UK/EU Investment Management Update (October 2020)

On the same day, in response to the ESMA statement above, the FCA published its own Statement on MiFID trade reporting and position limit obligations.

The FCA explained that ESMA’s statement meant that it intends to assess UK trading venues in relation to its opinions (here and here) on MiFIR trade reporting and commodity derivatives position limits. If positively assessed, they will be added to the list of venues with a positive or partially positive assessment for the purposes of those opinions with effect from the end of the Brexit transition period.

This means that EU investment firms trading on these UK venues would not need to publish details of those transactions through an approved publication arrangement (APA) in the EU. Commodity derivatives traded on UK venues would also not be regarded as economically equivalent over-the-counter (OTC) contracts counting towards the EU commodity derivatives position limits regime.

The FCA confirmed (as set out in its public statements from 2019) that in respect of UK requirements from the end of the Brexit transition period,

• The FCA does not require UK investment firms that transact on trading venues outside the UK, in the EU or elsewhere, to publish details of those transactions through a UK APA.
• The FCA does not consider commodity derivative contracts traded on trading venues, whether in the EU or elsewhere, as economically equivalent OTC (EEOTC) contracts, so they will not count towards the UK commodity derivatives position limits regime.

Finally, the FCA stated that it does not maintain a list of assessed overseas venues for the above purposes.

FCA Temporary Transitional Power

On 1 October 2020, the FCA published an updated version of the FCA Handbook and gave further details on how it intends to use the Temporary Transitional Power (TTP).

As we mentioned in our May 2020 Update, the effect of the TTP is that regulatory obligations on firms will generally remain the same as they were before the end of the transition period (31 December 2020) until 31 March 2022.

The updated FCA Handbook contains the rules that will apply from the end of the transition period on 31 December 2020 onwards. The TTP allows the FCA to choose when and how rule changes will apply to help firms adapt smoothly to the new rules. Firms will be able to see how changes will affect them by reviewing the updated Handbook and TTP information.

The FCA has stated it intends generally to apply the TTP on a broad basis until 31 March 2022. However, certain areas are excluded from this, and firms must be prepared to comply with new obligations in these areas by the end of the transition period. These include, as may be relevant to UK investment managers:

• MiFID II transaction reporting
• reporting obligations under the European Market Infrastructure Regulation (EMIR) and Securities Financing Transactions Regulation
• certain requirements under the Market Abuse Regulation (MAR)
• Client Assets Sourcebook requirements (CASS)
• securitisation rules

FCA Temporary Permissions Regime – FCA reopens notification window

On 30 September 2020, the FCA updated its webpage on the Temporary Permissions Regime (TPR).

European Economic Area (EEA) firms and fund managers wishing to use the TPR may continue to notify the FCA of such until 30 December 2020. No further action is required of firms that have already submitted a notification. Fund managers wishing to update a previously submitted notification should email the FCA by 9 December 2020, including their Firm Reference Number (FRN) in the email. They should expect to be able to submit an updated notification from 14 December 2020 but must ensure all the correct funds are included.

If new funds have been added to a fund manager’s population since their notification, the FCA confirms these will not be included in the temporary marketing permission regime unless included in an updated notification.

The FCA also published revised FCA directions for EEA or Treaty firms, EEA operators of collective investment schemes (CISs), and alternative investment fund managers (AIFMs), among others.

UK CCPs – European Commission equivalence determination for OTC derivatives clearing

On 21 September 2020, the European Commission (the Commission) published a time-limited equivalence determination for UK central clearing counterparties (CCPs). Equivalence is conditionally granted for a period of 18 months from 1 January 2021, expiring on 30 June 2022. The Commission is able to amend, suspend, review, or revoke its determination at any time. In particular, it views the continued, effective exchange of information between ESMA and the Bank of England as a prerequisite to maintaining its determination.

While maintained, the equivalence determination allows EU counterparties to continue to clear OTC derivatives subject to the EMIR OTC derivative clearing obligation on UK CCPs.

The Commission views the 18-month period as necessary to

• allow EU clearing members to reduce their exposure to UK market infrastructures
• allow EU CCPs to further their clearing capacity for relevant trades
• allow ESMA to review the systemic importance of UK CCPs comprehensively

UK CCPs – ESMA to recognise three UK CCPs as third country CCPs eligible to provide services in the EU

On 28 September 2020, ESMA announced that the three UK CCPs will be recognised as third country CCPs eligible to provide services in the EU after the end of the Brexit transition period on 31 December 2020.

