The UK Financial Conduct Authority (FCA) has proposed changes to asset management liquidity rules in order to better protect investors. The FCA is proposing that asset managers must assess, monitor and manage liquidity risk more efficiently in order to reduce the risk of investors being unable to access their funds at a time of need. The proposed changes are aimed at improving the transparency of liquidity risk management and give asset managers more flexibility in how they structure their portfolios. Read on to learn more about these proposed changes, and what they mean for investors.
UK regulator proposes changes to asset management liquidity rules
In response to concerns raised by the Financial Stability Board and others, the UK’s Financial Conduct Authority (FCA) has proposed changes to asset management liquidity rules which it believes will better protect investors.
The FCA’s proposals include:
- Introducing a ‘Liquidity Coverage Ratio’ for open-ended funds, requiring them to hold enough highly liquid assets to meet redemptions for 30 days without having to sell other assets at a discount;
- Enhancing stress testing requirements for open-ended funds;
- Requiring funds to disclose more information on their liquidity risks; and
- Giving the FCA new powers to intervene if it identifies serious risks to investor protection.
The regulator believes that these changes will help to ensure that investors in open-ended funds are better protected against the risk of sudden redemptions, and that the wider financial system is safeguarded against potential instability caused by problems in the asset management sector.
The changes are designed to improve investor protection
The UK’s Financial Conduct Authority (FCA) proposes changes to asset management liquidity rules to improve investor protection. The FCA is concerned that some firms may be managing their liquidity risk in a way that does not adequately protect investors.
To address this, the FCA is proposing a number of changes to the existing rules. These include:
Requiring firms to have robust policies and procedures in place to identify, measure, manage and monitor liquidity risk.
Introducing a new requirement for firms to hold a reasonable buffer of highly liquid assets (HLA) that can be readily converted into cash if needed, without adversely affecting the value of investors’ holdings.
Strengthening the current disclosure requirements so that investors are better informed about a fund’s liquidity risk profile and how it is managed.
The FCA believes that these changes will help ensure that firms are taking adequate steps to protect investors from the risks associated with illiquid assets.
The proposals include stricter requirements for liquidity risk management
In its consultation paper on asset management liquidity risk management, the UK Financial Conduct Authority (FCA) has proposed several changes to improve investor protection. The proposals include stricter requirements for liquidity risk management, including a requirement for firms to hold a minimum amount of liquid assets and to stress test their portfolios.
The FCA is concerned that some asset managers may not be managing liquidity risk effectively and that this could lead to problems for investors if they need to sell their holdings in a hurry. The regulator wants firms to have robust plans in place so that they can deal with any sudden outflows of cash.
The proposals are open for consultation until October 2019 and the FCA will consider all feedback before making any final decisions.
The changes would also require fund managers to disclose more information about liquidity risks
The UK Financial Conduct Authority (FCA) has proposed changes to the rules governing asset management liquidity in order to improve investor protection. The main change would be to require fund managers to disclose more information about liquidity risks, including how they are managed.
The FCA believes that the current rules do not adequately protect investors from the risks associated with investing in illiquid assets. The proposed changes would help to address this by increasing transparency and providing more information for investors to make informed investment decisions.
The proposal will now be open for consultation until 9 May 2019.
The proposals are open for consultation until
The proposals are open for consultation until 5 October 2018. The UK Financial Conduct Authority (FCA) has proposed changes to the liquidity rules for asset management firms in order to improve investor protection. Currently, asset managers are not required to hold enough cash to meet all redemptions within seven days. The FCA is proposing that this requirement be extended to 30 days.
This proposal comes as a response to the findings of the FCA’s ‘Thematic Review of Liquidity and Redemptions in Open-Ended Investment Funds’. This review found that some asset managers were not holding enough cash to meet all redemptions within seven days, which could lead to investors losing out if they needed to access their money quickly.
The extension of the liquidity requirements would provide investors with greater protection, as it would give asset managers more time to sell assets and raise cash if there was a sudden increase in redemptions. However, it could also lead to higher costs for asset managers and ultimately reduce returns for investors.
The FCA is seeking feedback on the proposals from interested parties before making a final decision.
Conclusion
In conclusion, the UK FCA has proposed changes to asset management liquidity rules that are intended to improve investor protection. These changes come as part of their ongoing effort to ensure a safe and secure financial environment for all investors. It is hoped that these new regulations will help prevent any potential losses due to mismanagement or misuse of funds by asset managers, while also providing additional assurance for those investing in asset-backed securities.
