The Financial Conduct Authority (FCA) and Treasury have launched a consultation on simplifying rules for asset managers as the regulator seeks to disentangle regulation from the EU’s alternative investment fund managers directive (AIFMD).
The proposals, outlined in a call for input paper on the future regulation of alternative fund managers, aim to cut red tape to make it easier for firms to enter the market and compete on a global scale.
The proposals aim to move current regulation away from the AIFMD’s ‘firm-facing’ legislative requirements.
Simon Walls, interim executive director of markets at the FCA, said: “We want rules, better tailored to UK investment managers. These could allow them to operate more efficiently, further supporting competition, competitiveness and economic growth.
“It’s part of our wider work to streamline the regulatory regime for asset managers, to support the continued competitiveness of our world-leading financial services as outlined in our new strategy.”
The industry has until 9 June to respond to the proposals.
Investment trusts
Within the paper, the regulator said it is seeking feedback on tailoring rules for investment trusts in areas such as transparency requirements and leverage.
The FCA noted the Treasury’s proposal for listed closed-ended investment companies (LCICs) keeps investment trusts in scope of AIFM regulation.
“We recognise that LCICs have some unique characteristics,” the regulator said. “They share some features with operating companies, but the majority are structured and operated as a fund. They are often presented to investors as an alternative collective investment vehicle.
“If managers of LCICs remain within the AIFM regime, we would set appropriate standards, taking into account the specific nature of that market and their wider regulatory framework.”
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The regulator said alongside work around other disclosure requirements for investment trusts, it is considering disapplying provisions in the FCA handbook, which focus on investor information and annual reporting, which require full-scope UK AIFMs of LCICs to disclose this extra information.
It will also take a ‘more proportionate’ approach to applying risk management rules to investment trusts that use low levels of leverage, while the FCA is also considering tailoring the rules on delegation to investment trusts.
Reacting to the proposals, Michael Moore, chief executive of the British Venture Capital Association, said: “We welcome the government’s consultation on developing a simpler and more competitive system for alternative investment fund managers (AIFMs).
“More effective, less burdensome regulation will make the UK private capital industry more globally competitive and help it to boost investment from the UK and international investors into growing British businesses.
“This consultation is an important step in securing the UK’s status as one of the world’s leading private capital hubs. We look forward to engaging on the principles and the detail of the changes, but this provides the opportunity to create a real boost for the Government’s growth mission by developing the UK’s private capital fund ecosystem and increasing inward investment in UK SMEs.”
This story was written by our sister title, Portfolio Adviser
