FCA Publishes a Closet Tracking Fund Webpage

The FCA published a new webpage on 14 March 2018, outlining its recent work on closet tracking funds. The FCA considers that closet tracking funds look like, and charge similar fees to, actively managed funds that strive to beat a benchmark; however, they are managed in a way that is similar to passively managed funds which track a benchmark and usually charge a much lower fee.

Following the FCA’s asset management market study it investigated 84 funds at the end of last year that were sold as market-beating. As a result of this investigation, the FCA is working with 42 of them to improve their management disclosures. It has ordered 64 of those 84 funds to improve disclosures as to how investors’ money was being managed and a number agreed to compensate investors as a result.

View the FCA webpage.

HM Treasury Issues Fintech Sector Strategy Paper

HM Treasury published a policy paper on 22 March 2018 setting out action the UK government has taken to make the UK the best place for Fintech business and its plans to preserve and extend the UK’s international edge, including action to remove barriers to entry and growth.

Among the plans, was an announcement of the establishment of a Cryptoassets Task Force comprising HM Treasury, the Bank of England and the FCA to explore the risks of cryptoassets and the potential benefits of the underlying distributed ledger technology. The task force is to report back in the summer.

Read the policy paper.

FCA Consults on its Approaches to Supervision and Enforcement

The FCA published two consultation papers on 21 March 2018 on its approaches to supervision and enforcement.

In the Approach to Supervision paper, the FCA says that it aims to be more forward-looking and pre-emptive in its supervision of firms since it considers that firms’ strategies and cultures are at the root of most major failings. The paper outlines the FCA’s supervision priorities, including:

  • For the wholesale markets the FCA’s focus will be on user protection, in particular conflicts of interest, and market integrity.
  • For the retail markets as they relate to asset management, the FCA’s priorities will include product suitability, complaints about products and provision of misleading or insufficient information on a products costs or risks.
  • For both, the FCA will aim to ensure that forms and market are stable and resilient, including from cyber-attack or technological failure, are not used as conduits for financial crime, main control over personal data, and do not fail in a disorderly way.

In the Approach to Enforcement paper outlines how the FCA conducts investigations and its powers. The FCA says that its overriding principle with regard to enforcement is substantive justice – to ensure it carries out investigations in a consistent and open-minded way.

The FCA is seeking views on a number of questions in its approaches to supervision and enforcement to find out if it is being clear in its approaches and what else it could be doing. Feedback can be given until 21 June 2018 and the FCA will publish final documents later this year.

Link to the FCA papers.