This announcement follows the completion of a cooperation agreement with the UK CCP supervisor (the Bank of England).

ESMA has determined that LME Clear Limited is a Tier 1 CCP, and that ICE Clear Limited and LCH Limited are Tier 2 CCPs. ESMA defers to national supervisors for the regulation of Tier 1 CCPs, but not for Tier 2 CCPs given their elevated systemic relevance for the EU. ICE and LCH will therefore effectively have to continue to comply with EMIR and be subject to some level of ESMA oversight.

This recognition decision applies for as long as the equivalence decision remains in force (which is, subject to certain conditions, to apply for 18 months until 30 June 2022). During this period, ESMA will review the systemic importance of the three UK CCPs.

MiFID Derivatives Trading Obligation – ISDA calls for mutual recognition of EU/UK derivatives trading venues

On 14 September 2020, the International Swaps and Derivatives Association (ISDA) published a paper analysing the impact of Brexit on the MiFID derivatives trading obligation (DTO).

It calls for the EU and UK to recognise the equivalence of each other’s derivatives trading venues before the end of the Brexit transition period. Otherwise, ISDA warns that EU and UK counterparties subject to the DTO will face conflicting requirements when wishing to trade with each other. They will practically be able to trade only with each other in DTO derivatives on U.S. swap execution facilities and with a “significant increase in operational complexity.” ISDA argues a lack of equivalence decisions will therefore exacerbate the inevitable fragmentation of liquidity in OTC derivatives markets following Brexit.

The paper analyses alternatives that have been proposed to mitigate the effect of DTO conflicts, concluding that recognition of each other’s derivatives trading venues will better resolve conflicts and involve the fewest practical challenges for firms and regulators.

Regardless of the option taken (if any), ISDA urges the UK to address additional conflicts created by the UK DTO’s application to trading by EU counterparties by

• removing the extraterritorial requirement to comply with the UK DTO on firms in the UK’s TPR when trading with UK counterparties from outside the UK
• confirming the UK DTO does not apply to EU firms in the TPR when trading from offices outside the UK with EU or third country counterparties
• no longer requiring branches of EU and third country firms to comply with the UK DTO, until it adopts a revised common approach with the EU to DTO territorial application to trading conducted through branches

Client Assets Arrangements – FCA “Dear CEO” Letter and online Brexit preparation guidance update

On 30 September 2020, the FCA updated its Brexit Considerations for UK Firms webpage, inserting a new section relating to client assets. This highlights certain requirements set out in the “Dear CEO” Letter on client assets (see COVID-19 update section below), reminding firms to ensure that these safeguards remain effective after the transition period ends.

The FCA’s decision to allow firms flexibility was made in response to the high levels of volatility in the market caused by the continued spread of the COVID-19 pandemic. For further information on the FCA’s original decision, please refer to our April 2020 Investment Management Update.

Client Assets Arrangements – FCA “Dear CEO” Letter

On 30 September 2020, the FCA published a “Dear CEO” Letter, Adequate Client Assets Arrangements, underscoring the importance of firms’ maintaining adequate arrangements to safeguard client assets in the midst of the COVID-19 pandemic. In particular, the FCA highlighted the following key requirements for firms.

• Governance and oversight. Firms should have adequate governance to identify material risks to client assets arrangements, including appropriate oversight by the senior manager with responsibility for client assets.
• Oversight of third parties and outsourcing. Firms must periodically carry out due diligence on third parties holding client assets. Firms that deposit client assets with any institution in the EEA should review their due diligence to ensure client assets will not be subject to increased risk due to changes arising from the end of the Brexit transition period. Where firms outsource to Third Party Administrators (TPAs), they nonetheless remain responsible for discharging their regulatory responsibilities, such as client assets rules compliance.
• Client money held with third-party brokers. Firms may place client money only with intermediate brokers to facilitate transactions. Firms should review client transaction account balances to ensure that they hold no excess client money.
• CASS Resolution Pack. Firms must maintain a complete an up-to-date CASS Resolution Pack to help insolvency practitioners understand their client assets arrangements and speed up the return of client assets.

The Council noted that Cayman Islands was removed from the EU list after it adopted new reforms to its framework on Collective Investment Funds in September 2020.

Following this update, twelve jurisdictions remain on the list of non-cooperative jurisdictions: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

ESMA’s decision reacts to market conditions arising from the COVID-19 pandemic. ESMA views this temporary heightened transparency obligation as essential for authorities to monitor developments in markets.

