On February 29, 2016, the FCA published good practices for liquidity management for investment management firms. The good practices are an outcome of the FCA’s work with the Bank of England to assess the risks of open-ended investment funds investing in the fixed income sector, culminating in a collation of practices which the regulator has seen being used by investment firms to manage liquidity. The FCA hopes that by publishing the good practices, all investment management firms can improve their liquidity management. The good practices cover four areas: (i) good disclosure of liquidity risks to investors; (ii) good processes and tools for liquidity risk management, including continuous re-assessment and updating to keep track with market conditions; (iii) good practices for managing redemptions and costs relating to redemptions, including disclosing those practices to investors; and (iv) thorough preparation for implementation of exceptional liquidity tools and measures, such as maintaining a procedure manual for implementation of each tool and testing implementation of tools to ensure that the measures work in practice.
The good practices are available at: http://www.fca.org.uk/news/liquidity-management-for-investment-firms-goodpractice.