UK UCITS and NURS: governance and oversight obligations
Authorised fund managers (AFMs) of UK UCITS and non-UCITS retail schemes (NURS) operate within one of the most densely regulated environments in UK financial services. The FCA's COLL sourcebook, the Collective Investment Schemes Order, and the fund rules applicable to each scheme create a comprehensive framework of obligation that spans portfolio management, custody, distribution, governance, and disclosure. The FCA's supervisory priorities for the funds sector in 2024/25 include liquidity management, ESG disclosure, and the oversight function of AFMs — particularly the adequacy of depositary oversight and the effectiveness of independent director and oversight functions.
Liquidity risk management remains the dominant supervisory concern following the liquidity events affecting certain property and absolute return funds in recent years. The FCA's final guidance on liquidity management for open-ended funds (FG20/15) requires AFMs to assess the liquidity of all portfolio assets against the redemption terms offered to investors, to model liquidity under a range of stress scenarios, and to have documented procedures for activating liquidity management tools (LMTs) — including swing pricing, dilution levies, gating, and suspension — in a timely and orderly manner. The FCA conducted a follow-up assessment in 2024 and found that implementation of FG20/15 remained incomplete in several areas, particularly in the calibration of swing pricing triggers and in governance arrangements for LMT activation decisions.
The depositary's oversight obligations under COLL 6.6B are often misunderstood. The depositary is not merely a custodian — it has an active oversight role that includes monitoring the fund manager's compliance with the scheme documents and applicable regulation, verifying the fund's NAV calculations, and ensuring that subscriptions and redemptions are carried out in accordance with the scheme. The FCA has found in supervisory reviews that some depositaries are performing only the minimum required checks and are not providing the level of independent scrutiny that the oversight function requires. Depositaries that identify potential compliance issues must escalate them to the AFM and, where the AFM fails to address them, directly to the FCA.
Independent director obligations for UCITS management companies and self-managed investment companies (SMICs) require genuine independence and adequate engagement with fund governance. The FCA's thematic review of authorised fund governance found that independent oversight functions were in some cases too passive, approving management recommendations without adequate challenge, and not receiving adequate information about fund performance, liquidity, and compliance. AFMs should review the governance arrangements of their funds against the FCA's good practice examples from this review and ensure that independent oversight is genuinely effective.
SDR and fund labelling
UK UCITS and NURS are subject to the FCA's Sustainability Disclosure Requirements (SDR) from 31 July 2024. AFMs using sustainability labels must ensure that their funds meet the qualifying criteria, and must produce consumer-facing sustainability product reports for each labelled fund. The anti-greenwashing rule applies to all fund communications regardless of whether a label is used. AFMs should review their fund marketing materials, factsheets, and KIID supplements for consistency with the anti-greenwashing rule before making any sustainability claims.