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FCA Publishes Dear CEO Letter for UK Asset Management Firms

On January 20, the Financial Conduct Authority (FCA) published a letter to the CEOs of asset management firms to outline their view of the key risks of harm to the customers or markets in which they operate (the Letter). The FCA defines asset management firms as firms that predominately manage mainstream investment vehicles, excluding wealth managers and financial advisers.

In the Letter, the FCA outlined the following supervisory priorities:

  • Liquidity management: The FCA warned that “ensuring effective liquidity management in funds is a central responsibility for any Authorized Fund Manager (AFM).” (While not referencing it directly, this may be a response to the issues with the Woodford Equity Income Fund, which the FCA has previously addressed in this letter and this policy statement. It also may be a response to recent concerns about the promotion of mini-bonds to retail investors, which resulted in this temporary product intervention);

  • Firms’ governance: The Senior Managers & Certification Regime (SM&CR) was expanded to asset managers on December 9, 2019 (for more information please see the December 13 edition of Corporate & Financial Weekly Digest). In the Letter, the FCA stated that work is planned “in the first half of 2020 to evaluate the effectiveness of governance across the sector,” including the implementation of SM&CR;

  • Asset Management Market Study (AMMS) remedies: The AMMS was published in 2017 (for more information please see the February 15 edition of Corporate & Financial Weekly Digest). One outcome of the AMMS was to require firms to conduct “value assessments.” In the Letter, the FCA stated that work is planned for the first half of 2020 to determine if these assessments are being done effectively;

  • Product governance: The FCA noted the product governance requirements introduced by the revised Markets in Financial Instruments Directive (MiFID II), and explained that work in early 2020 will assess how effectively these new product governance provisions have been implemented. They also will assess whether Authorized Corporate Directors (ACDs), to whom AFMs can delegate fund management responsibilities, are undertaking their responsibilities effectively;

  • LIBOR transition: The FCA is generally concerned that firms are not preparing to stop using the London Inter-bank Offered Rate (LIBOR) by the start of 2022 (for more information please see the March 1 edition of Corporate & Financial Weekly Digest), and anticipate issuing “further communications on our specific expectations for LIBOR transition in due course;”

  • Operational resilience: In the Letter, the FCA told asset management firms to expect more work on operational resilience in 2020 (for more information please see the January 17 edition of Corporate & Financial Weekly Digest); and

  • EU withdrawal: In the Letter, the FCA drew attention to the updated Brexit website, and noted that firms should be preparing for the end of the implementation period on January 1, 2021.

The Letter is available here.

©2020 Katten Muchin Rosenman LLP


About this Author

John Ahern, Financial Attorney, London, Katten Law Firm

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...