Time for Reflection: What Are The Key Questions AFMs Should Be Asking Themselves?

Claire Wallace , Olivia Stuart Taylor

In June 2021, the FCA published the findings of its review of Host Authorised Fund Management (AFM) firms. The FCA’s findings were that a number of Host AFMs do not currently meet their expectations and certain regulatory requirements. The key gaps in their expectations were identified across a few key areas: investment manager due diligence and oversight, governance, controls and financial resources.

As a result of this review, the FCA has indicated that it is undertaking a number of follow-up actions, including the commissioning of S166 Skilled Person Reviews with certain firms, and that there may be future regulatory action against firms who do not take note of their findings and ensure that they are meeting expectations. They will likely undertake a follow-up review within the next 12-18 months to check that their recommendations have been implemented.

The FCA highlighted that although the scope of this review was of Host AFMs, many of the findings and expectations also apply to AFMs with in-house investment managers. In light of these findings we explore the key questions Boards and senior management at AFMs should be asking themselves to ensure they don’t end up in the regulator’s cross-hairs.

Next steps:

The answers to the questions highlighted above may hopefully help AFM Boards, Risk and Compliance teams consider which areas they may need to focus on to ensure they meet the expectations of the FCA. Addressing any identified gaps should help firms ensure that they are well placed to respond to any follow up activities and keep meeting expectations.

How can Alpha help?

Alpha are well versed in both the Host AFM and internal AFM models, having conducted market reviews and supported AFMs in various capacities. We also have expertise in ICAAP reviews and an understanding of the forthcoming ICARA under the IFPR regulation.

Please do contact Claire Wallace if you would like a conversation with one of our Regulatory & Compliance specialists.

About the Authors

Claire Wallace

Claire is a Director in Alpha’s Compliance, Regulation and Risk Practice and has over 19 years’ experience covering regulator, in-house risk and compliance roles and consulting. She has held a number of controlled functions (CF10 and CF11) and senior management roles (SMF4 and SMF16) leading global teams, and more recently has acted as an interim global CRO for a large UK asset manager for 18 months.

Olivia Stuart Taylor

Olivia is a Manger at Alpha. She has 6 years’ experience in Financial Services consulting, predominantly working on regulatory change projects, Target Operating Model design and transformation programmes. Olivia joined from Accenture where she was a member of the Finance & Risk practice and she now supports the Regulation & Compliance practice.