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FCA Supervision Strategy Letter: Investment Firms, Asset Managers, Alternatie Investment Firms

FCA Supervision Strategy Letters

03 February 2020

The FCA has issued a number of Dear CEO letters over the last week. There has been one in relation to Portfolio Strategy for Investment Firms, another for portfolios of Asset Managers and a third to Alternative Investment Firms on portfolio strategy.

Dear CEO Letter: Alternatives Supervision Strategy

The Dear CEO letter to alternative investment firms outlines the FCA’s view of the key risks of harm that this sector pose to its customers/markets and lays out the regulator’s supervisory strategy, highlighting certain priorities, which include:

• Investor exposure to inappropriate products or levels of investment risks
• Market abuse
• Market integrity & disruption
• Client money and custody asset rules
• Brexit

The FCA’s letter notes that firms may be asked to partake in one or more pieces of work related to these specific priorities and that the regulator expects Firms to take action as required.

To read the Dear CEO Letter in full, click here.

Dear CEO Letter: Asset Management Supervision Strategy

The Dear CEO letter to Asset Management Firms outlines the FCA’s view of the key risks of harm that this sector poses to their customers or the markets in which they operate. In particular the FCA wants firms to consider how certain risks might be present at firms and how they should be mitigated. In particular the regulator sought to highlight the following to firms:

• Liquidity management
• Firm’s Governance
• Asset Management Market Study (AMMS) remedies
• Product governance
• LIBOR transition
• Operational resilience
• EU withdrawal

The FCA advises that, amongst other ongoing work in 2020, they will be undertaking work during the first half of the year to understand how effectively firms have undertaken value assessment. They will seek to evidence meaningful challenge at AFM boards on proposals made by the executive, including on costs, fees and product design.

The FCA have also reiterated that they expect Firms to ensure that funds’ objectives are clear, fair and not misleading and that they comply with the new rules around objectives disclosure (that resulted from AMMS) as they assess and authorise investment funds.

To read the Dar CEO letter in full, click here.

Dear CEO/Director: Portfolio Strategy Letter for Financial Advisers

The Dear CEO/Director Letter to Financial Advisers sought to highlight key areas of concern the regulator has with these financial advice firms. In particular, the FCA specifically detailed concerns over:

• Assessing suitability of advice and disclosure
• Defined benefit pension transfer advice
• Pensions and investment scams
• Adequate financial resources and professional indemnity insurance
• Ban on promotion of speculative min-bonds to retail customers
• Senior Managers and Certification Regime
• EU Withdrawal

All points raised within the letter should be considered by Firms and discussed with fellow directors and/or the Board to agree what further action should be taken. Principal Firms are also reminded to share the contents of this letter with their appointed representatives.

To read the Dear CEO letter in full, click here.

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