International Funds Focus Quarterly | April 2025
Published on 29th April 2025
Regulatory developments for fund managers in the UK and across Europe
There was an expectation back in January that 2025 would be a busy year for funds – and the first quarter has not disappointed. The broader financial services sector has already seen a high volume of regulatory initiatives following the government's business law reforms. This update therefore includes coverage of the planned changes for asset management in light of the government's recent policy paper on how to support growth.
The European Securities and Markets Authority (ESMA) and the UK's Financial Conduct Authority (FCA) have both set out their supervisory priorities for 2025 and set out the areas that will receive their attention. Private market valuations are the main focal point. The FCA is also consulting on how to reform investment disclosures. This fundamental reform will also have an impact on unauthorised firms and overseas funds being marketed into the UK.
The first quarter has also brought a couple of helpful updates for fund managers of retail funds on how to provide information to the FCA.
Osborne Clarke's investment management, fund formation and regulatory experts are well placed to advise you further on any of the rapidly changing developments covered in this edition of our International Funds Focus.
For further information please contact the experts mentioned in the articles or one of our funds partners: Helen Parsonage, Tim Simmonds, Alison Riddle, Simon Thomas and Robert Eke.
Private market valuations come under the microscope of the FCA
The FCA reviewed private market valuations last year and has published the findings this quarter.
The UK financial regulator found strong practices across the industry but highlighted areas for improvement in private market valuations. This heralds more in-depth regulatory scrutiny for which private fund managers will need to prepare, as the regulator will expect firms to take the findings into account and consider them in light of their own business practices. The findings are especially relevant for those operating in the mid-market and in relation to co-investment opportunities.
UK and EU regulators set out their supervisory priorities
The FCA has provided updates in relation to four multi-firm reviews:
In addition to the review of private market valuations, the regulator will launch an additional review of how fund managers value private assets in 2025. This time the FCA will focus on how fund managers deal with conflicts of interest.
The regulator will also launch a review of model portfolio services, exploring how firms are applying the "Consumer Duty".
The FCA will also publish its unit-linked funds review findings. Finally, all alternative investment funds (AIFMs) will indirectly be impacted by the regulator's work. This is due to the FCA casting its net more broadly than usual and reviewing the provision of services by depositaries, custody and third-party administrators. Emphasis will be on regulatory compliance across a spectrum of areas. The regulator is expected to benchmark the effectiveness of firms across these areas and publish its observations on good and poor practices.
In the EU, ESMA has launched a common supervisory action on the compliance and internal audit functions of retail management companies, as well as managers of AIFMs, across the European Economic Area.
Read more about supervisory priorities >
Read more about the additional review of private market valuation >
Read more about the review of depositaries, custody and third-party administrators >
Reforms to UK retail disclosure rules take shape
The government and the FCA are overhauling the UK’s retail disclosure rules as part of ongoing work to replace retained EU law. This will be known as the new "consumer composite investment" (CCI) regime and will take a fundamentally different approach from the EU's disclosure rules.
A swath of investment products will be covered by the CCI regime and new designated activities are being introduced, meaning unauthorised firms will also fall within scope of these new rules.
It's likely these reforms will impact overseas fund marketing into the UK – and the recycling of a key information document originally drafted for EU-distribution will no longer suffice.
Firms will be looking to consider the detail and the nature of the changes and their next steps in advance of the new rules.
There have been no significant updates over the quarter to the EU's ongoing reforms of its sustainability disclosures in the financial sector. However, the European Commission has clarified its approach to the current sustainability disclosures by providing technical clarifications on frequently asked questions about the EU's sustainability regime.
Read more about EU sustainability disclosures >
How retail funds should provide information to the FCA
The FCA has set out its expectations on what to include when applying for UK funds to be authorised for "deep" retail distribution. Furthermore, for non-UK fund marketing into the UK under the overseas funds regime, the regulator has added an online Connect user guide on how to notify material changes after these funds have been recognised.
