The asset management industry stands to save approximately £128 million per year in compliance costs from streamlining data reporting requirements, among other reforms proposed by the U.K.’s Financial Conduct Authority (FCA).
The regulator issued a trio of consultation papers on Tuesday that set out proposals for revising various rules in the asset management sector. They included proposals to simplify fund reporting requirements, launch an updated regime for alternative managers and simplify the rules around industry compensation.
The FCA said that the bulk of the expected compliance cost savings would come from the introduction of simpler fund reporting requirements.
As it stands, different fund types have divergent reporting requirements that produce data that is costly for firms to report and provides the regulator with data that is often inconsistent and hard to use, it said.
To address these issues, the FCA is proposing to consolidate and streamline fund reporting requirements and to apply “more proportionate” requirements on smaller asset managers that’s geared to the risk they pose to the market.
“Our proposals would make fund reporting more proportionate while increasing the quality and consistency of data reported to the FCA,” the regulator said. “Proportionality does not mean lowering expected standards in relation to consumer protection or market integrity; it means that reporting obligations should be set according to the scale of risk.”
To that end, under the new regime, “firms managing larger funds, which are likely to have a greater impact on market integrity or consumer protection, would report more data compared to firms managing smaller funds,” the paper said.
“By tailoring the regime for U.K. asset managers, we can collect better data while also saving industry tens of millions of pounds a year,” said Simon Walls, executive director, markets, at the FCA, in a release.
Indeed, improving the data that’s collected from investment funds “can help identity inaccurate asset valuations, poor value products, liquidity issues and retail clients wrongly being categorized … as professional clients,” the paper noted.
The FCA said that it aims to start testing the proposed new reporting framework in late 2026, with final rules expected in the first half of 2027, and the regime to be fully adopted in 2028.
At the same time, the regulator is also proposing to modernize its rules for alt managers, which are currently derived from the European rules that pre-date the U.K.’s exit from the European Union.
Since then, some of these requirements “have become dated,” the FCA noted.
It also said that the current rules don’t adequately distinguish between different types of funds — such as funds that trade primarily in public markets versus funds that utilize more illiquid instruments.
“Our aim is to make the rules more proportionate to firms’ size and activities, and to better match the rules to firms’ risks,” it said. “Greater flexibility should help firms compete, innovate and do cross-border business.”
That new regime also likely won’t launch until 2028, the paper noted.
The HM Treasury is developing proposed changes to the legislation underpinning the rules in this area.
The FCA is also planning to issue a second consultation of certain aspects of the alt manager rules that aren’t covered in the current consultation, and it’s planning a public roundtable on the prudential requirements for alt managers in September.
Finally, the FCA is also proposing to simplify the rules around industry remuneration, by replacing overlapping requirements in this area with “a clearer, more proportionate framework.”
That effort aims to respond to industry complaints that the existing requirements are needlessly complex and impose unnecessary compliance burdens on firms that typically aren’t systemic.
“We propose to move from detailed, prescriptive rules towards a more outcomes-focused approach based on firm governance and accountability,” the FCA said in its paper. It expects to publish its new policy in this area in the first quarter of 2027.
The deadline for the consultation on new fund reporting requirements is Sept. 22; the consultation on the proposed changes to the alt manager rules runs until Oct. 14; and the proposals on remuneration have a Sept. 16 deadline.