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FCA sets out next steps to improve competition in the UK’s asset management industry

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FCA sets out next steps to improve competition in the UK’s asset management industry

The Financial Conduct Authority (FCA) has today published the latest step in its response to the concerns identified through its asset management market study.

This is part of a package of remedies to ensure fund managers compete on the value they deliver, and act in the interests of the millions who entrust them with their savings.

Today’s publications include:

  • Final rules following a previous consultation, focused on the duties of fund managers as the agents of investors in their funds

  • A consultation on proposed rules and guidance, focused on improving the information that investors get about funds

    • The documents address concerns outlined in the June 2017 final report of the asset management market study and are an important part of a wider package to improve competition in this industry for consumers.

    The final rules and guidance cover:

    • a requirement for fund managers to make an annual assessment of value, as part of their duty to act in the best interests of the investors in their funds

    • a requirement for fund managers to appoint a minimum of two independent directors to their boards

    • the introduction of a new prescribed responsibility under the Senior Managers and Certification Regime to bring individual focus and accountability

    • technical changes to (i) improve fairness around the way in which fund managers profit from investors buying and selling their funds and (ii) facilitate the movement of investors into cheaper share classes

      • The City watchdog said the measures will deliver better protection for all investors, both those who are actively engaged with their investments and those who don’t follow their investments closely.

      To address its concerns that even actively engaged investors do not find it easy to choose which fund is right for them, the FCA today also published a further consultation on remedies related to funds providing better information about what they are offering. This includes proposals on:

      • how fund objectives can be expressed more clearly and be more useful to investors

      • making it clearer when funds are benchmark-constrained, or limited in how far their holdings can differ from the weightings of a benchmark index

      • ensuring that where a fund uses one or more benchmarks, this is disclosed consistently and explained to investors

        • The FCA has also published an Occasional Paper setting out the results of behavioural research which looked at how different ways of presenting information about charges affected investors’ decision-making and their understanding and awareness of charges. Ts paper can be read here.

        Christopher Woolard, executive director of strategy and competition at the FCA, said: “The investment choices open to people, and the decisions they make on how to invest, can have a profound impact on their financial health. They can also have consequences for their families, as well as society as a whole. That’s why it is important the asset management industry, which looks after the savings of millions of investors, is working as well as possible. But our market study found evidence of weak price competition in a number of areas.

        “Today’s announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.”

        Firms have 18 months to implement the rules on assessment of value and appointment of independent directors and 12 months for the rules related to the way in which fund managers profit from investors buying and selling their funds.

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