Global Trustee and Fiduciary Services Bite Sized Issue 7 2023
Global Trustee and Fiduciary Services Bite-Sized | Issue 7 | 2023 14 QUICK LINKS CRYPTOASSETS CYBER DORA ELIGIBLE ASSETS DIRECTIVE FINANCIAL STABILITY BOARD FINTECH LTAF MICA MIFID II/MIFIR NBFI SUSTAINABLE FINANCE/ ESG ASIA EUROPE LUXEMBOURG NORTH AMERICA UNITED KINGDOM • A wide range of approaches to liquidity stress testing with some methodologies insufficient to assess actual liquidity of the portfolio, using assumptions that were not appropriately conservative. For example, some firms’ models assumed that they would always sell the most liquid assets, without ever giving regard to the liquidity of selling a ‘vertical slice’ of the portfolio. • Firms typically had governance and organisational arrangements in place to meet large one-off redemptions but did not have sufficient arrangements in place to oversee cumulative or market- wide redemptions that could have a significant impact on a fund. • Wide variations in the application of anti-dilution tools such as swing pricing, which could affect the price investors receive when redeeming. The FCA states that asset managers should take account of the findings, as many of the examples of good practice highlighted in the review and letter contribute to improved consumer outcomes and are consistent with the Consumer Duty, which comes into force on 31 July 2023. In the companion Dear CEO Letter, the FCA states that the review focuses on Authorised Fund Managers, but it expects all asset managers and managers of Alternative Investment Funds to consider the findings for their businesses. Link to Liquidity Management Multi-firmReview here Link to Dear CEO Letter on Liquidity Management Multi-firmReview here Financial Services and Markets Bill Receives Royal Assent On 29 June 2023 the Financial Services and Markets Bill (the Bill) received Royal Assent. The Act contains new powers that will set the path for reforms to Solvency II, which HM Treasury states will unlock around £100 billion for productive investment and help cultivate innovation and grow the economy. The Act also introduces new secondary objectives for the Financial Conduct Authority and the Prudential Regulation Authority; aimed at facilitating the growth and international competitiveness of the UK economy. This will be backed up by changes to enhance the scrutiny and accountability of the regulators, including ensuring regular reporting and a greater focus on cost-benefit analyses. The Act also: • Enhances the scrutiny of the financial services regulators to ensure clear accountability, appropriate democratic input, and transparent oversight; • Removes unnecessary restrictions on wholesale markets – implementing the key outcomes of the Wholesale Markets Review; • Protects free access to cash in law and introduces crucial protections for victims of Authorised Push Payment scams; • Enables the regulation of cryptoassets to support their safe adoption in the UK; and • Establishes ‘sandboxes’ that can facilitate the use of new technologies such as blockchain in financial markets. Link to HM Treasury Press Release here Link to Financial Services and Markets Bill Webpage here One Month to go for the FCA’s NewConsumer Duty On 28 June 2023 the Financial Conduct Authority (FCA) updated its Consumer Duty webpage, providing more information on how firms should be preparing for the 31 July 2023 deadline for new and existing products and services that are open for sale or renewal. Referring to its finalised guidance (FG22/5), the FCA highlighted 10 of the questions in FG22/5 that firms could ask themselves.
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