On 25 January 2010, the FSA published a speech given by Dan Waters (Director, Conduct Risk, and Asset Management Sector Leader, the FSA) entitled Asset management regulatory trends and priorities in the post-crisis environment: an update from the FSA.

In his speech Mr Waters:

  • Commented on the current market conditions for asset managers, with a particular emphasis on the challenges and risks that the FSA considers may arise at this point in the economic cycle.
  • Reminded new UCITS managers that compliance with the UCITS framework will take considerable investment in systems and controls, and while asset managers may delegate various functions, they retain ultimate responsibility for compliance with the detailed requirements of UCITS III and UCITS IV.
  • Stated that the FSA’s work on structured products has shown that there remains a significant risk of profound mismatches between retail products produced through the investment chain and the needs of consumers who end up owning them.
  • Commented on the FSA’s developing view of product regulation in the retail funds and wider investments market with an emphasis not on product approval, but product governance, design and continued oversight by product providers. A key FSA priority is to develop a regulatory approach that looks more deeply into the value chain - into product governance, design and oversight by provider firms, rather than simply waiting to see what happens after products have reached mass circulation to the retail public.
  • Argued that despite previous work on TCF many product design processes do not evidence any real consideration of consumer needs. The FSA intends to look at this more closely in its supervision of firms in order to get a better understanding where business strategies, models and product development might create or exacerbate conduct risks to consumers.
  • Stated that the FSA has not seen firms adequately illustrate what they do to test products where it is appropriate to do so. Stress testing of products should be used to determine how they are likely to perform under a range of different market conditions, given knowledge and experience of past and anticipated market behaviour and the characteristics of the particular product.
  • Briefly commented on the wider European regulatory landscape, focusing on the European Commission’s work on packaged retail investment products (PRIPs) and the challenges arising from the Alternative Investment Fund Managers Directive.
  • Mentioned that it is not yet clear to the FSA where the Commission's work on PRIPs will lead.
  • Briefly mentioned the Retail Distribution Review (RDR) and stated that the FSA plans to include in the RDR Policy Statement a chapter which will set out a number of ideas on its future approach to platform services, taking into account the RDR decisions.

View Asset management regulatory trends and priorities in the post-crisis environment: an update from the FSA, 25 January 2010