On 20 January 2020, the FCA published a Dear CEO letter to asset managers setting out the key areas of harm asset managers pose to their customers and markets in which they operate. Overall, the FCA has observed that standards of governance, particularly at the level of the regulated entity, generally fall below its expectations.

The FCA’s supervision strategy addressing those key areas are set out below:

  • liquidity management. Where the FCA identifies potential liquidity issues with UK authorised funds it will ensure that authorised fund managers (AFMs) take prompt action to mitigate or resolve them;
  • firms’ governance. In H1 2020, the FCA will carry out work to evaluate the effectiveness of governance across the sector, focusing particularly on firms’ efforts to implement the senior managers and certification regime;
  • asset management market study (AMMS) remedies. In H1 2020, the FCA will carry out work to understand how effectively firms have undertaken value assessments on their authorised funds. The FCA will seek evidence of meaningful challenge at AFM boards on proposals made by the executive on cost, fees and product design. The FCA expects to do more work in the future to evaluate the effectiveness of the AMMS reforms;
  • product governance. In early 2020, the FCA will complete its reviews on how effectively the new product governance requirements have been implemented across the sector, and how effectively “host” authorised corporate directors undertake their responsibilities;
  • LIBOR transition. The FCA is in the process of gathering data from some asset management firms to enhance its understanding of their business models, including exposure to LIBOR risk;
  • operational resilience. Firms that suffer material technological failures or cyber-attacks are expected to contact the FCA promptly under Principle 11 of the  Principles of Businesses. The FCA expects to undertake further proactive work on this theme in the coming months; and
  • Brexit. Firms are expected to consider how the end of the implementation period will affect them and their customers and what action is required to be ready for 1 January 2021.

In terms of next steps, the FCA expects firms to consider the priorities and take appropriate action. The FCA also states that firms may be asked to take part in one or more pieces of related work.