Duncan ScottFCA has published a Dear CEO letter updating its portfolio letters issued in August 2022 and February 2023 setting out its Asset Management & Alternatives Supervisory Strategy. The letter sets out certain areas of focus (see below) that FCA wish to highlight to supplement the multi-year plan FCA set out previously and flags the various challenges the asset management industry faced in the course of 2023.
Assessments of Value and Consumer Duty
Following on from FCA’s earlier multi-firm review of AFMs’ assessment of value (AoV) it continues to engage with those firms with significant AoV deficiencies, using our regulatory tools as appropriate. FCA now intends to build on this and assess, under the Consumer Duty, firms have considered price and value of products and services provided to unit-linked funds. FCA will then undertake a joint multi-firm review with the life insurance portfolio, to understand price and value across the value chain and what actions firms have taken under the Duty to improve outcomes.
FCA has also reminded firms that the Duty will apply to closed products and services from 31 July 2024.
Change Management
FCA intends to continue its work with those firms identified as having deficiencies in their mapping of impact tolerances, risk identification and testing as required by Policy Statement 21/3: Building operational resilience. FCA reminds firms that by no later than 31 March 2025, in-scope firms must have performed mapping and testing showing that they are able to remain within impact tolerances for each important business service.
FCA has highlighted the advent of the Sustainability Disclosure Requirements and investment labels and warned firms that it will be concerned if firms make exaggerated or misleading sustainability-related claims, including about their investment products.
Valuation practices for private assets
FCA will be conducting a multi-firm review examining valuation practices for private assets, including examining the personal accountabilities for valuation practices in firms, governance of valuation committees, the information reported to boards about valuations and the oversight by relevant boards of those practices.
FCA is also intending to:
- continue its work with the Bank of England on the ongoing System-Wide Exploratory Scenario being conducted to improve understanding of the behaviours of banks and non-bank financial institutions during stressed financial market conditions and how those behaviours might interact to amplify shocks in UK financial markets that are core to UK financial stability;
- continue to support the Asset Management Taskforce to identify and harness potential innovative new technologies for the UK asset management industry;
- undertake work to implement the government’s Smarter Regulatory Framework (SRF) with a focus on MiFID, AIFMD and UCITS;
- launch its enhanced Fund Gateway; and
- continue engaging with international regulators.