General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
April 26, 2018

Andrew Bailey of FCA offered a regulatory perspective on the asset management sector, while speaking at the London Business School Annual Asset Management Conference. He examined the key challenges facing FCA and the asset management market, along with the regulatory developments in the sector. With regard to the regulatory developments, he focused on the market study on asset management that FCA conducted, the recent European legislation, and the technological developments.

The market study revealed several drivers of weak competition in the asset management sector. Some investors are not well-placed to find better value for themselves, while struggling to protect their own interests and to drive competitive pressure on asset managers. To help mitigate this, FCA has issued the rules and consultations that seek to address demand- and supply-side problems in the asset management market, some of which are as follows:

  • Final rules on governance remedies focused on asset managers as agents of their underlying investors. 
  • Final rules requiring asset managers to pay profits they may earn when dealing as principal in the units of dual-prices fund without putting their own capital at risk back into the fund.
  • Revised guidance published on changes to make it easier for asset managers to move investors from more expensive share classes to cheaper but otherwise identical classes
  • Consultation proposing to improve clarity over what a fund is offering (what it aims to do, how it intends to do it, and how performance is shown) as lack of clarity is a reason for weak competition.

The market study also highlighted the importance of clear disclosure of what asset management services cost through the presentation of a “single charge.” Behavioral testing by FCA showed that the way the new information is presented will be as important as the disclosure, if it is to help consumers make more informed choices. In response to other concerns highlighted by the market study, FCA is supporting an independent Institutional Disclosure Working Group (DWG). The group is seeking to agree a disclosure framework to support consistent disclosure of costs and charges to institutional investors. In this context, he also discussed the major change introduced by the EU regulations on the second Markets in Financial Institutions Directive (MiFID II) and Packaged Retail and Insurance based Investment Products (PRIIPS) Regulation. MiFID II and PRIIPS have recently introduced greater disclosure of all costs and charges, including transaction costs. Other issues highlighted by the market study include conflicts of interest, ineffective competition, and a lack of transparency on fiduciary management performance and fees in the investment consulting market.

Mr. Bailey added that advances in technology are leading to various changes in the investment management sector, with significant developments in straight-through deal processing (STP) and distributed ledger technology (DLT). The advent of DLT opens the potential for STP to become even more efficient. Potential benefits include more efficient management of counterparty risk, enhanced reconciliation, and lower collateral requirements. Regulators will be looking at the ability of firms to oversee DLT, STP, and other technology-related outsourcing arrangements effectively. There are also questions around accountability, if interruption to these services results in any losses for investors. Another area of growth is the increasing use of artificial intelligence (AI). Areas using AI include risk management, compliance, investment decisions, securities trading and monitoring, and client relationship management. Investment managers may well have to increase their technology spends to keep up with AI developments. Supervision of AI remains a challenge and may also raise issues of accountability, said Mr. Bailey. He concluded that all of these are "very important issues for FCA."


Related Links

Keywords: Europe, UK, Securities, Asset Management, Regulatory Developments, Fintech, Regtech, FCA

Related Insights

BCBS Finds Liquidity Risk Management Principles Remain Fit for Purpose

BCBS completed a review of its 2008 Principles for sound liquidity risk management and supervision. The review confirmed that the principles remain fit for purpose.

January 17, 2019 WebPage Regulatory News

HKMA Urges Local Banks to Start Working on FRTB Implementation

HKMA announced that it plans to issue a consultation paper on the new market risk standard in the second quarter of 2019.

January 17, 2019 WebPage Regulatory News

EBA Finalizes Guidelines for High-Risk Exposures Under CRR

EBA published the final guidelines on the specification of types of exposures to be associated with high risk under the Capital Requirements Regulation (CRR). The guidelines are intended to facilitate a higher degree of comparability in terms of the current practices in identifying high-risk exposures.

January 17, 2019 WebPage Regulatory News

MAS Guidelines on Risk Mitigation Requirements for OTC Derivatives

MAS published guidelines on risk mitigation requirements for non-centrally cleared over-the-counter (OTC) derivatives contracts.

January 17, 2019 WebPage Regulatory News

BoE Publishes the Schedule for Statistical Reporting for 2019

BoE published the updated schedule for statistical reporting for 2019. The reporting institutions use the online statistical data application (OSCA) to submit statistical data to BoE.

January 16, 2019 WebPage Regulatory News

PRA Delays Final Direction on Reporting of Private Securitizations

PRA and FCA have delayed the issuance of final direction, including the final template, on reporting of private securitizations, from January 15, 2019 to the end of January 2019.

January 15, 2019 WebPage Regulatory News

SNB Updates Forms on Supervisory Reporting for Banks

SNB published Version 1.7 of reporting forms (AUR_U, AUR_UEA, AUR_UES, AURH_U, AUR_K, AUR_KEA, and AURH_K) and the related documentation for supervisory reporting on an individual and consolidated basis.

January 15, 2019 WebPage Regulatory News

BCBS Finalizes Market Risk Capital Framework and Work Program for 2019

BCBS published the final framework for market risk capital requirements and its work program for 2019. Also published was an explanatory note to provide a non-technical description of the overall market risk framework, the changes that have been incorporated into in this version of the framework and impact of the framework.

January 14, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for January 2019

EBA published answers to 13 questions under the Single Rulebook question and answer (Q&A) updates for this week.

January 11, 2019 WebPage Regulatory News

PRA Proposes to Amend Supervisory Statement on Credit Risk Mitigation

PRA published the consultation paper CP1/19 that is proposing changes to the supervisory statement (SS17/13) on credit risk mitigation.

January 10, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2473