By Zainab Kuku
The FCA did not hold back in its most recent comments to ESG benchmark administrators, in an indication of its increasingly adversarial approach to ‘greenwashing’. It described the quality of disclosures of ESG factors considered in benchmark methodologies as ‘poor’, and aimed clear warning shots at administrators who fail to comply with the FCA’s feedback.
Read MoreBy Kai Zhang and Philip Morgan
On 1 February, the UK Government published another consultation paper on the proposed regulation of business relating to cryptoassets in the UK. This is to seek views (by 30 April 2023) on the overall approach and policy direction, and includes a call for evidence to gather more pertinent information on decentralised finance. As such, the consultation does not contain details on any specific proposed rules. For example, the proposed cryptoasset-related regulated activities described in the consultation paper are stated to be illustrative of the sorts of activities the Government intends to regulate, rather than specific proposals. For further information on this consultation please see our fintech blog here.
One of the UK FCA’s favoured ways of regulating is through “Dear CEO” letters, which seek to place a direct onus on CEOs to address FCA priorities. On 3 February 2023, CEOs of UK asset management firms were the recipients of one such letter. Much of the content is not surprising (e.g. the emphasis on consumer outcomes) but we highlight here some particularly notable points:
Read MoreBy Andrew Massey and Robert Lloyd
With effect from 31 July 2023*, a new Consumer Duty will require firms conducting regulated activities in the UK to act to deliver good outcomes for retail customers. The FCA has conducted a review of the implementation plans of a number of larger firms, and published its findings on 25 January 2023.
Although pertaining to larger firms, the findings – particularly the examples of good practice and areas for improvement – are intended to be “useful” for all firms preparing for the Duty. The underlying concern identified by the FCA is the risk that firms may not be ready in time, or may struggle to embed the Duty effectively throughout their business.
Read MoreBy Maya Ffrench-Adam and Andrew Massey
1 January 2023 marked the latest regulatory milestone in the UK’s phased implementation of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
The TCFD – first set up in 2015 by the Financial Stability Board – is an international body that has issued recommendations, targeted at multiple sectors, for disclosing climate-related financial information.
Read MoreBy: Kai Zhang
In an 8 June 2022 policy statement, the UK Government proposes a specific regime for supervising “critical” service providers to the financial services industry. This is to address concentration risk as many regulated firms rely on a few large service providers whose failure could potentially threaten the stability of, or confidence in, the UK’s financial system. The Government observes that in 2020 over 65% of UK regulated firms used the same four cloud providers for cloud infrastructure services.
Read MoreBy: Philipp Riedl
On 18 May 2022, the Rapporteur submitted to the Committee on Economic and Monetary Affairs (ECON) a report suggesting changes to the EU Commission’s envisaged regulation of loan originating funds under its proposed AIFMD amendments (AIFMD II). The report includes some proposed relief, notably:
Read MoreBy: Andrew Massey and Robert Lloyd
On 28 April 2022, the FCA published consultation paper 22/8 on proposals to protect investors in UK authorised funds by allowing authorised fund managers (AFMs) to create side pockets in the form of separate unit classes for funds affected by the conflict in Ukraine.
The proposals are novel for UK authorised funds in at least two respects. Firstly, they would allow side pockets to be created without requiring a shareholder extraordinary resolution or at least 60 days’ prior notice. Secondly, the AFM would be able to suspend dealings in the unit class formed to create the side pocket without having to suspend dealing in the entire fund.
Read MoreBy: Andrew Massey and Melissa Vance
Fund managers can expect changes to custodian and other fund service provider practices in response to regulator challenge, and should review their due diligence of service providers.
In a letter on 23 March 2022, the FCA instructed the Chief Executive and Boards of third-party custodians, depositories for authorised and non-authorised funds, and third-party administrators to review key risks identified by the FCA, including the following:
Read MoreBy: Andrew Massey
On 25 March 2022, the FCA confirmed new requirements for the key information document (KID) required for package retail and insurance-based investment products (PRIIPs) in the UK: policy statement 22/2. Investment funds are generally categorised as PRIIPs, although UK UCITS and UK non-UCITS retail schemes are exempted from the PRIIPs KID requirement until 31 December 2026.
Read MoreCopyright © 2024, K&L Gates LLP. All Rights Reserved.