Compliance teams within asset managers and alternative investment firms can expect a busy 2020. In two separate Dear CEO letters both published by the UK Financial Conduct Authority (“FCA”) on 20 January 2020, the FCA has stated that overall standards of governance in a range of areas fall below its expectations. The letters set out in brief terms the specific ways in which the FCA considers that firms may cause harm to customers or the markets in which they operate. It has invited firms to evaluate whether any of these risks are present in their operations and their strategies for tackling them. It has also set out in brief how it proposes to counter them through supervision.
The tables below summarise the key risks the FCA has identified, what it considers firms should be doing about them and which supervisory steps it proposes to take.
The FCA’s view of the asset management sector
The FCA’s view of the alternative investment sector
Whilst the letters are specific to their relevant sectors within the industry, firms should review both letters as there is overlap between the sectors in relation to the issues raised. The letters clearly indicate the FCA’s approach and focus on these matters and firms should use this as an opportunity to review their own processes and procedures in light of the letters and make adjustments where necessary.