‘Nuclear button’ hit on asset manager regulation

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Jun 29, 2017
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The Financial Conduct Authority said it wanted to “strengthen the duty on fund managers to act in the best interests of investors”

Chris Helgren/Reuters

Britain’s financial watchdog has “hit the nuclear button” to end years of light touch regulation of asset managers, lawyers said yesterday of moves to force greater transparency around fees.

The Financial Conduct Authority published plans yesterday that it said would create greater competition among asset managers. A key measure will be moves to force them to disclose “a single, all-in-fee to investors”.

Authority officials also emphasised that they wanted to “strengthen the duty on fund managers to act in the best interests of investors”. They said they would use the senior managers regime to boost “individual focus and accountability” and “to require fund managers to appoint a minimum of two independent directors to their boards”.

The authority will also aim to improve fairness around the management of share classes and the way in which fund managers profit from investors buying and selling their funds.

Jake McQuitty, a partner at the law firm TLT, said: “Investment consultants are also now squarely in the FCA's line of sight.” He said the proposals would “bring the asset management sector closer in line with the regulatory standards and expectations that exist in retail banking”. In that sector, the Competition and Markets Authority is introducing further measures to make it easier for customers to switch banks and to have more control over charges.

Jake Green, a partner at the City of London law firm Ashurst predicted that some asset managers would find the beefed up regime “brutal”. However, he went on to says that “it appears hard to argue with. The fact that there was found to be no relationship between charges and gross performance makes for stark reading”.

Green also saw “the shadow of the [senior managers regime] hovering closer over the asset management sector. It's mentioned frequently and the FCA expects it to help draw fund managers attention to acting with the best interests of the investors in mind”.

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