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Governance in Unit Linked Funds: Navigating Regulatory Challenges and Risk Management

This document explores the governance issues surrounding unit linked funds, emphasizing the complexities faced by firms in regulatory compliance. Highlighting a recent reprimand and financial penalties faced by a company, it discusses the broader implications for risk management and internal audits within financial institutions. Key topics include auto-enrolment, regulatory demands, and the essential alignment of governance with business strategy. The document concludes with actionable insights for improving oversight and ensuring compliance in investment activities.

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Governance in Unit Linked Funds: Navigating Regulatory Challenges and Risk Management

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Presentation Transcript

  1. Unit Linked Fund Governance 18 Sep 2013 George McCutcheon FIA MSc– Director, Financial Risk Solutions George.McCutcheon@frsltd.com

  2. Unit Linked Funds

  3. Nightmare Scenario “…Company X Reprimand and fine The Regulator reprimanded the Firm and required it to pay a monetary penalty of Y Breaches The breaches identified are … .” It could be you!

  4. Auto enrolment • Complexity • Regulators • Funds • Competition • Counterparties • Governance

  5. European Perspective (EIOPA)

  6. Risk Management • Committees • Compliance • AMSB • Senior Management • Internal Audit • Actuarial

  7. Document Decisions • Monitoring & Reporting • Internal Reviews • AMSB • Qualifications, Experience, Knowledge • Align with Business Strategy • Risk Management

  8. Investment Activity Systems • Valuations • Custodial Compliance Reporting Procedures • Funds Data Validation Controls • Unit Liability Matching • Counterparties Risk Management • Governance

  9. Investment Activity Board • Valuations • Custodial Compliance Board Committees • Funds Operational Management Senior Management • Unit Liability Matching • Counterparties Risk Management • Governance

  10. Fund Mandates

  11. FCA Thematic Review of Unit Linked Funds

  12. UK Regulatory Structure 1 April 2013 Prudential Regulation Authority FSA Financial Conduct Authority

  13. FCA Thematic Review: Assessment of Risks

  14. FCA Thematic Review: Key Emerging Issues

  15. Assessment Process

  16. Desk Based Analysis

  17. Interview Subjects

  18. Process Walkthrough

  19. Process

  20. Conclusions

  21. Themes

  22. Action Points

  23. Governance for Unit Linked Funds : Scottish Actuarial Society 18 September 2013 George.McCutcheon@frsltd.com

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