This week, we take a look at the FCA’s supervisory findings in relation to the investment management sector’s understanding and compliance with their appointed representative regulatory responsibilities.
We highlight the Delegated Regulations supplementing European regulations published on 22 May2019, the new cost transparency templates published by CTI and ESMA’s new co-ordination network on sustainability.
We review the LEI ROC update for consistency on fund family relationships.
Finally, we take a look at the FCA’s updated webpage on its decision on anti-competitive conduct in the asset management sector.
Investment management firms: significant AR shortcomings
On 20 May 2019, the FCA published its supervisory findings in relation to the investment management sector’s understanding and compliance with their appointed representative (AR) regulatory responsibilities. The FCA’s supervisory work identified that:
- there were significant shortcomings in principal firms’ understanding of their regulatory responsibilities in this area, and that most of those firms are not assessing the risks;
- most of these firms had weak or under-developed governance arrangements in place;
- there were concerns that some principals may not be holding adequate financial resources as a result; and
- many did not identify conflicts of interest inherent in this business model.
On the same day, chief executive officers of principal firms with ARs in this sector received a reminder of the FCA’s expectations in the form of a Dear CEO letter which can be read here.
Conflicts of interest and social impact (EuSEFs, EuVECA)
On 22 May 2019, Delegated Regulations supplementing European regulations were published dealing with matters relating to conflicts of interests and the exercise of voting rights to prevent conflicts, and procedures to measure positive social impact and information requirements.
- Delegated Regulation supplementing the European Social Entrepreneurship Funds (EuSEF) Regulation.
- Delegated Regulation supplementing the European Venture Capital Funds (EuVECA) Regulation.
LEI | update for consistency on “fund family” relationships
On 20 May 2019, the Legal Entity Identifier Regulatory Oversight Committee published its policy on fund relationships in the global legal entity identifier system. This requests the Global LEI Foundation to replace the current optional reporting of a single “fund family” relationship with the following relationships:
- fund management entity relationships;
- umbrella structures;
- master-feeder relationships.
Consistency is the aim of this update and to provide a means to facilitate a standardised collection of fund relationship information at the global level. You can read the policy here.
FCA decision on Competition Act 1998 and asset management sector
On 22 May 2019, the FCA updated its webpage on its Decision on anti-competitive conduct in the asset management sector. You can find the webpage here which contains links to the full Decision and the Decision Annexes. The FCA’s key message is that sharing information with your competitors may be illegal in certain cases. Firms need to:
- comply with competition law and relevant regulatory requirements;
- assure that their relevant employees know and understand the competition law relating to disclosure of information to and/or accepting it from competitors;
- have appropriate training and compliance procedures so that employees can identify strategic information and know how to handle it in compliance with the requirements; and
- notify the FCA of their own actual or possible contraventions of competition law (PRIN 11).
Cost Transparency Templates
On 21 May 2019, the Cost Transparency Initiative (CTI) announced the launch of finalised industry templates for the disclosure of costs and charges to institutional investors. Guidance accompanies these templates which will assist pension schemes and their advisors on how to use the cost information, and asset managers on how to provide cost information to their clients. The FCA made a statement on 22 May 2019 welcoming the launch of these templates as the CTI was a key remedy of the asset management market study, and a final step in the work of the Institutional Disclosure Working Group. You can find the CTI launch here, links to templates here, and the FCA’s statement here.
Co-ordination on sustainability
On 23 May 2019, ESMA announced that it has established a new co-ordination network on sustainability (CNS). The EU envisages a shift towards a more sustainable financial system and both it and EU securities regulators must, therefore, make sustainable finance an integral part of their activities. You can read the ESMA press release here.