The FCA has recently produced an update on improvements on fund authorisation, supervision and reporting agreements with trustees and depositaries. We set out below what the update covers:

  • Reduced authorisation times – from April 2015, the FCA will introduce new reduced targets of two months for authorisation of non-UCTIS retail schemes and one month for qualified investor schemes. The FCA needs the cooperation of firms with this to help deliver improvements to the industry.
  • Derivative reporting and disclosure review – after a review of funds that used derivatives for investment purposes, the FCA found that investors were not receiving adequate information about derivative leverage. To counter this, the FCA reiterated that firms should ensure investors are informed of important risks and identify whether a material risk is present. In addition, firms must submit to the FCA details of their derivative risk management process on an annual basis, as a minimum.
  • Valuation and liquidity oversight review – the FCA has found that poorly performed valuation and liquidity management can potentially cause harm to investors. In particularly property valuation can cause difficulties, so trustees and depositaries must take reasonable care to ensure that all scheme property is appropriately managed. During a review of liquidity, the FCA found that some firms performed no liquidity monitoring and so reiterated its requirements that business depositaries should perform liquidity monitoring in proportion to the liquidity risk, in order that investors are protected.
  • Reporting agreements – Trustees and depositaries will regularly report to the FCA on fund breaches. The FCA will use this information to build their understanding of the UK authorised investment fund.

To view the full FCA update, please click here.

Should you require any further advice or information on the above, Cleveland & Co, your external in-house counsel, are here to help.