Regulatory radar - Winter 2021

Luke Holloway shares the latest regulatory updates from the financial services profession 

FCA acts on ESG investments

The Financial Conduct Authority (FCA) has committed further to helping investors put environmental, social 
and governance (ESG) matters at the heart of their investment decisions.

To help enable this, the FCA published a discussion paper inviting views on potential criteria to classify and label investment products. This is aimed at helping consumers navigate their sustainability characteristics. The FCA is also gathering feedback on supporting entity-level and product-level disclosures. The input received will guide the FCA’s policy design in this area, ahead of consultation on new proposals in spring next year.

In its most recent Financial Lives survey, the FCA found 80% of respondents wanted their money to ‘do some good’, while also providing a financial return; 71% wanted to ‘invest in a way that is protecting the environment’; and 71% would not put their money into ‘investments which are unethical’.

The FCA is encouraging stakeholders to engage with the discussion paper so that it can design a disclosure and labelling system to achieve this.

To read the discussion paper, visit: https://bit.ly/3F6rM5Z

New financial regulators’ framework

In November, the Chancellor set out his vision for “an agile and dynamic approach to regulation that supports the growth of the UK economy”, in proposals for a new financial regulators’ framework.

While the UK was a member of the EU, the FCA and the Prudential Regulation Authority’s (PRA) ability to determine the most appropriate regulatory requirements for UK markets was constrained by requirements to apply EU rules.

The proposals announced will aim to facilitate the repeal of the majority of retained EU financial services law that is no longer appropriate for the UK, while giving UK regulators powers to replace the law with their own rules.

The plans would require the FCA and the PRA to consider both the implications for growth and international competitiveness of their regulations, as well as their existing objectives of maintaining market integrity, consumer protection and a sound financial system.

The consultation closes on 9 February 2022, after which the government will consider the responses. For more information, visit: https://bit.ly/3n8EA5N

FCA finalises rules for new long-term assets fund

The FCA is taking forward proposals to create a new type of open-ended authorised investment fund that will help support investment in assets like infrastructure and private equity.

Investment in these assets has the potential to generate better returns for investors, said the FCA, including those saving for retirement in defined contribution pension schemes.

The FCA stated that, currently, some investors are unable, or unwilling, to invest in long-term assets, even though these assets could meet their investment goals.

The new rules create a Long-Term Asset Fund (LTAF) regime – a new FCA-regulated fund designed specifically to help investment in assets including venture capital, private equity, private debt, real estate and infrastructure.

The FCA will be consulting next year on the potential for widening the distribution of the LTAF to certain 
retail investors. 

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