The lower threshold could continue to apply beyond 18 December 2020 if ESMA further extends it. It is unclear whether the UK would follow any extended lower threshold beyond 31 December 2020 when the Brexit transition period expires. The UK’s decision on this point could have an effect on shares admitted to trading on a UK trading venue.

For further information on ESMA’s decision to reduce the net short reporting threshold, please refer to our Update European Union Net Short Position Reporting Threshold Reduced to 0.1% (Updated 17 September 2020).

Market participants had, in reaction to survey data, raised concerns that research unbundling would reduce quality and availability of research in the EU generally and to a disproportionate extent in relation to SMEs. However, drawing on a sample of 8,000 EU listed companies between 2006 and 2019, ESMA concludes that following MiFID II’s introduction,

• There is no significant difference in sell-side research intensity (i.e., number of analysts).
• The decline in sell-side research coverage is a continuation of a long-term, albeit accelerating, trend.
• Sell-side research quality continues to improve moderately.
• Small- and medium-sized enterprises (SMEs) are not disproportionately affected in relation to the above metrics.

The analysis notes the Commission’s 24 July 2020 consultation on a possible “narrowly defined exception” to the research unbundling provisions for small and midcap issuers and fixed-income instruments. This, alongside potential buy-side impact analysis and a forthcoming ESMA econometric study, may lead the rules to evolve further.

The TRV report includes additional detailed analyses of model risk in collateralised loan obligations; interconnectedness and spillovers in the EU fund industry; and cost and performance of closet index funds.

ESMA draft rules for third country firms providing MiFID services and activities in the EU

On 28 September 2020, ESMA published its Final Report containing draft regulatory and implementing technical standards (RTS and ITS) on the provision of investment services and activities in the EU by third country firms under MiFIR and MiFID II.

These RTS and ITS are particularly relevant where the EU grants the UK (or any other third country) “equivalence” under MiFID II, that is, a determination under the MiFID II framework that a third country has a regulatory framework equivalent to that under MiFID II.

Under MiFID II, a firm in an equivalent third country is able to provide MiFID services on a cross-border service to professional clients throughout the EU on the basis of a registration made with ESMA. The RTS and ITS specify the information (and requisite format) that third country firms must provide to ESMA for the registration in the ESMA register of third country firms and for the information that third country firms have to report annually to ESMA.

A determination that the UK is equivalent under MiFID II would, for example, allow UK investment managers to provide MiFID portfolio management services to single managed account professional clients in the EU. It would also allow UK subadvisers of U.S./Asian fund managers to help market their affiliates’ funds, as the activity of marketing financial products such as fund units/shares amounts to one or more MiFID services in certain EU member states.

MiFIR data reporting – ESMA updates its Q&A document

On 28 September 2020, ESMA updated its Q&A on data reporting under MiFIR. In particular, a new Q&A has been added as relating to the “LEI of the Issuer” and existing Q&As on “Transaction Reporting” have been revised.

Of particular note is the new scenario included in Section 22, Question 13, on Transaction Reporting, relevant to UK/EU investment managers relying on execution algorithms provided by another firm (e.g., a broker-dealer).

Question 13:

Consider a scenario where an Investment Firm A executes a reportable transaction through an execution algorithm provided by another Investment Firm B.

Question (a)…

Question (b) …

(New) Question (c): Where Investment Firm B is using Investment Firm A’s membership to access the market, is Investment Firm B executing the transaction and does Investment Firm B have to transaction report?

(New) Answer to Question 13(c):

Yes. Investment Firm B is conducting the activity of executing a client order according to Art. 3 of RTS 22. The scenario is: 

IF A → IF B (algorithm) → IF A (membership) → CCP (Trading Venue) 

Assuming that both Investment Firm A is buying an instrument and dealing on own account, and the subsequent steps in Investment Firm B and A are in “any other” trading capacity, the respective reports should be completed as follows: 

In order to match Investment Firm B’s reports and reflect its involvement in more than one part of ‘the chain’, Investment Firm A has to submit two reports:

• one for its trade as a client with Investment Firm B (Report 1).
• one for its market-side trade with the Central Counterparty or another Investment Firm (Report 2).
  

However, the scenario in Question 13 assumes that the firm providing the execution algorithms (i.e., Firm B) is “executing and retaining control of the execution.” ESMA, in footnote 53 to this scenario, has confirmed that “If Firm B would only be acting by e.g. providing technology to Investment Firm A, and not be executing and retaining any control, Firm B would not transaction report. In such case Investment Firm A should report the direct market execution, not identify B as a counterparty, and identify the algorithm they (Firm A) have used (even if it was provided to them by Firm B.” 

