In February 2025, the Financial Conduct Authority (FCA) released a pivotal ‘Dear CEO’ letter, delineating its supervisory priorities for the asset management and alternatives sector. This communication underscores the FCA’s commitment to fostering a resilient, transparent, and consumer-centric financial environment.
FCA’s 2025 Supervisory Focus – Key Priorities
Enhancing Confidence in Private Markets
- Valuations: The FCA is set to publish findings from its multi-firm review on Private Market Valuation Practices. Firms are encouraged to assess these insights to ensure their valuation processes are robust and governed effectively. This aligns with the FCA Principles for Businesses (PRIN) and FUND 3.9 requirements.
- Conflicts of Interest: A forthcoming review will scrutinise how firms manage conflicts of interest, especially in scenarios involving continuation funds, co-investments, and partnerships with other financial institutions. Firms should ensure alignment with SYSC 10.
Building Resilience Against Market Disruption
The FCA emphasises the importance of prudent risk management, liquidity management, and operational resilience to mitigate potential market disruptions. Firms are reminded to maintain strong governance processes and conduct scenario testing where applicable.
Securing Positive Consumer Outcomes
With the growth of services like Model Portfolio Services (MPS), the FCA plans to review how firms are applying the Consumer Duty to ensure investors receive favourable outcomes. The FCA is also continuing its review into unit-linked funds, in particular assessing price and value across the value chain to ensure good outcomes are being delivered for investors, and plans to publish the findings, including good practice guidance, later in 2025.
Additional Focus Areas
- Sustainable Finance: The FCA will engage with firms offering sustainability-related products to understand the implementation of labelling, naming, and marketing rules. The anti-greenwashing rule (ESG 4.3) comes into force on 31 May 2024, and further SDR rules apply from 31 July 2024.
- Financial Crime and Market Abuse: There is a continued emphasis on robust systems and controls to combat financial crime, with a particular focus on anti-money laundering (AML) measures in private market funds. Firms should ensure compliance with SYSC 6.1.1R and the FCA Financial Crime Guide.
Implications for Firms
Asset management and alternatives firms should proactively:
- Review and Align Practices: Evaluate current procedures against the FCA’s outlined priorities.
- Engage with Regulatory Developments: Participate in discussions, especially concerning the review of the Alternative Investment Fund Managers Directive (AIFMD), the call for input for which, was issued in early April 2025.
- Strengthen Governance and Culture: Foster a culture of accountability and transparency, ensuring that senior management is actively overseeing risk and compliance.
By attentively addressing these areas, firms can not only comply with regulatory mandates but also enhance their operational resilience, foster consumer trust, and position themselves favourably in a competitive market landscape.
How Complyport Can Help
Complyport supports asset managers and alternative investment firms in navigating complex regulatory requirements. From Consumer Duty implementation to robust governance frameworks and sustainable finance compliance, our experts can help your firm stay ahead of FCA expectations.
Our services include:
- Operational Resilience Assessment and Testing
- Consumer Duty Gap Analysis and Implementation Support
- Valuation Oversight and Framework Design
- Conflict of Interest Reviews and SYSC Alignment
- Sustainable Finance Compliance, including SDR and anti-greenwashing readiness
- AML and Financial Crime Control Assessments
- Governance Reviews and SMCR Support
- Outsourced Compliance Function and Monitoring Programmes
Contact us today to discuss how we can support your regulatory strategy.
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