Following the FCA's introduction of new rules for funds investing in inherently illiquid assets, and the tussle between the EU and UK regulatory authority over whose regulatory regime was to blame for 2019's "liquidity crisis", fund managers and platform providers can expect additional regulatory scrutiny over the effectiveness of their liquidity management.
IFAs who do not consider liquidity issues when advising on suitability are also exposed to potential claims and regulatory attention. As investors wake up to the potential for liquidity risks, claims professionals will be alive to the potential for "contagion risk" and underwriters will also be assessing what questions they need to ask fund managers and IFAs regarding their management of liquidity risk.
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