FCA: Improving investor engagement through technology

In February 2023, the Financial Conduct Authority (“FCA”) released a discussion paper on ‘Updating and Improving the UK regime for asset management’ (DP23/2). The paper seeks feedback on proposals to enhance the UK regime for asset management. Among the proposed changes, the FCA has suggested the use of technology to improve the consumer experience in the asset management industry. The integration of technology to improve the customer experience in financial services is critical for ensuring that the industry remains competitive, customer-centric, and innovative.

The FCA proposes improvements to the following areas:

Investor engagement:

The FCA suggests that better use of technology could help improve attendance and participation at unitholder meetings. The FCA suggests that use of platforms such as a platform for the registered holder of the units, could enable their customers to vote electronically on proposals and submit those consolidated votes from registered unitholders to the authorised fund manager depositary. The FCA have also requested feedback on whether it should do more to facilitate investor engagement with their fund manager such as, mandating managers to offer directed voting to investors in pooled funds.

Fund prospectuses:

The FCA is concerned that fund prospectuses are not fulfilling its primary function of providing in-depth information to fund investors, who want to know more than is set out in the standard consumer disclosure documents. The FCA is exploring ways to modernise its approach to investment regulation and is considering several proposals. These proposals include redefining and aligning regulations with international best practices, making the fund prospectuses more modular, and altering content requirements to support clearer and easier segmentation. The FCA is also considering renaming the prospectus, so it is easier for investors to understand its purpose, as well as requiring firms to use tagging, data, or other forms of machine-readable content. Additionally, another proposal requires the prospectus to be stored and published under a central repository.

Managers’ reports and accounts:

According to the FCA, while managers’ reports and accounts can be provided electronically, they are still primarily designed as paper-based documents and are often difficult to review on screen or extract information from, as they are often in PDF format. The FCA is concerned that these reports are unengaging and are given little prominence by fund managers. Therefore, the FCA is seeking feedback on how to change the rules for managers’ reports and accounts to enable firms to make the best use of technology to meet investors’ information needs. Proposals include developing a common template that is machine-readable and requiring reports and accounts to be stored in a central repository maintained by the FCA.

To access the full discussion paper, please click here.

We’ll be exploring more of the proposals in the FCA’s discussion paper over the coming weeks, look out for our summaries covering:

  1. Improving the way the regime works.
  2. Measures to promote competition and innovation in the industry.
  3. How FCA rules could be improved.

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