FCA gets it on for UK asset management competition
Who doesn’t love a sweet and perfectly formed asset management industry? The UK’s Financial Conduct Authority (FCA) has revealed its next steps to improve competition in this arena.
For those of you whose memories haven’t been decimated by 21st century life, you may recall back in 2016 that the FCA said there was weak price competition in a number of areas of the industry.
With this in mind, the FCA has today (5 April) published its latest edicts. These include final rules following a previous consultation, and a consultation on proposed rules and guidance.
Christopher Woolard, executive director of strategy and competition at the FCA, says: “The investment choices open to people, and the decisions they make on how to invest, can have a profound impact on their financial health. They can also have consequences for their families, as well as society as a whole.”
He adds: “That’s why it is important the asset management industry, which looks after the savings of millions of investors, is working as well as possible. But our market study found evidence of weak price competition in a number of areas.”
Well, the last sentence seems kind of similar to what was going on in 2016.
Anyway, the regulator’s documents address concerns outlined in the June 2017 final report of the asset management market study.
The final rules and guidance cover:
- A requirement for fund managers to make an annual assessment of value, as part of their duty to act in the best interests of the investors in their funds;
- A requirement for fund managers to appoint a minimum of two independent directors to their boards;
- The introduction of a new prescribed responsibility under the Senior Managers and Certification Regime to bring individual focus and accountability;
- Technical changes to (i) improve fairness around the way in which fund managers profit from investors buying and selling their funds and (ii) facilitate the movement of investors into cheaper share classes.
Gripped by publication fever, the FCA says it is also publishing a further consultation on remedies related to funds. This includes proposals on:
- How fund objectives can be expressed more clearly and be more useful to investors;
- Making it clearer when funds are benchmark-constrained, or limited in how far their holdings can differ from the weightings of a benchmark index;
- Ensuring that where a fund uses one or more benchmarks, this is disclosed consistently and explained to investors.
Firms have 18 months to implement the rules on assessment of value and appointment of independent directors and 12 months for the rules related to the way in which fund managers profit from investors buying and selling their fund.
The FCA’s asset management market study can be found here.