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FCA 2017/2018 Business Plan: How does it affect the Investment Management Sector?

FCA 2017/2018 Business Plan: How does it affect the Investment Management Sector?
  • United Kingdom
  • Financial institutions - Asset managers and funds


On 18 April 2017, the FCA published its 2017/2018 Business Plan and Mission. In addition, for the first time, the FCA has published its Sector Views, which highlight the issues and developments the FCA sees in the sectors it regulates. Together, these documents provide greater clarity about how the FCA operates.

This briefing will focus on the sector priorities specific to investment management that are set out both in the business plan starting on page 60 and in the sector views document on page 47.


The FCA has made it clear that its focus is on making competition work in the investment management sector. Its rationale is that the size of the sector is significant (£7 trillion of collective institutional and individual assets managed by the sector) and that it has a direct impact upon consumers, either through their retail investments or their pension funds. The FCA points out that they see the sector playing a key role in upholding overall market integrity and contributing to financial stability.

Outcomes the FCA is seeking from the investment management sector

The FCA would like to ensure the following:

  • Firms act in the best interests of their investors and earn customer trust
  • Investors reward firms that act in their best interests
  • Investment management products deliver value for money
  • Investors understand the objectives of the funds they are investing in
  • Funds report their performance against appropriate benchmarks
  • Fund managers implement available liquidity management tools when they face investor redemptions and/or valuation issues, and manage conduct risks effectively
  • Fund managers remain responsible participants in the wholesale markets 
  • Critical service providers, particularly custody banks, achieve acceptable levels

FCA’s priorities for the investment management sector

The FCA focusses on three key activities relating to investment management:

Asset Management Market Study

In November 2016, the FCA published an interim report on its asset management study. In the business plan, the FCA reiterates its competition concerns and the package of remedies that were proposed in the interim report.  It further clarifies that it will publish the final report in Q2 2017 and will consult on proposed remedies and interventions. For more information about the interim report, please see our November 2016 briefing.

Fund liquidity strategy

The FCA states it will continue to participate in the ongoing debate with national and international authorities around the liquidity management of funds.  It  will review feedback to its discussion paper on liquidity management in open-ended funds, which it published in February 2017.  The FCA states that, following stakeholder feedback, it will review its policy options and the available tools that asset managers have to manage liquidity when facing redemptions and valuation issues.  It will also assess how adequate they are in managing conduct risks and addressing financial stability concerns.

Custody banks strategy

The FCA is planning a number of interventions in the custody bank sector which include:

  • continuing its work to ensure firms meet its CASS standards governing the safekeeping of client assets;
  • supporting the PRA’s work to map and evaluate critical infrastructures in firms;
  • evaluating custody banks’ resilience and resistance to cyber-attacks; and
  • evaluating the quality of product governance and controls at firms.

Cross-sector priorities

In addition to its sector priorities, the FCA Business Plan sets out six cross-sector priorities, starting on page 36, which are similar to those set out in last year’s business plan.  These include the following:

  • Firms' culture and governance
  • Financial crime and anti-money laundering 
  • Promoting competition and innovation 
  • Technological change and resilience
  • Treatment of existing customers
  • Consumer vulnerability and access to financial services

More detail about the FCA’s analysis of the issues is provided in the sector views document.

With respect to the extension of the Senior Managers & Certification Regime to all FSMA firms, the FCA states that its focus “is to deliver a regime that is simple, proportionate and clear.”  The FCA plans to tailor the new regime to reflect the different risks, impact and complexities of firms.

Brexit and the FCA’s role

The UK's decision to leave the EU and the outcome of the negotiations on the UK's withdrawal from the EU are cited as one of the risks in the FCA's risk outlook in Chapter 4 of the business plan.

The FCA explains that Brexit has important implications for the FCA over the coming years and will be a key area of focus. The FCA is liaising closely with HM Treasury and the Bank of England  to ensure a smooth transfer of EU rules and legislation into the domestic framework, and that the regulatory framework continues to operate without interruption following the UK's withdrawal from the EU.

The FCA has highlighted five principles that will provide the basis on which it advises the government:

  • Cross-border market access
  • Consistent global standards
  • Co-operation between regulatory authorities
  • Influence over standards 
  • The opportunity to recruit and maintain a skilled workforce.


The custody banks strategy appears to be the only new key activity highlighted in this year’s business plan. The FCA’s activities with respect to the Asset Management Market Study and fund liquidity strategy are a continuation of already announced work.

Unfortunately, the business plan does not provide any real clarity on Brexit which is surprising given that this business plan will take us half-way to the point when the UK’s withdrawal is complete.

The FCA’s comments on taking a more proportionate and tailored approach to the extension of the SMCR should be welcome news for all FSMA firms not yet subject to the regime.