FCA's Latest Dear CEO Letter: Is the Devil in the Detail?


Andrew Poole and James Read

Publish Date


Compliance Alert

  • Compliance

Two years on from the last “Dear CEO” letter to the “Alternatives” portfolio, which in FCA parlance is the Hedge Fund and Private Equity sectors, the regulator has reached out to note that COVID-19, Brexit, and the cessation of LIBOR have caused them to reassess their supervisory priorities for the sector.  

A brief skim of the headline terms does not actually suggest much of a reassessment, however closer reading indicates a broadening of considerations. 

In our latest alert, we examine and provide guidance on: 

  • The FCA’s view of the main risks of harm that alternative investment firms pose to their customers 

  • Expectations around the FCA’s marketing rules, coming into force from 1 December 2022, 

  • The impact of new Consumer Duty obligations 

  • Important nuances in the FCA’s focus on conflicts of interest 

  • The regulator’s growing focus on market integrity and disruption, market abuse, and culture 

  • The application of Task Force on Climate-Related Financial Disclosures to Alternative Investment Fund Managers with over £5bn from 2023 

Read more in our article, first seen in FT Adviser.  

 Read more

Our guidance 

While overall tone remains consistent, we encourage firms to note the more targeted mentions of certain areas. We consider conflicts of interest to be a growing area of focus for the FCA, and the cases in the early part of 2022 demonstrate this. Obviously COVID-19 hindered the FCAs ability to conduct further investigations, but as some form of normality takes place, we anticipate this picking up once again. 

What’s more, political pressures to open the private markets to a wider pool of investors will inevitably lead to issues around suitability while culture and governance are central to the Senior Managers and Certification Regime. Could this Dear CEO letter represent a subtle changing of approach from a regulator facing increased pressures both internally and from governmental changes? If so the alternatives sector will have to be prepared for some targeted questions. 

How we help

If you have any questions or concerns regarding any of the items raised in this notice, or in the Dear CEO letter itself, our compliance advisory specialists are available to review any of your current practices that you feel may need additional scrutiny. Complete this form or call +44 (0) 20 7042 0500 to connect with us.