Commenting on the FCA’s latest consultation paper on ‘Extending the SDR regime to Portfolio Management’:
Daniel Barry, wealth and asset management risk and regulation lead at KPMG UK, said: “This is a crucial consultation given that portfolio management services are such an important activity for UK firms - including wealth managers with direct retail customers.
“It’s been a challenge for the FCA to make the SDR regime work for this part of the market. The final rules for these firms were originally expected in the FCA’s November 2023 policy statement but there was significant pushback from the industry on the original consultation paper.
“The industry is now scrutinising the detail of the draft rules and considering its response. Although the FCA’s latest proposals would align the requirements for portfolio managers much more closely with the final rules for fund managers, there will be nuances to work through under the proposed labelling regime. For example, portfolios that invest in funds will potentially need to consider whether the chosen sustainability standard should be applied at fund or asset level, and at which level to set and assess KPIs. Retail-focused firms are also facing a short timeline to prepare for the naming and marketing rules – potentially needing to comply by 2 December.”
“Firms managing portfolios for professional clients will likely welcome the possibility of opting into the regime and the more proportionate associated requirements, but some are likely to be disappointed that the scope has been restricted only to UK-domiciled clients and that services provided to funds have been excluded.”
