l FCA Takes Asset Managers to Task | SMCR Compliance

FCA takes asset managers to task over subpar governance

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The Financial Conduct Authority (FCA) has issued a stinging criticism of asset managers’ approach to liquidity management, governance, value for money and investing in adequate technology.

In a letter addressed to chief executives, FCA director of wholesale supervision Marc Teasdale flagged “key risks of harm” the regulator sees asset managers posing to customers and markets and demanded appropriate action be taken.

Teasdale said: “Overall standards of governance, particularly at the level of the regulated entity, generally fall below our expectations. Funds offered to retail investors in the UK do not consistently deliver good value, frequently due to failure to identify and manage conflicts of interest.

“Inadequate investment in technology and operational resilience has led to deficient systems which could cause harm to market integrity or loss of sensitive data.”

Teasdale highlighted liquidity management in open-ended funds as a “central responsibility” for an authorised fund manager, or authorised corporate director (ACD). He said liquidity remains their responsibility even if they delegate fund management to a third party.

It comes after the suspension and subsequent closure of the Woodford Equity Income fund which had Link Fund Solutions as its ACD. The regulator is probing the relationship between the two parties as well as the general role of external ACDs.

The letter also warned asset managers over their board governance, drawing attention to the Senior Managers and Certification Regime (SMCR) which was extended to asset and wealth managers on 9 December.