The Financial Conduct Authority (FCA) has launched a discussion paper as it seeks to update UK asset management regulation following Britain’s exit from the European Union.
The regulator has requested comments from stakeholders as to how the sector can improve support for investors and increase competition.
Participants have until 22 May to respond to the paper with their views before a feedback statement is published later in 2023.
The FCA said the Future Regulatory Framework set out by the government, which gives the authority responsibility for updating regulation following the UK’s exit from the EU, presents an opportunity to modernise and tailor rules to the needs of UK markets and consumers.
It wants any new regulation to enable innovation and technological development, while being consistent with international standards so that UK-based firms can continue to operate efficiently on a global scale.
The regulator will also seek to simplify and standardise requirements where possible. The £11tn industry is currently governed by retained EU laws.
While no proposals for changes have been cemented yet, the paper suggested a few areas that could be looked at, including simplifying guidance around liquidity stress testing.
Camille Blackburn, FCA director of wholesale buy-side, said: “The UK has an opportunity to update and improve the UK regime for asset management. We want to hear from a wide range of voices about how we can enhance the existing standards and what we should prioritise to bring the most benefits to consumers, firms and the wider global economy.
“Given the UK’s leading role as a centre for asset management, we want to make sure our rules are fit for the future. 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.”
Fund administration overhaul ought to be front and centre
The consultation comes as the industry is preparing to adapt to new consumer duty rules set to come into effect at the end of April.
Kevin Doran, managing director at AJ Bell Investments, said: “Today’s release from the FCA is one of those rare birds in the industry of a genuine consultation. With no cemented new proposals put forward, the next three months should give the industry the time to fly a kite on some Brexit dividend proposals.
“That it overlaps with the sector’s dash to complete the consumer duty project by the end of April is unfortunate, but any opportunity to progress some of the more archaic practices within the industry should be seized with both hands.
“Top of the list will no doubt be creating a post-Ucits 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. Less immediately practical, but equally important issues to discuss will be new technologies such as AI and blockchain and how the industry embraces these on a day-to-day basis.
“As an industry, we should never forget whose money it is we’re looking after. Hopefully, we can take this opportunity to make investing easier for customers. Reducing costs, improving transparency and allowing people to feel good about investing.”
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