It highlights the potential benefits of developing broad industry best practice principles for measuring and evidencing execution quality, such as better fulfilling increasingly sophisticated regulatory requirements and yielding operational and cost efficiencies.

Additionally, it includes comparative analyses of current data quality (measured by observability and reliability) across several major FICC product categories, pointing to optimization and standardization of data sets as the key factor in improving execution quality measurement.

The FMSB also reminds firms that the FCA and ESMA are reviewing MiFID II best execution reporting requirements (RTS 27 and 28). It notes a 24 July 2020 Commission Staff Working Paper that recommends delaying these until the review is complete.

In relation to market abuse, the FCA reported:

• It had received 5,336 suspicious transaction and order reports (STORs) and 788 external notifications about potential market abuse, opening 415 preliminary market abuse reviews. These resulted in 53 enforcement investigations and 102 nonenforcement actions.
• It saw a significant improvement in data quality in firms’ transaction reports and an increase in firms requesting FCA sample data of their reporting to improve their own data quality monitoring.
• It developed a new market cleanliness indicator, the “Potentially Anomalous Trading Ratio” (PATR).

In relation to money laundering, the FCA reported the following:

• It had conducted 30 onsite visits and 151 desk-based reviews, issuing 17 skilled-person requirement notices (9 in the investment management sector). As a result, it sought 3 attestations and commenced 5 enforcement investigations.
• It increased its number of active anti-money laundering (AML) investigations to 65.
• It analysed the financial crime returns of approximately 2,000 firms.
• It worked with the UK government on its Economic Crime Plan and became the AML and counter-terrorist financing supervisor for businesses carrying on cryptoasset activities.

FCA 2019 Market Cleanliness Statistics

On 10 September 2020, the FCA published its 2019 Market Cleanliness Statistics for the UK equity markets.

The 2019 Market Cleanliness (MC) Statistic, showing the proportion of corporate takeover events in which the FCA observed abnormal movements in share price pre-takeover announcement, was 17.5%. This is an increase on the 2018 figure (10%) but stays close to the five-year average.

The 2019 Abnormal Trading Volume (ATV) ratio, looking at abnormal increases in trading volumes in equity instruments and some equity derivatives ahead of potentially price-sensitive announcements, remained at 6.4%. This matches its 2018 level, although quarterly measures fluctuated more throughout 2019 than in 2018.

The new Potentially Anomalous Trading Ratio (PATR), covering “potentially anomalous” participant activity in the same range of products as the ATV ratio, was 6.7%. This is an increase on 2018 (6.1%). The FCA identifies “potentially anomalous” trading when a participant trades in an instrument that is atypical for it, trades significantly more than usual in the direction of an announcement, or makes a significant profit from trading positions established immediately prior to an announcement. The FCA stresses that the 2019 figure represents a very small percentage of overall UK trading activity (being 6.7% of the 0.08% of trading activity that occurred during a sensitive time period).

Market Manipulation – FCA publishes decision notice against Corrado Abbattista

On 16 September 2020, the FCA published its Decision Notice (the Decision) against Corrado Abbattista for market manipulation. This imposes a financial penalty of £100,000 on Abbattista and prohibits him from performing any functions in relation to regulated activities. Abbattista has appealed the Decision.

Abbattista was founding partner and chief investment officer at Fenician Capital Management LLP.

The Decision finds that between 20 January and 15 May 2017, Abbattista placed orders for contracts for differences referenced to shares in certain companies with no intention of executing them. The orders were large compared with the average market size and placed so their full size was visible to market participants.

Over the same period, he placed smaller iceberg orders on the opposite side of the order book, this time intending to execute them. The market would not have known he had concurrent buy and sell positions.

The FCA concludes he falsely represented intentions to buy/sell to the market while his true intention was the opposite (to sell/buy). Abbattista’s larger orders therefore gave false and misleading signals to the market as to demand/supply.

Abbattista has referred the Decision to the Upper Tribunal. His central argument is that his orders were part of a legitimate investment strategy. That strategy was to place a large order on the other side of the book to liquidity test for hidden block traders when his smaller order was not being filled as quickly as he had expected.

FCA Market Watch 65

On 1 September 2020, the FCA published Market Watch 65, the 65th edition of the FCA’s newsletter on market conduct and transaction reporting issues.

