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UK Investment Management – Hot Topics

Internal Audit Areas of Focus

August 2022

In its business plan for 2022-23, the FCA continues to position itself as a forward-looking, proactive regulator while focusing on measures to prevent and reduce serious harm to customers and market participants. Our “Hot Topics – Internal Audit (Aide Memoire)” has been prepared by our team of internal audit professionals and subject matter experts bringing out viewpoint the regulatory topics focused upon by the FCA in the business plan, emerging themes and matters of continuing importance for internal audit functions of investment management firms in the UK.

As the regulatory landscape continues to evolve, it is important for investment management firms to assess the impact of the key regulations reflecting in the FCA’s business plan. Some recent developments on the key topics are as below:

  • Consumer Duty - FCA issued final rules for the new Consumer Duty within Policy Statement PS22/9 on 27 July 2022. Firms are expected to be completing their gap analysis and seeking board approval for the draft implementation plans in October 2022.
  • Environment, Social and Governance (ESG) - Key priorities for the FCA include protecting customers from misleading marketing and disclosures and build an ecosystem that protects the integrity of ESG labelled securities. On the back of SFDR (EU regulation) and expected SDR (FCA), firms should start their planning on their Net Zero Transition.
  • Inclusion and Diversity – The FCA has been assertive on making financial services sector more inclusive and diverse. In order to lead by example, the FCA has committed to diversity targets for itself. Also, the FCA has issued a Policy Statement (PS22/3) in April 2022 implementing changes to Listing Rules to enhance their financial reporting.
  • ICARA – It has been little more than a year since the FCA published its Policy Statement on the new Investment Firms Prudential Regime (IFPR) introducing ICARA. Governance and risk management from the perspective of reducing harm to customers and market participants continue to be on the FCA’s focus.
  • Market Abuse - In both its three-year Strategy and 2022/23 Business Plan, the FCA sets out an intention to take assertive action in relation to Market Abuse by increasing its own level of monitoring of markets in a near real-time environment.
  • Operational Resilience - Following the March 2022 deadline, UK firms will need to make strategic choices around investment in infrastructure and embedding a resilient target operating model to operate within their Impact Tolerance.
  • Suitability and Vulnerable Customers - In its 2022 Strategy, the FCA emphasizes the need to identify and support vulnerable consumers, specifically because of the impact of the pandemic and rising costs of living.
  • Appointed Representative (AR) Regime - The proposals within CP 21/34 and the final rules published by the FCA in PS22/11 seek to strengthen oversight of ARs and improve information provided to the FCA.

Hot Topics – Internal Audit (Aide Memoire) also touches upon standing topics of continuing importance within the investment management industry from both regulatory and governance good practice perspective as well as emerging topics within the industry.

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