UK: Key Takeaways From The UK Financial Conduct Authority's Review Into The Asset Management Market

Last Updated: 10 July 2017
Article by Chris Ahern and John MacGarty

In Short

The Situation: On 28 June 2017, the UK Financial Conduct Authority published the final findings of its review into the UK mainstream asset management market and announced a package of reform proposals to address the concerns identified.

The Result: The FCA's final report highlights investor protection, competitive pressure and regulating intermediaries as areas of concern. The proposed new rules and guidance to address these concerns are subject to a relatively rapid consultation timetable.

Looking Ahead: Despite the stated focus of the report, it is expected that the FCA's findings and proposals will, to some extent, inform practice across the market, including for private equity and other alternative fund managers, who need to pay close attention to the future consultations.

On 28 June 2017, the UK Financial Conduct Authority ("FCA") published its final report in relation to its review of the UK asset management market. The report sets out a package of reform proposals designed to address certain concerns identified in the report.


The UK's asset management industry is the second largest in the world, managing approximately £6.9 trillion of assets. The FCA launched its market study in November 2015 to investigate how well the market works generally and whether the investment products consumers invest in offer value for money. The review was intended to focus on mainstream asset managers (i.e., not alternative asset managers), pooled investment funds, insurance-based investment products and segregated mandates.

Findings and Reform Proposals

The FCA's final report identifies three key areas of concern: (i) a lack of investor protection, (ii) a lack of competitive pressure and (iii) regulation of intermediaries.

Investor Protection. The FCA proposes to strengthen the duty on asset managers to act in the best interests of investors and to use the Senior Managers regime to bring individual focus and accountability. The proposals (which are subject to further consultation) include a requirement that asset managers appoint at least two independent directors to their boards, changes to make it simpler for managers to switch investors into cheaper share classes where applicable, a requirement for better disclosure of box management practices and a return of risk-free box profits to investors. The FCA will also chair a working group to focus on how to make fund objectives more useful, and it will consult on how benchmarks are used and performance reported.

Competitive Pressure. The FCA identified a lack of pricing competition among asset managers. To increase competitive pressure, the FCA proposes to introduce a requirement that managers disclose a single, all-in fee (including asset management fees and an estimate of transaction costs and any intermediary fees) to investors. In addition, the FCA supports calls for consistent and standardised disclosure of costs and charges to institutional investors and recommends that both industry and investor representatives agree on a standardised template of costs and charges. The FCA proposes to ask an independent person to convene a stakeholder group to develop these proposals further, for both mainstream and alternative asset classes.

Regulating Intermediaries. The FCA will seek views from interested parties on whether to ask the UK competition authority to investigate investment consultancy services. Subject to such a referral, the regulator recommends that the UK Treasury consider bringing investment consultants into the regulatory perimeter.

Private Equity and Alternative Funds

Whilst alternative asset managers were excluded from the focus of the FCA's review, there will be a question over whether the FCA's revised approach might be brought to bear on managers of private equity, hedge and other alternative asset funds in the future. Given that the FCA is a principles-based regulator, it is likely that the current proposals reflect the FCA's perception of best practice toward investors in any asset class.

Indeed, the FCA's director of competition is reported as having stated that: "The focus of the study has been on the mainstream asset management community. Broadly, do we think some of the same principles apply to hedge funds? Yes". The FCA has specifically indicated that it will include private equity and hedge fund managers in its transparency drive despite them not being a focus of the study. Although it is also reported that the FCA has no immediate plans to look at these firms, we would not rule out future action or impact.

Additionally, investors may seek to apply any changes in approach or policy that they adopt as a consequence of the FCA's findings and recommendations in relation to their mainstream investments to their alternative investments, particularly in respect of transparency issues, which could bring pressure on alternative asset managers to conform with any changes in practice.

Next Steps

Any new rules and guidance will be subject to a cost–benefit analysis and formal consultation. The FCA has published a consultation paper setting out its proposals in relation to fund governance, risk-free box profits and share-class switching. The closing date for responses is 28 September 2017.

The FCA expects to publish further consultation papers on most of the remaining reform proposals before December 2017.

Given the relative speed at which the FCA is acting, we will continue to monitor the proposals closely and continue to provide updates on the rapidly evolving regulatory landscape.

Three Key Takeaways

  1. The manner in which asset management firms are governed and communicate their objectives and charges to investors is likely to change in the near future.
  2. The FCA's findings and proposals are likely to affect private equity and other alternative funds as a matter of expected best practice and future regulatory action.
  3. All asset management firms should keep close track of the regulatory developments as the FCA looks set to move quickly.

Nikesh Pandit of the London Office assisted in the preparation of this Commentary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions