"More work needs to be done by investment management firms to ensure they spend their customers’ money with as much care and attention as if it were their own."
In a review, the regulator visited 17 firms, including asset managers and wealth managers, to assess their dealing commission arrangements.
It also investigated how they had responded to the examples of good and poor practice from its discussion paper on the use of dealing commission regime, published in 2014.
The FCA identified poor practices at the majority of firms it visited and says several "could not demonstrate meaningful improvements" in terms of how they spend their customers’ money through their dealing commission arrangements.
At the extreme end, some continued to use dealing commission to purchase non-permissible items, such as corporate access and market data services, contrary to FCA rules.
The FCA says it will consider further action, including referring firms for further investigation.
In its conclusion, the FCA said: "More work needs to be done by investment management firms to ensure they spend their customers’ money with as much care and attention as if it were their own.
"Despite some progress being made, much of the poor practice we’ve highlighted previously is still commonplace. This is concerning considering the majority of the rules on the use of dealing commission have been in place for over a decade.
"Firms that have paid closer scrutiny to this area have generally seen a reduction in the dealing commission they spend on research, which feeds directly into better investment performance for their consumers.
"Such improvements, if replicated across the market, will also help to enhance the attractiveness of the UK investment management sector for potential investors."