UK Conduct Regulator Wants Asset Management Sector to Reflect on Risks to Customers and Markets01/22/2020The U.K. Financial Conduct Authority has published two letters addressed to the CEOs of firms in the asset management and funds sectors. The first letter is addressed to CEOs of FCA-authorized firms directly managing mainstream investment vehicles or advising on mainstream investments, excluding wealth managers and financial advisers. The second letter is addressed to CEOs of FCA-authorized firms managing alternative investment vehicles, such as hedge funds or private equity funds, or managing alternative assets directly or advising on these types of investments. The letters follow the FCA's report on its review of how firms in the asset management sector selected and used risk modeling and other portfolio management tools.
The letters set out the FCA's view of key risks of harm that these firms raise for their customers and the markets that they operate in. The FCA is requesting each CEO to consider whether their firm presents these risks and the firm's strategy for mitigating the risks.
The letters also set out the FCA's areas of supervisory focus. For fund managers, the FCA's priorities are: (i) liquidity management; (ii) firm governance, including the Senior Managers & Certification Regimes; (iii) implementation by firms of the changes resulting from the Asset Management Market Study remedies; (iv) product governance; (v) Libor transition; and (vi) operational resilience. For other firms in the asset management sector, the FCA is focusing on: (i) investor exposure to inappropriate products or levels of investment risk; (ii) client money and custody asset controls; (iii) market abuse; (iv) market integrity and disruption; and (v) anti-money laundering and anti-bribery and corruption. Preparing for the end of the Brexit implementation period is a priority for all relevant firms.
View the Dear CEO letter on Asset Management Supervision.
View the Dear CEO letter on Alternatives Supervision Strategy.
View details of the FCA's review report on the use of risk modelling.
Return to main website.
Financial Regulatory Developments Focus