Today’s publication of the FCA’s final AMMS report shows both that the regulator has listened and that the fund industry has managed to get its message across fairly coherently. But whilst it may be perceived as a slight softening from the stance taken by the FCA last November – particularly around “all-in pricing” (a corner the regulator seems to now be trying to slowly back its way out of) the industry is not in for an easy ride by any means.
There are a couple of interesting points emerging from the final report. First, by shifting some of the burden of governance and duty of care towards end clients into the SMCR, the FCA is sending out a very strong signal about how it wants individual and corporate behaviour to change, and perhaps where it considers the greatest improvements are to be made.
Second, investment consultants have dealt with this lobbying process less effectively than asset managers. Whilst the regulator acknowledges the undertaking in lieu, made by the big three, to try and avoid being referred to the CMA, ultimately the FCA has said “thanks, but no thanks”. The fact that these undertakings were made in private in a perceived act of “collusion” is an irony few have missed.
Furthermore, it’s clear that the threat Brexit poses to the industry, and therefore the Treasury revenues, has also been taken into account, whether this is explicit or not. The industry needs to sharpen up, but this is not the time for heavy handedness, particularly with MiFID II also on the horizon.
But the biggest takeaway is that the regulator will be closely accompanying the industry on its journey to meet these new regulatory demands. The threat of a CMA referral for the asset management sector may have rescinded but it remains in the shadows. Failure to comply with both the letter and spirit of the final, consulted upon rules will doubtless see it return in some form.