January 31, 2020

FCA issues two “Dear Chief Executive” letters to Asset Management Sector

On January  20, 2020, the UK Financial Conduct Authority issued two “Dear Chief Executive” letters to the asset management sector (which includes, for example, hedge funds or private equity funds) regarding its supervision strategy.  In one of the letters, which was sent to alternative investment firms, the FCA highlighted that it was focusing on the systems and controls that firms had in place to prevent financial crime. The FCA noted that “overall standards of governance, particularly at the level of the regulated entity, generally fall below our expectations” and considers this presents a significant risk of harm for less sophisticated investors. The FCA have already carried out assessments on firms’ systems and controls in relation to prevention of market abuse and observed that there is “significant scope for improvement”. The FCA have also said that they intend to review firms’ systems and controls in place for prevention of money laundering, bribery and corruption with a particular focus on anti-money laundering and terrorist financing.

The second letter, sent to asset management firms, focused on other matters including liquidity management, governance, LIBOR transition and operational resilience.

Letter to alternative investment firms | Letter to asset management firms