Post Brexit overhaul planned by FCA to secure the UK’s status as an international hub for asset management
The Financial Conduct Authority (FCA) is looking to overhaul rules governing the asset management industry in a bid to keep the UK attractive to international money managers following Brexit.
In a discussion paper published this morning, the FCA said it was looking to “improve asset management regulation with a more modern and tailored regime” as part of its overhaul of financial rules post-Brexit.
The UK asset management industry – which collectively handles around £11 trillion in assets – is still governed by retained EU laws which the FCA will now have powers to reform under the Future Regulatory Framework, tabled by ministers to boost powers of UK financial regulators.
In the discussion paper today the watchdog said it wants to ensure that the UK “remains an attractive domicile for internationally active asset managers”.
“We want to see innovation in the sector, maintaining the UK as a leader in the use of technology. We also want to see the sector work in the best interests of the consumers and businesses it serves,” the FCA said. “These outcomes reflect a well-functioning asset management market.”
The regulator has not cemented any new proposals at this stage but said it will aim to “promote further discussion and listen to stakeholders’ views about what it should prioritise”.
Camille Blackburn, director of wholesale buy-side at the FCA, said the UK has “an opportunity to update and improve the UK regime for asset management.”
“We want a UK wholesale market which supports the economy and is open to innovation, while remaining consistent with high standards of consumer protection and market integrity,” she added.
A consultation on the plans is now underway with the industry invited to weigh in on the overhaul before May.
Analysts at AJ Bell said today the announcement was “one of those rare birds in the industry of a genuine consultation” in which the industry could set out their own agenda to the regulator.
“Top of the list will no doubt be creating a post-UCITS [Undertakings for the Collective Investment in Transferable Securities] world for UK asset managers, but front and centre ought to be an overhaul of the barbaric relic that is fund administration and – in particular – the fragmented process of buying and selling funds in an era where transacting in ETFs is infinitely easier,” said Kevin Doran, managing director of AJ Bell Investments.
The consultation comes as UK asset managers prepare to navigate the impact of the new consumer duty, set to be introduced by the FCA in July.
While not directly consumer facing, money managers who handle investors’ cash are expected to fall in line with the rules. The watchdog warned earlier this month that some asset managers “may be further behind in their thinking and planning for the Duty”.
“This brings a risk that they may not be ready in time, or they may struggle to embed the duty effectively throughout their business,” the FCA said.