On 3 February 2023, the FCA published a portfolio letter addressed to CEOs of asset management firms, setting out its supervisory strategy for the sector. In the letter, the FCA outlines the harms to consumers or markets that it believes are most likely to arise from asset managers’ business models and explains how it intends to supervise firms to address these harms.
In terms of its supervisory approach, the FCA states that it will focus on assessing how effective firms’ governance is in identifying, considering and mitigating harm. It will focus on firms with known issues or where it finds outliers in the risk categories it sets out in the portfolio letter.
The FCA identifies the following supervisory priorities and in each case explains its view of the risks, what it expects firms to do and what it will do itself:
- Product governance.
- ESG and sustainable investing.
- Product liquidity management.
- Investment in operations and resilience.
- Financial resilience.
The FCA expects CEOs to consider whether the risks of harm it has identified are present in their firm and, if so, adopt strategies for mitigating them. In any future supervisory engagement the FCA will consider whether the firm’s governing bodies and senior managers with accountabilities have taken appropriate action to ensure that consumers and markets are adequately protected from these harms.