Investment management update - July 2022

11 July 2022

Welcome to the June/July 2022 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.

This month’s edition includes the following updates:

  • post-Brexit developments are underway with a new Financial Services and Markets Bill, an HMT consultation on Solvency II reform, and the UK regulators’ outlining their upcoming publications;
  • the FCA recommends the regulation of ESG data and ratings providers; and
  • the future direction of the EU’s Sustainable Finance Disclosure Regulation has become clearer with further guidance from ESMA and a series of requests from the European Commission.


  • On 29 June, the FCA published a feedback statement on the integration of ESG in capital markets, in response to a 2021 consultation. The FCA outlines the case for regulating ESG ratings and data providers and recommends that the Government bring those firms into the regulatory perimeter. The FCA also details its “measured approach” to ESG-labelled debt instruments.
  • On 24 June, the FCA stated that it had identified and will address a mistake in the on-shored PRIIPs RTS in relation to negative transaction costs because of anti-dilution measures being applied. The revised RTS will take effect on 1 January 2023.
  • On 23 June, the FCA published an update on the progress of its data science initiatives. The FCA suggests that it has deepened its understanding of markets using Data Science Units across its organisation. Specific initiatives underway include moving its physical data centre to a cloud service, developing a Data Lake as a central store of all FCA data, and implementing analytics tools to identify trends and outliers. Nikhil Rathi, the FCA’s CEO, also gave a speech in which he highlighted the FCA’s work with Google and reiterated that the FCA will become a “data regulator” within five years.
  • On 14 June, the Government published a draft version of the Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022, which has been laid before Parliament, and an explanatory memorandum. The legislation introduced the Investment Firms Prudential Regime (IFPR) in the UK. The amendments concern risk retention requirements for securitisations, exempting certain short-term liabilities from bail-in powers, and other changes to “tidy up” redundant rules.
  • On 10 June, the FCA published its latest Quarterly Consultation (CP22/10). The paper consults on a range of miscellaneous changes to the FCA’s Handbook, including changes relevant to MiFID firm prudential rules, the FCA’s decision making process, and compensation rules in respect of funeral plan providers. The deadline for responses was 18th
  • On 26 May, the Financial Services Compensation Scheme (FSCS) published its May Update forecasting the size of the levy for 2022/23 at £625m. The Investment Provision class of firms are likely to be charged £115m, down from £200m (the annual maximum) due to fewer claims for compensation. Although the number of claims in relation to SIPP providers is expected to increase next year. The FCA continues to consider broader reforms to the funding of the FSCS following its discussion paper that closed earlier this year. Meanwhile the FSCS has also published a paper on “The balancing act of compensation”.
  • The FCA published a discussion paper on the Primary Markets Effectiveness Review. The consultation initiates the second stage of the review and concerns feedback on the listing regime. It follows the FCA’s initial statement of policy changes last year, such as permitting dual share classes in the UK. The discussion paper closes for comments on 28
  • The Financial Services Regulatory Initiatives Forum (comprising the Bank of England and the UK’s regulators) published their latest Regulatory Initiatives Grid on 25 May. The grid contains initiatives relating to ESG, investment management, conduct and other themes. Items of note include a series of ESG related publications, including a consultation on the Sustainability Disclosure Requirements, and a consultation on broadening the distribution of the Long Term Asset Fund, all due in the coming months.
  • The FCA and the Bank of England jointly published a discussion paper on improving the resilience of money market funds (MMFs). The considerations reflect those of the global Financial Stability Board’s reflections on the performance of MMFs during March 2020. The consultation closes on 23 In addition, the FCA published guidance on the current MMF rules.
  • HM Treasury is consulting on reforms to the Solvency II framework on the prudential treatment of insurers. The Government is keen to release more capital for the purposes of long-term and productive investment and has flagged the reforms as part of its post-Brexit deregulatory agenda. The consultation closes on 21
  • The Government announced at the Queen’s Speech on 10 May that it would table a new Financial Services & Markets Bill to create a new post-Brexit regulatory architecture, and to introduce reforms to Solvency II and capital markets rules, among other reforms.


  • On 24 June, the legislation to amend the implementation date of the revised EU PRIIPs RTS was published in the EU’s Official Journal. The revised RTS will take effect on 1 January 2023.
  • On 14 June, the European Parliament published a draft motion objecting to the European Commission’s proposal to include nuclear power and natural gas in the EU’s Green Taxonomy.
  • The European Commission published a letter to the ESAs inviting their recommendations to amend the Sustainable Finance Disclosure Regulation (SFDR) RTS to include information in disclosures about investments in fossil fuels and natural gas. The ESAs have until 30th September to provide their views. The European Commission published a further letter to the ESAs requesting proposals to increase the SFDR’s transparency beyond the environment and to support efforts to decarbonisation. The ESAs have until April 2023 to respond.
  • On 2 June, the ESAs published a series of clarifications on the SFDR’s current RTS. Topics addressed include the calculation of principal adverse impacts and minimum levels of Taxonomy-aligned investments. Plans to clarify and improve the SFDR were outlined in ESMA’s sustainable finance roadmap earlier this year. Related to this, on 31 May, ESMA published a briefing for supervisors on the integration of ESG considerations into investment management business.
  • ESMA has published draft RTS proposing that the introduction of the Central Securities Depositaries Regulation (CSDR) mandatory buy-in rule should be delayed for three years. The draft legislation provides a formal supplement to ESMA’s no-action letter, which notified the regulator’s intention not to enforce the rule that formally took effect in February 2022.
  • On 31 May, ESMA published the results of its Common Supervisory Action on the costs and fees of investment funds. The final report states that there is grounds for improvement in the application of ESMA’s June 2020 guidance, and for harmonisation in the treatment of undue costs, among other issues.
  • ESMA has published its view on best execution reports under MiFID II. The final report recommends that the European Commission consider reforms to RTS 28 reports, while the European Commission has separately proposed removing RTS 27 reports.
  • On 16 May, ESMA publishes a statement for fund managers on Russia and Ukraine. The statement contains guidance on valuation of effected assets and the use of liquidity risk management tools.
  • ESMA is consulting on notifications to supervisors for the cross-border marketing of AIFs and UCITS. The deadline for responses is 16 ESMA will create ITS and RTS to govern managers’ notifications to market in a Member State.