Investment management update - October 2022

16 November 2022

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.

Key things to look out for include:

  • the FCA has been very active on ESG, consulting draft rules for the new Sustainability Disclosure Requirements, initiating a multi-firm review of fund managers’ compliance with its ESG guidelines, and confirmed that it will develop a voting disclosure regime for asset managers in the UK;
  • there have been a raft of tech-related developments: the FCA is consulting on the role of Big Tech in financial services, the UK’s authorities are gathering information on firms’ use of Artificial Intelligence, and the FSB has proposed a global framework for the regulation of crypto-assets and stablecoins; and
  • the EU has reached a landmark political agreement on improvements to the European Long Term Investment Fund (ELTIF) regime.


  • On 25 October, the FCA published its delayed consultation paper (CP22/20) on the UK’s new sustainable finance regime: the Sustainability Disclosure Requirements (SDR) and associated ESG investment labels. The consultation comprises draft rules on sustainable investment “labels” and the qualifying criteria which must be met in order to use the same, a series of investor disclosures, naming and marketing rules, and the introduction of a general “anti-greenwashing” rule. The draft rules differ slightly to the proposals in the FCA’s 2021 Discussion Paper (namely in relation to the proposed categories of sustainable investment labels). In addition, there will be further consultations on the application of the rules to overseas funds and on ESG requirements for financial advisers. Separate but related, a UK Green Taxonomy is under development. The consultation will close on 25 January 2023 and a policy statement should follow by 30 June 2023. The FCA expects the new regime to begin no sooner than 30 June 2024.
  • On 25 October, the FCA issued a discussion paper (DP22/5) about the role of Big Tech firms in UK financial services. The consultation is a high-level exploration of the implications for consumers and competition, and the emerging risks and opportunities, with a view to developing a regulatory regime that ensures the biggest competition benefits for consumers and addresses the areas of greatest harm. Specifically, the FCA considers that there could be short-term and perhaps enduring benefits from Big Tech’s market entry, but that these benefits might be eroded over time if market power becomes entrenched and is exploited by those same firms. The consultation will close on 15 January 2023.
  • The FCA is reported to have begun a multi-firm review of managers’ compliance with the ESG-related rules and the FCA’s expectations as detailed in its 2021 “Dear AFM Chair” letter which sets out guiding principles for ESG and sustainable investment funds. The regulator has suggested that enforcement actions might arise from the exercise. Note that EU regulators will undertake a similar exercise on greenwashing over the next two years.
  • On 19 October, the Advertising Standards Authority banned two HSBC adverts that they decided had overstated the bank’s green credentials. The adverts concerned HSBC’s net zero commitments and tree planting activities, but the authority said that the adverts omitted “material information” about the bank’s contribution to carbon dioxide and greenhouse gas emissions.
  • On 18 October, the FCA published an update on its progress against the workstreams and outcomes identified in its Consumer Investments Strategy, launched in September 2021. The publication outlines the composition of the market and changes that have happened over the past year. The FCA summarises the work that it has delivered, such as blocking one in five consumer investment firms entering the market, using emergency powers and undertaking proactive supervision and enforcement activity. It details work expected to impact the market over the coming year, including the introduction of the Consumer Duty, the recently reformed financial promotions regime and a tougher appointed representatives regime. The FCA also provides an update on its longer-term work, and reports on progress against four main areas of outcomes: mainstream investments, higher-risk investments, scams and fraud and consumer redress. The FCA will report again in 2023.
  • On 13 October, the Government dropped its intention to appeal a High Court ruling that its net zero commitment is unlawful because the strategy contained insufficient detail about how the commitment will be achieved. The Business Department has until March to produce a new net zero strategy.
  • On 11 October, the FCA, PRA and Bank of England jointly published a discussion paper (DP5/22) about the use of artificial intelligence (AI) and machine learning (ML) in financial services, both of which are expected to increase due to greater availability of data, improvements in computing power and the wider availability of relevant skills and resources. The discussion paper seeks views from a range of interested stakeholders and “a broad-based discussion” on the current regulatory and legal framework, and the challenges related to the use of AI and ML. The consultation will close on 10 February 2023.
  • On 10 October, the FCA published an update to its authorisation service standards, which are relevant to firms that apply to be registered with the FCA or seek permission to undertake regulated activities. The update covers the FCA’s progress against its service standards, including statutory and voluntary adopted timescales, and its plan to address deficiencies. The update details the reasons that the FCA did not achieve some of its timelines in 2021/22, namely increased scrutiny of firms at the application gateway building on the recommendations that arose from failings of London Finance & Capital; the receipt of incomplete or poor-quality applications from firms in particular under money laundering, payment services and electronic money regulations; and an increased volume of applications such as for Approved Persons status. The FCA intends to improve its performance through increased capacity and capabilities via recruitment; improvements to the application process such as simplifying complex application forms; transition to a new case management system in 2023 that will automate some processes and reduce the need for manual effort; and improved communication and engagement with firms at the gateway.
  • On 6 October, the Department for Work & Pensions (DWP) published a consultation on broadening the investment opportunities of Defined Contribution (DC) pension schemes. The consultation seeks to exclude “well-designed” performance fees, including carried interest, from the DC charge cap. The aim is to facilitate DC schemes’ investment in the new Long Term Asset Fund and in private markets more generally. The consultation also addresses the requirement on DC schemes to disclose or explain their policies on illiquid investments.
  • In a letter dated 6 October to the then Pensions Minister, Alex Burghart, the FCA’s head of ESG, Sacha Sadan, provided an update on the FCA’s response to the Taskforce on Pension Scheme Voting Implementation’s report and recommendations, including that the FCA will shortly undertake a review of asset manager voting policies and is considering introducing a voting disclosure regime for asset managers in the UK. The FCA is convening a Vote Reporting Group (comprising a range of interested stakeholders with an independent chair, while the FCA and other regulators would attend as observers) to ensure a proportionate and practical approach to vote reporting.
  • On 5 October, the FCA updated its webpage on the Consumer Duty. The information page for firms addresses queries that the FCA has received. These include a clarification that the FCA’s requirement for 31 October 2022 board or top-level management sign-off of firms’ implementation plans does not mean fully scoped work, but the expectation that firms will detail how they intend to fully scope and complete the work by the 31 July 2023 implementation deadline.