The newsletter reminds firms of the importance of maintaining the confidentiality of FCA information requests. Information requests are not to be discussed with staff outside Compliance without prior FCA agreement, and only under strict instructions as to maintaining confidentiality.

It further reiterates to firms that legally privileged material is not to be submitted alongside or within STORs/market observations. However, the presence (as opposed to contents) of legally privileged material is to be disclosed where relevant to the narrative of the notification and must not be viewed as grounds not to submit good quality STORs.

The FCA additionally highlights several data-quality issues in transaction reports, which it says firms ought to note and use to review the completeness and accuracy of their reports. These are set out below.

Unreported transactions. The FCA expects firms to have arrangements in place to determine when an instrument is in scope for transaction reporting, and infrastructure to submit reports no later than the close of the following working day. Where a data reporting services provider indicates it will stop providing its services, affected firms are to make alternative arrangements to continue meeting transaction reporting obligations. Breaches are to be reported promptly.

Immediate underlying. The International Securities Identification Number (ISIN) of the “immediate” underlying instrument is to be used as the underlying instrument code for transactions executed in financial instruments with an underlying. The “ultimate” underlying instrument is not to be used.

Trading venue transaction identification codes (TVTICs). The FCA expects trading venues to review their procedures for generating and distributing consistent, unique TVTICs to buying and selling parties. Investment firms should review their processes for accurately reporting TVTICs.

Country of branch fields. These are only to be populated where the buyer or seller was the firm’s client. The country code of the client’s nationality or location should not be given. Instead, that of the branch receiving the client’s order or making the investment decision under the client’s discretionary mandate should be used.

Systems and controls. The FCA reminds firms that its acceptance of transaction reports does not imply their accuracy. Firms must (under RTS 22) make data extract requests to reconcile transaction reports with front office records. The FCA also stresses the importance of back reporting.

Market Abuse Regulation (MAR) – ESMA reports outcomes of its MAR review

On 24 September 2020, ESMA reported on the outcome of its MAR review. The report follows ESMA’s 2019 consultation, where ESMA asked for views on various aspects of the MAR review.

ESMA’s review is broad in scope, but the following may be of particular interest to investment managers:

Spot foreign exchange (FX) contracts. ESMA concludes that further analysis should be carried out on the suitability of setting-up an EU regulatory regime on market abuse on FX spot contracts, taking into account the FX Global Code of Conduct and involving the views of central banks.

Definition of inside information. ESMA concludes that the definition of “inside information” set out in Article 7 of MAR is sufficient to combat market abuse and should not be changed, except with respect to front running. Front running, it suggests, should be applied beyond persons charged with order execution to include other categories of persons who may be aware of a future relevant order, such as issuers and their directors and institutional investors. ESMA further intends to issue additional guidance on pre-hedging conducts, including factors to be taken into account when assessing market abuse and conduct violation risks.

Market sounding regime. The majority of respondents to the ESMA consultation were of the view that the compulsory regime is disproportionately burdensome and should be made optional. ESMA disagrees, as only a compulsory regime will ensure that an adequate audit trail is left for national competent authorities to effectively investigate potential abuse. It recommends that the Commission amend Article 11 MAR to clarify that the regime is mandatory and that compliant market soundings will confer protection from allegations of unlawfully disclosing inside information. ESMA further recommends the introduction of sanctions for violations of market sounding obligations, regardless of whether unlawful disclosure of inside information has been committed.

Of note to investment managers is ESMA’s statement that persons receiving market soundings should continue to carry out their own assessment regarding the possession of inside information. ESMA requests flexibility from the Commission to amend its guidelines to introduce recommendations to market sounding recipients that are tailored to their size, sophistication, and nature.

Insider lists. ESMA maintains its view that insider lists are a key tool in market abuse investigations and should be kept, with minor clarifying amendments.

Collective investment undertakings (CIUs). The majority of respondents suggested that the characteristics of CIUs admitted to trading or trading on a trading venue (i.e., listed funds) made market abuse unlikely (particularly as compared against other issuers). However, ESMA concludes they should not be exempted from the scope of MAR. This is because the generation of inside information in relation to CIUs could create an objective risk for other market participants in the absence of disclosure obligations. However, it recommends that the MAR should specifically exclude self-managed CIUs from “persons discharging managerial responsibilities” (PDMR) obligations.

