FCA leaves property funds in limbo with lack of date for new rules

FCA leaves property funds in limbo with lack of date for new rules
(Chris Ratcliffe/Bloomberg)

Confusion still abounds the future of open-ended property funds after the Financial Conduct Authority said it is still considering the next steps after an industry consultation.

In the latest regulatory initiatives grid, the FCA confirmed that it had published its feedback on the proposal to introduce notice periods for the funds, but did not give any more information on when it will release the next steps of the consultation.

The watchdog said last May it said it would not confirm specific property fund rules until a consultation on the long-term asset fund had been completed.

This was concluded in October, and the regulator has not outlined any further details to date. 

One of the solutions touted by the regulator in the consultation was the introduction of notice periods for redemptions, either on certain days throughout the year, or a set time after a withdrawal request has been given.

However, this presents a headache for platform providers who currently do not have the functionality to adhere to notice periods for redemptions.

Last week, head of investment research at AJ Bell, Ryan Hughes said the sector is in a "state of paralysis" due to the lack of update from the watchdog.

Sustainability labels

In its latest publication, the city watchdog said it will publish a consultation paper on the sustainability disclosure requirements, including sustainable investment labels, in July this year.

Europe's Sustainable Finance Disclosure Regulation, which came into force at the start of 2021, already makes sustainability-related demands of advisers. 

However, its rules were not onshored prior to the UK's exit from the EU.

The FCA is now introducing its own sustainability disclosure requirements for firms involved in investment management and decision-making processes.

Plans to classify sustainable investments into distinct groups may also be aligned with existing SFDR categories, the regulator said in its discussion paper at the end of last year.

The changes will focus specifically on sustainable investment labels, consumer facing disclosures for investment products, client and consumer facing entity and product level disclosures by asset managers and FCA regulated asset owners.

The labels and criteria are intended to help consumers navigate their sustainability characteristics and the input received will guide the FCA’s policy design in this area, ahead of consultation on new proposals in spring next year. 

Business reviews

The grid also indicated that the past business reviews of defined benefit pension transfer advice will mostly be completed this year.

The FCA said while the reviews are expected to continue until autumn 2023, there will be “substantial completion” by autumn this year.

The final guidance on the consumer duty will be published between July and September this year, with firms given until the second quarter next year to implement changes, the FCA said.

Finally, the regulator said it intends to publish the consultation into Isa investment pathways this quarter.