CBI publishes outcome of FMCs thematic review
21 October 2020
- Designated Persons
- Lack of effective delegate oversight/demonstrable challenge of delegate
- Deficiencies in the level of review on monthly reporting and further independent analysis/verification of same
- Poor quality of reporting received from delegates
- Lack of demonstrated criteria to enable board escalation
- Delegate Oversight
- FMCs unable to evidence appropriate level of delegate due diligence both initial and ongoing – ongoing being prescribed as at the very least annually
- Where FMCs rely on delegate policies/procedures, unable to demonstrate review and approval of same
- No formalised process for initial and ongoing review of delegate policies/procedures
- Lack of effective engagement with delegates – particularly Investment Management and multi manager investment management umbrellas
- Lack of SLAs with each third party arrangement in place at inception and review on an ongoing basis giving rise to the risk that those activities are not governed/compliant with legal/regulatory requirements
- Operational Risk – Guidance states that a FMC must have a board approved risk framework including risk register/appetite
- No entity specific risk management framework
- No entity specific risk appetite statement/risk register
- Board Approval of new sub funds
- Per Part 1 of delegation oversight, a board should be able to evidence robust discussion and challenge of any proposed new strategies. This should be carried out in advance of a new sub fund launch. There was a lack of evidence of early discussion to agree/set proposed strategy with the board
- Organisational Effectiveness – role of an independent director on the board of the FMC
- No evidence of formal meetings taking place between the OED and the board or the DPs
- More focus needed on conflicts of interest and personal transactions of the OED
- Should have at a minimum quarterly meetings with the DPs with a focus on delegate oversight
- Required to submit a report to the board at least annually including conflicts of interest/personal transactions
- Governance & Culture
- All but the smallest of FMCs should appoint a CEO who is responsible for the day to day management of the FMC
- Independent directors tenure exceeded 10 years in 28% of cases and 5 years in 2/3 of cases – tenure needs to be addressed
- Gender imbalance – of the 1,654 directorships only 16% are held by women – diversity needs to be addressed
- Absence of board specific Terms of Reference
- Resourcing
- Time commitment of DPs and more generally, resourcing levels were below CBI expectations
- Some instances of co-mingling of support staff in both the IM and Risk functions
- Lack of succession planning