Recently the FCA has launched a new consultation paper (CP24/8) to discuss the extension of the Sustainability Disclosure Requirements (SDR) to Portfolio Management services. This regime extension will build on the SDR, which was introduced in the November 2023 PS23/16, which mainly targeted the asset management sector.
The aim of this extension of the regime to portfolio management activities is to assist customers in navigating the markets, especially where sustainable investment is an objective. As the context of the world is changing around us, customers are increasingly looking to adjust their investment objectives, with sustainability being a popular objective. With the development of Consumer Duty the regulator wants to ensure that customers are provided with as much information as they require to make informed decisions.
Who will be Affected?
As the name of the paper suggests, this extension of the SDR rules will affect the portfolio management services sector. The FCA has gone on to further define that this will compromise the following:
- Firms that manage investments; and
- Private equity or other private market activities firms that provide advice on investments or manage investments on a recurring or ongoing basis for the predominant purpose of investment in unlisted securities.
Therefore, if you provide services in the above areas, this extension will affect you and your firm’s activities.
What will be introduced?
Similar to how PS23/16 changed the asset management business, the proposed extension will see the same rules being introduced into the portfolio management space. Some of the key areas of change are as follows:
- Application of the labelling regime to products;
- Application of the naming and marketing rules of products; and
- Additional disclosure requirements for portfolio managers.
For further information regarding the full SDR rules and its application, take a look at Complyport’s summary article of PS23/16 which explains the full package of SDR rules.
The Aim of SDR
The aim of the introduction of these measures is to ensure that where portfolio managers make offerings that claim to be sustainable investments, the claims are trustworthy and meet the high standards of the regulators. Without such rules there is possibility for sustainability claims to be used as marketing ‘gimmicks’ and risk jeopardising the integrity of the sector and the services offered within it.
Next Steps
The consultation regarding SDR in relation to the portfolio management sector is due to close on 14th June 2024. Firms therefore have between now and then to provide feedback on the proposed extension, with feedback due to be published alongside the final rules in the second half of 2024.
The final rules are expected to then come into effect for portfolio managers from 2nd December 2024. It is therefore advisable for firms to start considering the SDR rules and how they will affect their business when the new rules come into force.
How Complyport Can Help
Having to navigate the ever-evolving SDR landscape within the financial services sector can be time-consuming. With the finals rules expected to come into effect in December 2024, our consultants are offer a tailored and flexible approach to ensure your firm is prepared. We offer:
- SDR/ESG Readiness Assessments
- SDR/ESG Review against categories
- Policy and procedure updates
- Ongoing support for any questions regarding the new regulations
- SDR/ESG Training
Complete the form below to book a free consultation.
About Complyport
Complyport is a market-leading consulting firm supporting the UK financial services industry for over 22 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport can assist with the preparation of a GAP analysis and impact assessment on the investment firm’s capital adequacy and risk management framework of the Company under the regulatory framework.
We specialise in supporting the UK financial services industry with compliance guidance, advice and best practice.
- Financial Crime Risk and Compliance support
- Consumer Duty implementation advice
- Prudential support, IFPR, ICARA and financial resilience advice
- Operational resilience & Cybersecurity advice
- CASS advice and protections of client assets
- Compliance managed services and resourcing compliance personnel
- Skilled Person Reviews and Regulatory Investigation
- Financial Promotions guidance, support, and management software solutions
- Comprehensive compliance work-flow management software
Complete the form below to book a free consultation.
