Updated Legal Status of International Funds | March 19, 2024
The Financial Conduct Authority (FCA) has outlined its supervisory priorities for the next year, with a strong emphasis on the implementation of the Consumer Duty for asset managers and wholesale firms. This focus comes as some firms are experiencing problems with implementing the Consumer Duty for closed products, and the FCA expects to hear from them sooner rather than later.
The FCA has published helpful information on the Consumer Duty implementation, including the results of a second survey of firms carried out in November 2023 and a summary of two Ipsos surveys. Firms are expected to proactively tackle issues related to consumer outcomes, rather than waiting for FCA intervention.
One of the key areas of focus for asset managers is ensuring that their closed products offer fair value to customers and avoid exploiting consumers' lack of knowledge or behavioral biases. Firms should consider the Consumer Duty when approving financial promotions.
The FCA's supervisory priorities do not focus on the minutia firms need to deal with, but rather on the effectiveness of governance arrangements, oversight, and management information. Firms should ensure their strategies, leadership, and people policies prioritize good customer outcomes.
In addition to the Consumer Duty, the FCA will also be looking at governance and stewardship expectations for asset managers. The Financial Reporting Council (FRC) has revised the UK Stewardship Code for asset managers and asset owners, effective January 2026, with a transition period. The revisions involve changes to the definition of stewardship, reducing reporting burdens, and making stewardship reports more flexible.
The FCA continues to strengthen complaint handling, financial promotions, creditworthiness assessments, and disclosures, which interact with Consumer Duty expectations around treating customers fairly and ensuring good governance. The FCA’s broader market supervision includes authorisation metrics, enforcement actions, and improving firm engagement and transparency, which support overall FCA objectives for governance across all regulated firms, including asset managers.
The FCA has also announced a multi-firm review on the valuation practices for private assets. The expected amendments to MiFID II and MiFIR have been published, focusing on improving access to market data and trade transparency, establishing EU-level "consolidated tapes", banning "payment for order flow", and introducing new rules on commodity derivatives.
The FCA has raised concern over asset managers' compliance resources due to the high volume of significant business and regulatory change to be delivered in 2024. Firms are advised to identify and address any discrepancies in outcomes for different customer groups and share relevant information with each other in the same distribution chain to quickly address consumer harm and deliver good outcomes.
In September 2025, the FCA will publish a detailed assessment of how Consumer Duty applies to wholesale firms and asset managers that do not deal directly with retail clients. This will provide further clarity on FCA expectations for asset managers’ governance frameworks.
In conclusion, the FCA’s supervisory focus for 2024/25 encompasses enforcing Consumer Duty principles among asset managers, enhancing governance and stewardship standards via the revised Stewardship Code, and monitoring compliance through enforcement and rulebook optimisations. The September 2025 report on Consumer Duty in wholesale contexts will provide further clarity on FCA expectations for asset managers’ governance frameworks.
Firms need to consider the Consumer Duty when approving financial promotions for their business, focusing on ensuring that closed products offer fair value to customers and avoiding exploitation of consumers' lack of knowledge or behavioral biases in their investing activities. The FCA's supervisory priorities for 2024/25 also include strengthening complaint handling, financial promotions, and governance across all regulated firms, including asset managers, in the finance industry.