For example, the FCA expects

• boards and senior managers to make all necessary arrangements before end-2021 to identify exposure to LIBOR and ensure that the transition away harms neither clients nor smooth market operation
• firms to treat clients that will be affected by the LIBOR transition fairly and to communicate the risks and effects to them in a clear, timely manner

Additionally, the FCA states that all firms should

• conduct end-to-end inventory of LIBOR exposure, covering the full range of contracts, processes, and systems (whether in-house or ancillary)
• get assurance on timely software upgrades in order to use alternative rates, where third-party vendors provide critical systems
• familiarise themselves with its transition path and accompanying statement

The webpage further specifies the other actions expected of firms undertaking any of the following activities: asset management; benchmark administration; corporate finance (and similar) advice; custody services provision; principal trading; and wholesale brokerage.

The FCA advises firms to check its site regularly as it will be periodically updated with information ahead of end-2021.

Sterling overnight index average (SONIA) – Bank of England Working Group press release

On 10 September 2020, the Bank of England’s Working Group on Sterling Risk-Free Reference Rates (the Working Group) issued a press release, Securing a SONIA-based sterling loan market.

The paper reiterates the importance of transitioning away from LIBOR before end-2021 (LIBOR’s availability is guaranteed only until that point).

The Working Group had recommended that lenders be ready by the end of Q3 2020 to offer non-LIBOR-linked products to customers and to include contractual arrangements to facilitate conversion of all new or refinanced LIBOR-linked products to SONIA or other alternatives. It recommended lenders to cease new issuance by the end of Q1 2021 of all sterling LIBOR-linked loan products expiring after the end of 2021.

Although it revised these timelines due to the impact of COVID-19 earlier this year, it says market volatility in the intervening period continues to demonstrate LIBOR’s longstanding weaknesses. It also notes that LIBOR’s availability is guaranteed only until end-2021. The importance of transitioning beforehand therefore “remains unchanged.”

The Working Group held a webinar on 18 September 2020 and has published three papers to support firms’ transitioning their existing sterling LIBOR-linked contracts, covering (i) legacy loan products, (ii) existing bonds and securitisations, and (iii) the appropriate “credit adjustment spread” for fallbacks for sterling cash market products.

The SMSG warns generally that more clarity is needed on ESG disclosures. For instance, the advice requests that the ESAs and Commission explain how to calculate certain indicators else they risk receiving differing and incomparable company data sets.

Additionally, the SMSG suggests that a particular indicator’s relevance may vary depending on product type. Reference indicators for adverse impact should, it says, accordingly be applied at product level as opposed to entity level.

Sustainability-linked bonds (SLBs) to be eligible as ECB collateral

On 22 September 2020, in a clear demonstration of support for the product, the European Central Bank (ECB) announced that SLBs will be eligible as central bank collateral, starting 1 January 2021. This marks the removal of the biggest obstacle to the SLB market’s development and may result in a significant increase in the number of SLB issuances in Europe.

For further information on this important development, please refer to our October 2020 Update Sustainability-Linked Bonds Will Be Eligible As European Central Bank Collateral.

John Glen speech to the Investment Association

On 7 September 2020, John Glen, the Economic Secretary to the Treasury, addressed the UK Investment Association on sustainability and responsible investment (SRI).

SRI continues to top the Treasury’s agenda for its asset management sector strategy. Glen underscored this focus on SRI, notably stating that the UK government intends at the very least to match the EU Sustainable Finance Action Plan’s ambition.

Glen stressed the Treasury’s desire for asset managers to become “effective stewards on behalf of clients by holding the companies they invest in to account.” He reminded large asset owners of the Green Finance Strategy’s expectation that they will make climate-related disclosures by 2022. Glen also appealed to investment managers to “do more” in the social and environmental space.

The original script of the speech is available here.

New UK disclosures for asset managers – Task Force on Climate-related Financial Disclosures (TCFD)

On 22 September 2020, Christopher Woolard, Interim Chief Executive at the FCA, wrote a letter to Guy Opperman MP, the UK’s Minister for Pensions and Financial Inclusion.

The letter stated that the FCA intends to consult on implementing client-focused TCFD-aligned disclosures for asset managers and contract-based pension schemes in the first half of 2021, with new obligations coming into force in 2022.

The letter stated that the FCA will be mindful of the interaction of its work with related international initiatives, including those that derive from the EU’s Sustainable Finance Action Plan, but the FCA considers that taking forward TCFD-aligned requirements is consistent with and complementary to those initiatives.

Guy Opperman MP sent a letter dated 30 September 2020 to Mr Woolard in response, welcoming the FCA’s approach.