  • On 24 October, FinDatEx finalised an updated version of the European ESG Template (EET) Version 1.1. FinDatEx recommends that Version 1.1 should be introduced from 1 December 2022 and that Version 1 should be phased out from 30 April 2023.
  • On 19 October, the EU’s institutions reached a political agreement on reforms to the European Long Term Investment Fund (ELTIF). The reforms will broaden the ELTIF’s investment rules and allow master-feeder and fund-of-fund vehicles, among other changes. The legislation will be formally adopted soon. It is expected to take effect in 18 months with grandfathering for legacy ELTIFs and the potential for newly launched ELTIFs to adopt the rules before the implementation date. Read more in our update.
  • On 17 October, the European Council adopted new legislation on gender representation on boards. The rules will require public companies to achieve a target of 40% of female non-executive directors on their boards or a third of the board if the member state applies the rules to both executive and non-executive directors. The European Parliament must also approve the rules. Once adopted, member states will have two years to implement the legislation.


  • On 14 October, IOSCO published a survey intended for asset managers and index providers. The survey aims to inform IOSCO about conduct-related issues in relation to index provision: the respective roles of managers and index providers, the impact of index providers’ administrative errors on funds, and potential conflicts of interest. Responses are due by 26 November.
  • On 12 October, IOSCO published a final report on retail distribution and digitalisation. The report analyses developments on online marketing to retail investors, both within countries and across borders. IOSCO recommends regulatory tools to protect investors including firm-level rules, staff licensing and qualifications and supervisory surveillance and detection systems.
  • On 11 October, the Financial Stability Board (FSB) published its proposed regulatory framework for crypto-asset and stablecoins. The proposal contains two consultations: first, on a globally consistent regulatory and supervisory framework for “crypto-asset activities” with an aim to promote cooperation; second, a consultation on the regulation and oversight of “global stablecoins” with a view to addressing financial stability risks. The deadline for responses to the two consultations and the overarching framework is 15 December.