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The FCA has issued CP24/8, a consultation paper proposing to broaden the sustainability disclosure requirements and investment labelling regime to include a more extensive range of portfolio management services, building on the rules for fund managers set out in PS23/16 and the initial proposals in CP22/20.
Expanding the scope
The proposals seek to encompass discretionary portfolio management services, including model, customised, and bespoke portfolio management services. This expansion aligns with the definition used for TCFD-aligned disclosure rules, capturing a wide range of services beyond those solely driven by client mandates.
With a focus on delivering outcomes for retail investors, the proposed rules target wealth management services for individuals and model portfolios for retail clients. Firms offering professional client services can opt into the labelling regime but will not be subject to the naming and marketing requirements.
Summary of the proposals
Proposal | Requirement for Portfolio Managers |
| Labels | Portfolio managers can use a label if at least 70% of the gross value of the assets within the portfolio are invested in accordance with the sustainability objective, and the other qualifying criteria are met. |
| Naming and marketing rules | Portfolio managers providing services to retail investors are subject to the naming and marketing rules. |
| Consumer-facing disclosures | Portfolio managers will be required to produce consumer-facing disclosures if using a label or sustainability-related terms without a label, publishing them on their website, or otherwise providing them to their clients. |
| Product-level disclosures | Portfolio managers will be required to produce pre-contractual disclosures and ongoing product-level disclosures if using a label or sustainability-related terms without a label, publishing them on their website, or otherwise providing them to their clients. |
| Entity-level disclosures | Portfolio managers with over £5 billion in AUM will be required to produce entity-level disclosures in relation to the overall assets managed in relation to sustainability in-scope business. |
| Distributor rules | Distributors of portfolio management offerings will need to provide labels and consumer-facing disclosures to retail investors. |
Looking Ahead
The consultation will close on 14 June 2024, with final rules to be published later this year. The labelling, naming, and marketing requirements, along with consumer-facing and pre-contractual disclosures, are set to take effect on 2 December 2024. From 2 December 2025, firms with over £50 billion in AUM must produce entity-level disclosures, and smaller firms with over £5 billion in AUM have until 2 December 2026. These dates align with existing fund manager regulations, except for the initial labelling and disclosures start date.
If you would like to read more about the SDR regime, please see our previous blog and find out how our team can support you on our Sustainable Finance webpage.
"We propose to extend the SDR and investment labels regime to all forms of portfolio management services, including where the portfolio management offering (the agreements or arrangements) are model portfolios, customised portfolios and/or bespoke portfolio management services (tailored to the clients’ needs and preferences). ......As the SDR and labelling regime has been developed primarily for retail investors, also referred to in this paper as ‘consumers’, the proposals to extend the regime are primarily aimed at wealth management services for individuals and model portfolios for retail investors."
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