FCA consults on fund liquidity risk management enhancements

The FCA is consulting on how best to ensure that authorised fund managers are equipped to manage their funds’ liquidity  and that they use their management tool effectively. The proposals follow measures the FCA has taken since the FPC noted in 2019 that there was a mismatch between some funds’ redemption terms and the liquidity of their assets. The FCA wants to create two new annexes in COLL which will include the main relevant IOSCO recommendations and bring together all the FCA’s communications to date. It does not expect AFMs to need to make significant changes as a result of the proposals.

The changes would broaden the COLL definition of “dilution” and make a few consequential changes within COLL as well as introducing the new Annexes, which will also apply to FUND.

Consultation closes on 23 February.