UK FCA consults on enhancing fund liquidity risk management

The UK Financial Conduct Authority (FCA) has published consultation paper CP25/38 on enhancing fund liquidity risk management. The FCA sets out in detail the context for this consultation, citing the work carried out both in the UK and internationally in respect of liquidity risk management for collective investment schemes in recent years.

Key proposals the consultation paper seeks feedback on include:

• Requirements for authorised fund managers of undertakings for collective investment in transferable securities (UCITS) funds and non-UCITS retail schemes (NURS) to have anti-dilution tools available.
• Changes in respect of the "listed asset presumption", which is the presumption that a transferable security admitted to or dealt on an eligible market is presumed not to compromise an authorised fund manager's ability to redeem units.
• Removing the derogation from the eligibility tests for holding transferable securities and approved money-market instruments and guidance on eligible markets.
• New conflicts of interest requirement to ensure equitable treatment of unitholders.
• Updating guidelines issued by the European Securities and Markets Authority on liquidity stress testing and including the guidelines in the FCA handbook.
• Proposed guidance on effective liquidity risk management systems.

The FCA does not intend to make any changes to the rules or guidance relating to arrangements where an authorised fund manager acts as a "host" managing a fund and which delegates portfolio management to a MiFID investment manager (the "sponsor").

The final chapter discusses the planned 2026 consultation on the Alternative Investment Fund Managers Directive. The FCA's view is that, given the current framework for alternative investment funds aligns with international standards, any proposed changes are expected to be limited.

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