Our latest Funds and asset management regulatory news supplements our General regulatory news with items specific to the funds and asset management industry. Read both to keep abreast or recent regulatory developments.

Contents

• Role of investment managers in post-COVID-19 recovery: FCA speech
• MMF Regulation: ESMA statement on external support

Role of investment managers in post-COVID-19 recovery: FCA speech

The UK Financial Conduct Authority (FCA) has published a speech by Christopher Woolard, FCA Interim Chief Executive, on the role of investment managers in the post-COVID-19 recovery.

Among other things, in his speech, Mr Woolard notes that the FCA intends to consult later in summer 2020, in a "genuinely open way", on whether long-term investor interests would be better served by finding a way in which open-ended property funds could safely transition to a structure in which liquidity promises to investors are better aligned with the liquidity of fund assets.

Mr Woolard also mentions that there is now an opportunity to look again at the FCA Handbook, focusing less on tick box compliance and more on promoting outcomes that serve the public interest. He encourages the investment management sector to work with it to ensure it has a high-quality regulatory framework that supports a financial system fit for recovery.

MMF Regulation: ESMA statement on external support

The European Securities and Markets Authority (ESMA) has published a statement on external support under Article 35 of the Regulation on money market funds (MMF Regulation) in light of actions by financial markets authorities to mitigate the impact of COVID-19 on financial markets.

Under Article 35, MMFs are not allowed to receive external support, which is defined as "direct or indirect support offered to an MMF by a third party, including a sponsor of the MMF, that is intended for or in effect would result in guaranteeing the liquidity of the MMF or stabilising the NAV per unit or share of the MMF". ESMA explains that the market liquidity brought by certain measures taken by central banks and securities and markets regulators may have indirectly benefited MMFs through the intermediation of credit institutions, including through the purchasing of short-term assets held by MMFs.

Therefore, ESMA seeks to clarify the potential interaction between the intermediation of credit institutions and the requirements of Article 35 on external support. ESMA states that MMFs may enter into transactions with third parties, including affiliated or related parties, provided the requirements of Article 35 of the MMF Regulation are met.

The statement is also intended to coordinate the supervisory approaches of national competent authorities in light of these and any future liquidity challenges for MMFs in the context of the COVID-19 pandemic.

[View source.]