What the FCA Business Plan means for asset management

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Written by:
20/04/2015
On 24 March, the Financial Conduct Authority (FCA) published its 2015/16 Business Plan. The Plan contains a number of items of interest for consumers and financial services providers. Here are the most important:
  • Fund Review

The FCA will launch a ‘post-authorisation’ review of funds, aiming to establish whether they are being run in line with how they are described in the marketing material and associated documentation (such as factsheets and prospectuses) provided to investors.

  • Asset Management Market Study

The FCA will initiate a market study of the asset management industry. At present, the exact form of the study is yet to be fully announced, but the Plan mentions that asset management fees – and how they are calculated – will be a key focus. A terms of reference document will be published when the study is formally established later this year.

  • Culture Review

The FCA will launch a review of whether culture change programmes have delivered sufficient results, with particular reference to retail and wholesale banking. However, it notes that some aspects will be relevant to all firms in shaping their governance programmes, including asset managers.

In this respect, the FCA notes a focus on middle management including policies around remuneration, hiring, performance management and promotion decisions, as well the internal reporting of concerns, the level of responsibility taken by front line staff for the right outcomes, and the autonomy and empowerment of key control functions.

The FCA also notes its continuing focus on individual accountability, particularly the following considerations: how a board engages in conduct issues including how it probes high return products or business lines; whether it understands strategies for cross-selling products; how growth is obtained; and whether products are being sold to the right customers.

  • Inducements/Conflicts of Interest

Guidance on inducements and conflicts of interest relating to investment advice was published by the FCA in January last year; the FCA will this year assess how firms’ practices have changed.

  • Emerging Distribution Models

The FCA will investigate non-advised sales of investment and protection products. The FCA intends to examine how consumers behave when making their own investment decisions, and how asset managers support consumers in choosing products that are suitable for their circumstances.

  • Unfair Contract Terms

The FCA will renew its focus on unfair contract terms in the financial services sector, as the Consumer Rights Act will take effect in October this year; the Act lends further legal clarity to the notion of ‘fairness’ in contract terms, and allows for better assessment of contracts.

  • Fraud & Financial Crime

While the FCA intends to continue its focus on clamping down on money laundering and bribery corruption measures (as these areas can deliver the most ‘value’), it will also look at issues of fraud.

  • EU Law

This year, a number of measures will be implemented – many of which have implications for asset managers and will require changes to documentation, policies and procedures. These include;

MiFID II

Market Abuse Regulation

PRIIPS

Benchmark Regulation

Insurance Mediation Directive 2

Fourth Anti-Money Laundering Directive

 

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