Welcome back to the Fides Weekly Update. Take a look at the top legal and compliance new stories we’re talking about this week and don’t forget to scroll down to see our regular feature of Movers & Shakers of the week!
1. Crunch time for asset managers: FCA puts market study into action
Fund managers received the final rules from the FCA’s consultation paper into its asset management market study on Thursday, all of which centre around the requirement to act in investors’ best interests and provide value for money.
Following the report produced in June last year, Thursday’s announcement cited both a list of finalised rules with set deadlines, and proposed guidelines yet to be confirmed, where the regulator is looking to rectify bad practice impacting the savings of three-quarters of the UK population.
Improvements on governance standards featured in the finalised rules, with asset management firms ordered to appoint a minimum of two independent members to their boards. The appointments must be made by September 2019, and senior officials will be held accountable for this under the Senior Managers & Certification Regime.
Given that ‘value for money’ was a key term throughout the document, firms will need to prove that charges are reasonable in relation to costs and quality of service, and that they are required to switch investors over to cheaper share classes if it’s in their best interests.
Also confirmed was the introduction of the all-in fee and a clampdown on box profits. An all-in price will allow investors to make the best available investment choices (and get best value for money) by including an estimation of trading costs in the final price given to them.
Meanwhile, a ban on box profits will be implemented in April 2019, which could prove a blow to some fund managers. This form of profit is generated through a dual-priced fund structure, whereby the difference between the spread in a fund’s offer price, at which investors buy in, and the bid price, at which the provider buys units back, can be kept as profit by fund managers.
The FCA has announced that box profits should be returned to the fund to be used towards customer investments.
Whilst these rules are set to come into force over the course of 2019, there were proposed new rules that could potentially affect performance fees, the disclosure of fund objectives and closet tracking. ‘Closet tracking’ describe funds that claim to actively purchase investments but wind up with a portfolio not much different from the benchmark. It has entered the scrutiny of the regulator recently, and last year the FCA reported that “there is around £109bn in ‘active’ funds that closely mirror the market which are significantly more expensive than passive funds.”
Commenting on the above measures, Christopher Woolard, executive director of strategy and competition at the FCA, said the “announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.”
This week saw the deadline pass for all large organisations in the UK to report their gender pay gaps. Having followed this issue closely over the past few months, we have prepared a special report detailing all you need to know about law firm results, and how this reflects on the sector.
CLICK HERE to read the report.
Movers & Shakers of the week
Pinsent Masons global corporate crime head Barry Vitou is set to move to Greenberg Traurig’s London office to set up a white collar defence and special investigations practice
Chief technology officer Ian Storer departs Allen & Overy to join UBS as an architect for legal
McDermott Will & Emery has hired a team of 50 lawyers, including 20 partners, from a number of DLA Piper’s US offices. The mass move is expected to add $100m in revenue for McDermott.