The Financial Conduct Authority (FCA), the UK’s financial supervisor, plans to introduce a new overseas funds regime in April next year, as part of Britain’s post-Brexit framework for authorising non-UK investment funds to reach British investors. It plans a consultation before the regime takes effect.
Addressing a conference in London organised by Alfi, the Luxembourg fund industry association, Mhairi Jackson, the FCA’s lead on asset management policy, said a provisional system, set in place following the UK’s EU departure, is presently in effect for these funds. Under the incoming rules, they will need the FCA’s approval for UK distribution, Reuters reports from London.
“We’re significantly enhancing our systems to ensure the approval process is as efficient as possible,” Jackson told Thursday’s conference.
The regime is pivotal, especially when considering the intertwined relationship between Britain and major EU financial hubs like Luxembourg. A significant portion of funds offered in the UK are listed in centres such as Luxembourg and Dublin, yet are managed by portfolio professionals based in London.
The FCA has faced speculation over potentially imposing extra informational requirements on overseas funds, including a UK value evaluation. While Jackson clarified that the final call on any such prerequisites would lie with the finance ministry, she affirmed that no decision has been finalised. The FCA, however, is set to consult shortly regarding the data that these overseas funds will be mandated to submit.
FCA in ‘push back’ on greenwashing
At the ALFI conference, Britain’s financial watchdog also said it was having to “push back” against some investment funds that misleadingly attempt to label themselves as being focused on environmental, social and governance (ESG) based performance. Regulators across the world are seeking to crack down on “greenwashing”, or over-inflated climate friendly claims by companies and funds to attract investment.
“We have seen some passive funds with ESG related names that are actually just passive funds, they are just replicating normal indexes that don’t have a ESG focus, which we deem to be completely misleading and something we have been pushing back on,” Jackson told the ALFI conference, according to Reuters.
“We’ve also seen some funds come through where the fund’s proposed holdings differ very much from the objectives and the statements that they are holding out to be true,” she said.
Jackson shared the Alfi stage with CSSF director Marco Zwick. Zwick emphasised the resilience of Luxembourg’s asset management sector amidst worldwide financial fluctuations. He stressed the significance of liquidity management in addressing the potential dangers posed by shadow banking. To mitigate these risks, measures have been taken, such as nurturing tight market relationships and shifting global views on non-bank intermediation businesses that could lead to potential spill-over risks.