The FCA seeks views for post-Brexit regulation of the UK asset management sector

The FCA has announced that it is seeking views on how it could improve regulation of the UK’s asset management industry, which consists of around 2,600 firms managing around £11 trillion of assets for UK and global clients.

On 20 February 2023, the FCA published a Discussion Paper (DP23/2) on updating and improving the UK regime for asset management, which includes chapters on:

• The structure of the asset management regulatory regime, which considers the broad issues around the rules for asset managers and funds and areas where the rules could be simplified or restructured.
• Improving the way the regime works, which sets out areas where the FCA considers that there may be an opportunity to improve how the asset management regime works, including in respect of rules for authorised fund managers, depositaries and funds.
• Technology and innovation, which sets out the FCA’s thinking on the role of technology in supporting better outcomes from authorised funds, which touches on recent developments related to fund tokenisation, tokenised portfolio assets and investments in cryptoassets.
• Improving investor engagement through technology, which considers how the FCA’s fund rules could be revised, in light of technological developments, to improve investor engagement, particularly in respect of the experience of retail investors once they have invested in their chosen fund. This chapter also covers the post-sale information that fund managers give investors and the wider market about the fund and its activities, as well as how retail investors can interact with the fund manager and make their views known.

The FCA’s call for views comes in the context of the UK Government’s Future Regulatory Framework (FRF) review, which was set up to decide how the regulatory framework for financial services should adapt to the UK’s new position outside the EU post-Brexit. The FRF will involve HM Treasury repealing retained EU law and replacing it with an appropriate UK framework. Once the Treasury begins work on this area, the FCA will need to move the detailed requirements of retained EU laws into its rules for asset managers, which is why it is reviewing the wider asset management regime against its objectives ahead of this.

The FCA asks that the industry provides its views by 22 May 2023, following which the FCA will consider the feedback and publish a feedback statement later in the year, potentially accompanied by a consultation paper on certain discussion topics.

You can find our client note on the discussion paper here