Terry Smith’s fund business has been asked by the Financial Conduct Authority to undertake a review of its operations
Terry Smith’s fund business has been asked by the financial watchdog to undertake a review of its operations, The Mail on Sunday can reveal.
The Financial Conduct Authority has asked Fundsmith to carry out a review, carried out by independent consultants, under section 166 of the Financial Services and Markets Act.
Section 166 reviews are commissioned by the FCA to provide “an independent perspective on those aspects of a company’s business that are of concern to us or where we need further analysis”, according to the annual report. of the regulator.
Explore: The FCA commissioned Fundsmith to carry out a review, conducted by independent consultants, under Section 166 of the Financial Services and Markets Act.
Smith, 68, is one of Britain’s most renowned stock breeders, having set up his own shop in 2010.
His firm manages over £28bn of retailer cash and his largest fund, Fundsmith Equity, has generated returns of over 500% since launch. Section 166 reviews may be requested for issues of governance, control and risk management assessment.
They also include reviews of how funds handle customer money, conduct, financial crime controls and information management.
However, the FCA does not publicly disclose any details of its Section 166 requests. The companies examined are not permitted to discuss the matter. Fundsmith and the FCA declined to comment.
Section 166 requests are not investigations but reviews of a company by a third party. They are often carried out by one of the “big four” consultants – PwC, Deloitte, KPMG and EY – or by leading law firms.
The FCA issued 11 such orders between January and March. In 2020, it was reported that a series of US banking giants had received orders from the regulator over the quality of their financial information.
Smith, who is based in Mauritius, recently caught the eye after criticizing consumer giant Unilever for being ‘obsessed’ with its sustainability credentials.
He said in his annual letter to shareholders: “A company that feels it has to define the purpose of Hellmann mayonnaise has, in our view, clearly lost track.”
Fundsmith made record profits in the year to March 2021 of £57.7million. Fundsmith Equity’s top ten holdings include Microsoft, L’Oreal, Estée Lauder, Philip Morris and LVMH.
On its website, Fundsmith summarizes its investment strategy by owning “a small number of high-quality, resilient, global growth companies that present good value and which we intend to hold for a long time”.