UK – The extent to which fiduciary duties apply to asset managers and consultants is to be reviewed at the behest of the UK government – with the consultation seeking to learn if the duty's existing interpretation hampers long-term and environmental investing.

In a statement, the Department for Business, Innovation and Skills said the review by the Law Commission would "provide greater clarity" for institutional investors as to what they should consider when investing on behalf of members or customers.

The department said the review was a direct response to the Kay Review on long-term investing and that it would "seek to address concerns that these [fiduciary] duties are too often interpreted as a requirement to maximise short-term returns".

The terms of reference given to the Law Commission ask it to examine the extent to which the current legal definition of 'fiduciary duty' applies to investment managers, pension trustees and consultants.

Additionally, the impact of the prevailing definition on the ability to invest for the long term – "even where this may not be in the immediate financial interest" of beneficiaries – was also to be examined, including the extent to which ethical concerns can or must be taken into consideration.

The Law Commission said it would publish a consultation on the matter later this year, with the aim of releasing its recommendations by June 2014.

Speaking at the BIS parliamentary committee yesterday, business secretary Vince Cable said he was minded to accept the Commission's findings, and noted that its would likely require legislation.

Christine Berry, head of policy and research at ShareAction, said the review was a "major step" in ensuring existing law was not seen as a barrier to long-term investing.

"Fiduciary obligation should be the thread that keeps the investment industry connected to the needs of the people whose money they manage," she said. "It should not be seen as a straitjacket demanding the pursuit of short-term profit at any cost."

BIS said further that it had already asked the Financial Services Authority to examine to what extent regulation affected the standards it expected from institutional investors.

The incoming Financial Conduct Authority (FCA), the regulator created due to the split of the FSA's responsibilities, said in its recently released business plan for the next financial year that it would be reviewing the management of conflicts of interest where managers were acting as agents.

"This means that, when making investment decisions, or buying products and services for customers, asset managers must always act in customers' best interests, putting customers' interests ahead of their own and treating all their customers fairly," it said.

The FCA also criticised fund design, noting the rise of "hidden" fees and ever more complex charging structures.

"In 2013-14, we will undertake a project that will highlight the behaviours and practices of asset management firms in relation to charging structures that harm consumers," it said.

It also said it would be examining practices in the transition management (TM) business, noting that, as a manager's hire by pension funds was often unadvised, information could be "irregular when negotiating and reviewing such transactions".

"The use of affiliates by transition managers, unclear fee structures and complex legal and pre/post-transition documentation can result in poor customer outcomes," it said, noting there could be an "immediate" impact on pension funds.

"There is evidence the level of transparency and market conduct among TM participants is not to the standard we require," it continued.

"In 2013-14, we will undertake a project to review practices across the main TM industry participants to assess whether customers are being treated fairly."

The publication of the FCA's business plan comes shortly after the Investment Management Association argued that improving fiduciary standards across the industry would help lower fees by better aligning asset managers with end clients.