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It’s almost becoming a cliché – but this year
will be a busy one for regulatory compliance. So much so, that the
Financial Conduct Authority (FCA) has issued a “Dear CEO”
letter: its main point is a concern over whether asset managers
have sufficient compliance resources to deal with the
“high volume of significant business and regulatory change
to be delivered in 2024”.
This year brings asset managers a three-in-one Kinder egg of
regulatory developments. It brings a new regime (sustainability
disclosures), the continuing roll-out of major regulatory
developments (such as the Consumer Duty) as well as updates to
well-trodden regulatory territory on both sides of the Channel.
This is in addition to planned FCA supervisory reviews of asset
managers.
Much ink has been consumed drafting horizon scanners to provide
a holistic overview of changes, combined with the details of what
needs to be done, by whom and by when. This article provides a
summary of the main developments of this year’s first
quarter.
Osborne Clarke’s investment management, fund formation and
regulatory experts are well placed to advise you further on any of
the topics covered in this edition of Funds Focus. For further
information please contact the experts mentioned in the articles or
one of our funds partners: Helen Parsonage, Alison Riddle, Tim
Simmonds, and Simon Thomas.
EU pushes through changes to the regulation of AIFMs
The European Union has changed the regulation of alternative
investment fund managers (AIFMs). The new rules introduce targeted
amendments to several key areas of which European AIFMs need to be
aware. While AIFMD II does not apply to AIFMs from the UK, it will
affect UK managers that, for example, use the services of host
AIFMs in Luxembourg and Ireland.
Meanwhile, for the UK, the FCA has set out different reform
priorities for the same area.
Read more >
UK sustainability disclosure regime to introduce greenwashing
rule
This spring brings the phasing in of the UK’s sustainability
disclosure regime with an anti-greenwashing rule coming into force
applying to all authorised firms. Following this, UK asset managers
making funds available to retail investors, as defined under the
FCA Handbook, will either have to use “sustainability labels”, abstain
altogether from using certain fund names and making any
sustainability claims in financial promotions, or provide a range
of information relating to sustainability.
Listen to our podcast >
Read more about sustainability labels >
Read more about sustainability information
>
UK FCA flags supervisory scrutiny of asset managers
The FCA is focusing on asset management. Its supervisory focus
for the next year is set out in a “Dear CEO” letter
recently received by all authorised firms in its asset management
and alternatives portfolio. To address a range of issues of
concern, the FCA will be reviewing the effectiveness of asset
managers’ governance arrangements. A separate workstream is
dedicated to reviewing private assets valuation practices.
Furthermore, the regulator has recently published its findings
after reviewing “host AIFM” models. The FCA have provided
guidance for firms operating the AIFM host model but is also
considering potential policy changes.
Read more about the Dear CEO letter >
Read more about the host AIFM review >
UK financial regulator gives guidance on implementing the
Consumer Duty
The FCA has also taken stock of the Consumer Duty implementation
and published helpful information, reminding firms of the four
consumer outcomes required by the duty, and set out examples of
good practice, highlighting areas for improvement. This is useful
for asset managers when considering what changes they need to make
to meet the 31 July 2024 implementation deadline for closed
products and services. Distributors of overseas funds marketing
into the UK will also be affected.
Read more >
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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