Compliance

FCA Urges Asset Managers To Ensure They Invest As They Declare

Amisha Mehta, Assistant Editor, London, 11 April 2016

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The UK's financial watchdog has issued a statement reminding asset management firms to operate in line with investors’ expectations.

The Financial Conduct Authority has urged asset managers to invest in line with their stated strategy after finding some instances of unclear product descriptions and inadequate governance or oversight.

The findings come from a review in which the FCA assessed 19 UK fund management firms responsible for 23 UK authorised funds and four segregated mandates. The regulator found that asset managers were generally taking the right steps to ensure they manage funds as they say they will.

“In most circumstances they are clear about how they are going to invest and have the correct level of oversight to ensure practice follows promise,” said Megan Butler, the FCA's director of supervision – investment, wholesale and specialists.

“However, the industry needs to consider how it communicates when funds are linked to financial benchmarks. It is also vital that funds keep investment practices under review so they match their stated aims and strategy, irrespective of whether the fund is still actively marketed, because investors base their decisions on this information.”

The review also found that not all the firms monitored the distribution of their funds as carefully as they should. It found two funds that were available on execution-only platforms when the fund management company had planned for them to be available only with advice. More encouragingly, five firms were investing in smarter ways to analyse data from their distributors to better understand the types of customers that were investing in their funds.

The UK fund industry manages over £6 trillion ($8 trillion) of assets, the FCA noted. Firms in this industry manage UK domiciled funds worth more than £800 billion on behalf of institutional and retail investors.

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