UK: FCA consultation on assessment of value rules for authorised funds closing soon

Several respondents noted that the assessment of value (AoV) rules in COLL go further than the requirements under the Consumer Duty price and value outcome, which is outcomes-focussed, potentially giving rise to an unlevel playing field between those firms complying with the AoV and those complying with the Consumer Duty.

In Feedback Statement FS25/2 “Immediate areas for action and further plans for reviewing FCA requirements following introduction of the Consumer Duty” the FCA committed to consult on proposals to streamline the AoV annual reporting requirement, as part of its objective of reducing the administrative burden for firms.

The FCA recognises that the prescriptive nature of the reporting requirements creates costs for AFMs.  Based on feedback around low levels of consumer engagement, the FCA considers these costs may be disproportionate to the benefit of greater transparency.  The FCA also appreciates that, because the style of reporting varies widely, it is not always easy to compare the AoV reports of different AFMs.

The consultation closes on 14 July 2025.

See our previous client briefings:

• UK: FCA reports on the Consumer Duty price and value outcome
• UK: FCA Call for Input: Review of the Handbook in light of the Consumer Duty
• Implications of the new Consumer Duty for Asset Managers

What are the proposals to streamline the AoV annual reporting requirement?

In chapter 7 of CP 25/16 Quarterly Consultation Paper No 48FCA is consulting on the following proposals:

removing the detailed reporting requirements in COLL, and these are detailed, as they require:
• a description of the assessment including for the seven matters under COLL that must be considered
• an explanation for any case in which the benefits of economies of scale are not passed on
• an explanation of cases where comparable classes have higher charges
bringing in a general requirement that the AFM’s annual report must include:
• a summary of the AoV
• the conclusion of the assessment as to whether the charges out of scheme property are justified in the context of the overall value delivered by the scheme
• any remedial action they are taking to address poor value

The FCA wants to provide greater flexibility for firms as to how they comply with AoV requirements, while maintaining high standards, including meeting the Consumer Duty, and reducing administrative costs.  However, some firms may consider that the broader requirements will lead to essentially the same outcome, and therefore the administrative burden may not be materially reduced.  Firms are encouraged to respond to the consultation should they feel that the FCA’s proposals do not go far enough, particularly if they have practical suggestions for what could be done better, or further areas of the rules that could be streamlined. 

What else do I need to know about the AoV annual reporting requirement?

AFMs will continue to be able to publish the AoV information in a composite report if they choose.

The AoV reporting requirements should continue to be overseen by the board of the AFM.

AFMs who wish to include more information about the value the fund offers in the annual report, a composite report, other investor communications or to manufacturers and distributors will be free to do so, subject to the usual requirement that such communications should be true, fair and not misleading.

The FCA believes that its proposals will lead to significant cost savings for AFMs.

Next steps

The consultation closes on 14 July 2025. Responses to CP25/16 should be emailed to: cp25-16@fca.org.uk.

How ES can help

We act as an independent legal advisor to clients including individuals, senior managers, FCA approved persons, who are subject to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) dealing with comprehensive matters including conduct and governance issues.

We have extensive expertise and experience working with our clients to provide them with advice about meeting the relevant regulatory requirements, including by assessing the impact of the new regulations on the client’s business operations, reporting timelines, risk management, outsourcing and third party risk management.