among a small number of individuals.”
Some firms also failed to ensure that their risk management resources matched the scale and complexity of the business, the review found — exposing them to added operational and cyber risks.
“This was particularly relevant where third-party relationships were becoming deeper or more numerous, or where firms were making greater use of new technologies such as AI,” the regulator noted.
Additionally, the FCA saw weaknesses arise where firms’ business models evolved, or target customers shifted, but their policies, procedures and control frameworks didn’t match those changes.
As some businesses grew, the regulator found that their approach to dealing with conflicts of interest didn’t keep pace — and that certain fast-growing firms needed to put more effort into ensuring that customers are receiving value.
“Without active monitoring, firms may be less able to check if their products and services continue to meet customer needs, represent fair value, or remain appropriate for the intended target market,” the FCA said. “This increases the risk of causing foreseeable harm to consumers.”
The report provides guidance to high-growth firms, including best practices for ensuring that governance and controls are keeping pace with the growth of the business.
“Firms with strong governance, risk management and oversight arrangements are often better equipped to manage the challenges associated with rapid growth,” it said. “This can improve the sustainability of growth and reduce the risk of consumer harm as the firm scales.”