By Katrina Cockram, Principal Consultant
The Financial Conduct Authority (FCA) recently wrote an update to the Asset Management and Alternative sector, outlining areas of regulatory focus for firms.
The letter is an update to sectoral portfolio letters issued previously by the FCA in August 2022 and February 2023, detailing thematic regulatory focus areas the FCA expects various financial services sectors to focus on in the year ahead. Here, we summarise the update.
Thematic overview
A key consideration in the letter was the effectiveness of firms’ governance arrangements. The FCA expects firms to allocate senior accountability for the risks listed below:
- Assessment of Value and Consumer Duty
- Financial and operational resilience
- ESG considerations
- Valuation practices for private assets
- Market integrity and disruption
- Regulatory Framework Reform (Smarter Regulatory Framework, Offshore Funds and PRIIPs disclosure reform)
The FCA understands that failing to manage and oversee risks stemming from these thematic areas could result in poor outcomes for investors and customers – in turn, crystallising reputational and resilience risks.
While a certain level of guidance is offered, firms are expected to demonstrate that they have considered each of the above thematic areas in turn.
Next steps expected of firms
The FCA acknowledges that firms will need to consider the above points in the context of their activities.
However, the regulator nonetheless expects the Board and the CEO to discuss the content of the FCA’s publication, consider how it applies to the firm’s business and take remedial action where needed.
The FCA further expects firms to consider if risks of harm exist and ensure that these risks are mitigated by all necessary actions.
How IQ-EQ can help
To assist firms with applying the FCA’s guidance and reviewing the regulator’s expectations of the Alternatives sector in proportion to each firm’s nature, scale and complexity of its business, the compliance consulting team at IQ-EQ have drafted pragmatic guidance and support materials to help firms align with the FCA’s expectations and resulting peer group practices.
If you’d like to discuss the FCA’s update to its Alternatives Supervision Strategy and find out more about the support available from IQ-EQ’s in-house compliance consulting and technical regulatory reporting teams, please get in touch.
