The FCA has announced it is launching a hub for asset management start-ups overwhelmed by the authorisation process as it reveals it takes 1,200 calls a month from investment managers about their applications.
The announcement regarding the hub was made at the FT Investment Management Summit, where FCA executive director of supervision for investment, wholesale and specialist Megan Butler revealed the regulator last year approved 204 new asset managers.
She also spoke on delegation after Brexit, Mifid II deadlines and the regulator’s proportionate approach to the senior managers regime.
The first phase for the asset management start-up hub launches in October with pre-application meetings, dedicated case officers and access to the website portal. Next year the service will expand to include quarterly surgeries and online booking for pre-application meetings.
Fund Strategy understands there are no immediate plans to increase staff count with the new service, but there is the possibility that could change.
Butler says the regulator wants to make sure investment managers aren’t put off of operating in the UK by avoidable barriers to entry. However, she warned the launch was not designed to lower entry standards to the market. “We have no intention of presiding over a decline in quality.”
The PRA already runs a similar hub for start-up banks.
The hub would be based on four principal objectives: clear expectations; accessible information; positive engagement between the FCA and market entrants; and end-to-end support throughout the start-up cycle.
Mifid II and senior managers
The summit heard how the EU, supported by the FCA, is working to address concerns that Mifid II research costs clash with regulatory requirements in the US, where broker dealers receiving payment for research would have to apply to become investment advisers.
US lobbyists have been pushing the SEC for a response to how companies can respond to the unbundling of research costs.
“Let me assure you that we are fully aware of this issue, and we are in close contact with colleagues in the EU and US, who are working on a solution. So please watch this space,” Butler told the audience.
However, when it comes to enforcing Mifid II from 3 January, she says the FCA has “no intention of taking enforcement action against firms for not meeting all Mifid II requirements straight away”.
“If there is evidence they have taken sufficient steps to meet the new obligations by the start date,and that there are plans in place to complete the process.”
Butler reminded firms of their duties regarding the market abuse regime and legal entity identifiers (LEIs).
On the latter she said underlying clients need to be aware that an LEI is needed by the deadline in order to trade under Mifid II and that the process is “not particularly expensive or complex”.
Butler outlined how the FCA is taking a proportionate approach to the senior managers regime with plans for a “core regime”, which will apply baseline requirements to every firm, and an “enhanced regime”, which will affect the largest and most complex businesses.
Firms have until 3 November to provide the FCA with feedback on its planned approach to the regime.
‘Sensible outcomes’ on Brexit
Butler says the FCA is particularly conscious of the need to find “sensible outcomes” on delegation changes resulting from Brexit.
In July, Esma urged regulators in the EU27 to raise awareness on outsourcing arrangements with UK providers once it withdraws from the EU and warned against “letter-box” entities.
Butler says there are questions over whether a change to delegation provision could have an adverse impact on European and global markets.
“We see no real justification for unnecessarily complicating rules around delegation and outsourcing. Both are integral elements of efficient market business models. Both work well now. And there is no reason to suggest both won’t work well in the future.”