Investment management update - November 2024

14 November 2024

Welcome to the latest edition of our investment management update.

This publication has been tailored to highlight topical news, cases and changes in the law impacting the investment management sector.

UK

On 31 October 2024, the FCA published a webpage setting out key lessons from how firms responded to the CrowdStrike outage and their preparedness to respond to future incidents. The FCA statement encourages all firms, regardless of how they were affected by the CrowdStrike incident, to consider these lessons, to improve their ability to respond to and recover from future disruptions.

On 27 October 2024 the FCA fined Mr Käärmann, the CEO of Wise plc and senior manager of Wise Assets UK Ltd, £350,000 for breaching a senior manager conduct rule. The enforcement action related to Mr Käärmann’s failure to notify the FCA of an HMRC fine for deliberately failing to notify HMRC of a capital gains tax liability; and being added to an HMRC public tax defaulters list.

On 25 October 2024, the FCA published the results of a survey into non-financial misconduct at wholesale financial services firms. The FCA has also set out its expectation of firms in response to the survey. Firms should reflect on the data and consider how their own performance compares with their peers. The FCA expects firms to discuss non-financial misconduct at senior management and board level and consider whether they need to take steps to improve: (i) their culture; (ii) how they identify and manage risks; and (iii) how they address non-financial misconduct on an ongoing basis.

On 16 October 2024, the FCA published an interim update for its regulatory initiatives grid (the Grid). The update covers known regulatory initiatives impacting firms from October 2024 to March 2025. Publication of the eighth edition of the Grid was postponed due to the general election.

On 10 October 2024, the draft Consumer Composite Investments (Designated Activities) Regulations 2024 (the CCI Regulations) were published. The CCI Regulations set out the government’s framework for replacing the UK PRIIPs regime and will come into force when UK PRIIPs is repealed.

On 9 October 2024, the FCA published Market Watch 80. This issue focused on market abuse in leveraged equities trades stemming from firms accepting instructions from unknown beneficial owners.

On 7 October 2024, the FCA published a portfolio letter setting out its supervisory strategy for financial advisers and investment intermediaries. The letter focused in particular on (i) retirement income advice; (ii) ongoing advice services; (iii) firms’ liabilities and financial resources; and (iv) consolidation.

On 7 October 2024, the draft Packaged Retail and Insurance-based Investment Products (Retail Disclosure) (Amendment) Regulations 2024 were published. These provide an exemption for investment trusts from the requirements to produce a KIID and certain MIFID cost disclosures.

On 4 October 2024, the Government published guidance on how regulated firms can share customer information with law enforcement agencies pursuant to the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The guidance clarifies how regulated firms can ensure that they can benefit from the protections in ECCTA and ensure that they can continue to maintain compliance with GDPR, the MLRs, POCA and complaint handling requirements.

On 2 October 2024, the Court of Appeal ruled in favour of the FCA in FCA v BlueCrest Capital Management LLP. The Court of Appeal upheld the FCA’s power to require redress from firms.

The Joint Money Laundering Steering Group (JMLSG) has published revisions to its Part II Sector 18 (Wholesale markets) of its Guidance. The revisions have been submitted to HM Treasury for Ministerial approval.

Europe ex UK

On 28 October 2024, ESMA published a consultation paper on MiFID II payment for research amendments. The changes are intended to align MiFID with the new payment option offered under the Listing Act, which allows for joint payments for execution services and research, irrespective of the market capitalisation of the issuers covered by the research.

On 25 October 2024, the EU Commission published the text of Delegated Regulation 2024/2759 on the use of derivatives by ELTIFs. The Delegated Regulation specifies when ELTIFs can use derivatives to hedge risk, the requirement for ELTIF redemption policies and liquidity management tools and criteria for the disposal of ELTIF assets. This legislation came into force on the day following its publication.

On 11 October 2024, ESMA published new Q&As for AIFMD, UCITS, MiCA and MIFID II. The new Q&As address the following areas in particular: (i) the crystallisation of performance fees in the case of the creation of a new UCITS/compartment/share class in the course of the financial year; and (ii) ESMA’s guidelines on performance fees in UCITS and certain types of AIFs.

On 11 October 2024, ESMA published its annual report on sanctions imposed under AIFMD, MAR and MiFID.

On 1 October 2024, ESMA published its annual work programme for 2025. The programme considers the intensification of ESMA’s focus, in particular, on the implementation of greenwashing standards, amendments to substantive legislation including EMIR and MiFID II and financial innovation in AI.

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