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June Investment Management Update

June Investment Management Update

  • United Kingdom
  • Financial institutions - Asset managers and funds


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FCA policy statement on disclosure rules following application of PRIIPs Regulation

On 2 May 2017, the FCA published a policy statement (PS17/6) on its disclosure rules following application of the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (Regulation 1286/2014).

In PS17/6, the FCA summarises and responds to the feedback received to its consultation paper published in July 2017. It sets out how the FCA's disclosure requirements will change to reflect the introduction of the PRIIPs key information document (KID). The text of the final rules and guidance are set out in the Packaged Retail And Insurance-Based Investment Products Regulation Instrument 2017 (FCA 2017/28).

The FCA has decided to publish the Handbook guidance consulted on with only a few changes. The changes to the FCA Handbook focus on those changes necessary to reflect the direct application of the PRIIPs Regulation that will apply to firms that manufacture, give advice on or sell PRIIPs to consumers in the retail market. However, the FCA acknowledges the lack of guidance and clarification at EU level on the PRIIPs Regulation will lead to operational difficulties and legal uncertainty for some firms.

Annex 2 of PS17/6 includes lists of products that the FCA considers are PRIIPs or non-PRIIPs, which the FCA has amended slightly, following consultation. The FCA clarifies that its comments in PS17/6 on those lists may be amended or clarified further following any clarification at EU Level that may be provided during 2017.

On 15 May 2017, the FCA updated its webpage: PRIIPs disclosure: Key Information Documents, which it last updated in November 2016, to reflect comments in PS17/6.

For more information about PRIIPs, please see our most recent PRIIPs briefing.

IOSCO Annual Conference: Building Securities Market Resilience in the Post-Crisis World

On 17 May 2017, the International Organization of Securities Commissions (IOSCO) held the public sessions of its Annual Conference “Building Securities in the Post-Crisis World.” The public conference comes at the conclusion of IOSCO’s private meetings in which members discussed policy responses to challenges facing securities regulators.

A press release has been issued which explains that the following issues were discussed in the private meetings:

  • Asset management: The IOSCO board progressed its initiatives on liquidity risk management of collective investment schemes, aimed at strengthening the resilience of this form of market-based finance. The work also forms part of IOSCO’s efforts to take forward the relevant Financial Stability Board (FSB) recommendations to address potential structural vulnerabilities related to asset management activities.
  • Derivatives markets: It was agreed that the IOSCO board should examine regulatory reforms in derivatives markets to determine whether any aspects of the reforms, while contributing to financial stability, may have had negative, unintended markets effects which may need to be addressed by regulators. The Board also discussed IOSCO’s work with the Committee on Payments and Market Infrastructures on CCP resilience and recovery issues and on the FSB initiative on CCP resolution.
  • Financial benchmarks: To further address market issues, the IOSCO board agreed to prepare a public statement on matters for users of financial benchmarks to consider when selecting benchmarks.
  • Determining the role of regulation in FinTech and automation: An industry representative presented a possible framework for the regulatory use of penetration testing, which allows firms in the financial industry to evaluate their systems and controls, identify vulnerabilities, and strengthen their infrastructure against cyber threats. The Board agreed that a careful scoping out of possible future work would be very useful.

IOSCO’s annual conference focussed on the challenges of strengthening market resilience, addressing financial misconduct and financing the real economy through capital markets. Participants also discussed the role of international standards in securities markets and how regulators can support market development. For more information about the 2017 annual conference, please see IOSCO’s dedicated webpage.

FCA Assessing Suitability Review Report published

On 18 May 2017, the FCA published its “Assessing Suitability Review Report.” This report sets out the findings from the FCA’s review into the market for pensions and investment advice. The review was launched in April 2016.

The FCA initiated this review in April 2016 in recognition of the role it has to play supporting the sector in delivering suitable advice. The purpose of the review is to assess a statistically robust sample of advice files that allows the FCA to draw conclusions on the suitability of advice and quality of disclosure in the sector as a whole.

The FCA review assessed 1,142 individual pieces of advice given by 656 firms against the suitability and disclosure rules in the Conduct of Business sourcebook. It found the following in terms of suitability:

  • in 93.1% of cases, the sector provides suitable advice
  • in 4.3% of cases, the sector provides unsuitable advice
  • in 2.5% of cases, the sector provides unclear advice

The FCA considers that these are positive results for the sector and that they are a result of the successful adoption of the Retail Distribution Review by advisers.

The FCA also reported the following disclosure results:

  • 52.9% of cases, the sector provides acceptable disclosure
  • in 41.7% of cases, the sector provides unacceptable disclosure
  • in 5.4% of cases, the sector provides uncertain disclosure

The FCA will be beginning a communication programme over the course of 2017 and into 2018, where it will share more detail on its findings, including communicating examples of good and poor practice. The FCA also intends to repeat this review in 2019. This will be based upon advice delivered in 2018 and it will measure how the results have changed since 2015. This will also allow the FCA to assess how firms have implemented the requirements introduced by MiFID II, PRIIPs and the IDD.


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