The UK Financial Conduct Authority ("FCA") issued a policy statement establishing new rules and guidance to improve investor protections in the UK asset management industry. The new requirements represent the latest steps to address concerns identified in the FCA's 2017 asset management market study final report.
In the final report, the FCA found that price competition within the market is weak, fund performances are not routinely reported against an appropriate benchmark and investors often lack information concerning fund objectives and performance. The new rules and guidance focus on the duties that authorized fund managers have as the agents of investors, and will require fund managers to provide annual assessments of the costs and value of their funds. Fund managers will also be required to have at least two independent directors on their boards, and technical amendments will be implemented to (i) change how fund managers profit from investor activity and (ii) simplify movement into cheaper share classes.
In addition, the FCA issued a second consultation paper proposing further rules and guidance to improve the "quality, comparability and robustness" of information that authorized fund managers make available to investors.
The new FCA rules and guidance will become effective on April 1, 2019 (regarding risk-free box profits) and September 30, 2019 (on value assessment and independent directors). The revised non-Handbook guidance that relates to share classes is effective immediately.
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