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The key changes suggested were:
a). The introduction of a mandatory suspension of funds where pricing is unreliable due to uncertainty over the valuation of underlying assets;
b). Improving liquidity management;
c). Increased disclosure and transparency.
These changes came into effect in September 2020, but the suspension had already been operated in advance by funds for retail investors when the valuation firms introduced "material uncertainty" clauses in their March 2020 valuations as a result of Covid.
Even before the new rules had come into effect in September 2020, the FCA had published a further consultation, CP 20/15. This was published on 3rd August 2020 and ran until 3rd November 2020. You can find it here. The key feature was the proposed introduction of mandatory notice periods for real estate funds for retail investors. This in turn gave rise to an issue for ISA eligibility which was then subject to a separate, rather frustrating, consultation. You can find our response to the CP 20/15 consultation here and on ISAs here.
In May this year, the FCA published their feedback paper, which summarises the responses to FCA consultation paper CP20/15. You can find here. It sets out where the FCA have got to in their thinking, and confirms what had been said informally that this being slowed to allow the LTAF to come up on the express track.
The key points are:
The FCA will not take a final decision on its policy position until Q3 2021 at the earliest. This includes the decision as to whether or not to require notice periods at all, although the tenor of the document suggests that this remains strongly the direction of travel;
There is a recognition of the operational challenges, particularly in respect of platform architecture, which needs to be addressed for property funds and the LTAF;
The issue of HMRC’s position on the ISA rules is noted. As we commented recently in our regular newsletter, we assume that this means that the FCA and the Bank of England will be paying HMRC a visit in the early hours of the morning armed with baseball bats;
The FCA comment that they will allow a suitable implementation period before the rules come into force, to allow firms to make operational changes, noting feedback that 18 months to 2 years would be an appropriate period.
We are pleased that the FCA are considering a change to the deferral rules / architecture (page 11 of the paper) as this is something that we have been banging on about since 2017.
More generally, it is positive news that the FCA are not rushing through changes and recognise the need to look at the whole investment architecture.
We await further developments.