Fund Governance Insights

Depositary Insights
Summer 2021

20 minute read time

Welcome to the Summer edition of Depositary Insights, which offers the latest thinking on regulatory and industry developments from NatWest Trustee and Depositary Services.

As we enter the second half of 2021, it seems an appropriate moment to reflect and take stock, while also considering the emerging themes and trends on the horizon as we look further ahead.

In this edition we will examine a number of topics of priority interest in the market:

• The Long Term Asset Fund

• The FCA’s feedback on depositaries’ AFM replacement plans

• The future of the UK funds regime

• How UK regulations are evolving in 2021

• The regulation of cryptoassets

• The proposed “Direct2Fund” model

Recently we have also seen significant developments in terms of the FCA’s review of the Host AFM market, as well as the FCA’s review of Assessment of Value reporting. We are currently engaging with our clients on these key topics and will address them in more detail in forthcoming editions.

It has therefore been a busy year for regulation and policy for the sector, and this looks set to continue.

The Long Term Asset Fund: gathering momentum but hurdles to overcome

The discussion gained momentum with the publication, on 7th May, of the FCA’s consultation paper (CP21/12) on the LTAF. This was published on the same day as the FCA’s Feedback Statement on liquidity mismatch in open-ended property funds. While the liquidity mismatch proposals are likely to have up a two year implementation period,the government has committed to have the LTAF up and running by the end of this year.

AFM replacement: resilience amid uncertainty

The FCA has previously observed depositaries play an important role in preventing harm to investors in funds and the current impact of Covid-19 has made this responsibility more important than ever.

The UK Funds regime: looking ahead

On 26th January this year, HM Treasury issued a call for input on the future of the UK funds regime. As we enter the second half of the year, more than six months after the end of the UK-EU implementation period which came after Brexit, it is a good time to reflect on the call for input and what the process might tell us about the future of the UK funds regime. 

Principles or prescription? How UK and EU regulations are evolving in 2021

As we enter the second half of 2021, it is possible to detect a subtle change in the way that regulators in the UK and EU are approaching rule-making. One set of rules is more prescriptive, setting detailed requirements and expectations of firms, while the other is increasingly principles and outcomes based. 

From niche to mainstream? Cryptoassets and the funds industry in 2021

Much has been written about the “potential” behind cryptoassets and associated technology such as distributed ledger technology (DLT): “crypto” has captured the zeitgeist. However, behind the headlines, there is still much foundational work to be done in terms of defining terms, scoping the opportunities, and balancing risks. 

The Direct2Fund model: time to look ahead

The FCA recently announced that a planned consultation on the “Direct2Fund model” had been postponed to later in 2021 at the earliest, due to the high volume of existing regulatory activity. However, as the industry considers matters such as attractiveness of the domicile, efficiencies and investor protection, it is worth keeping the proposals in mind, and on the radar.

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