Independent Investment Management Initiative – Response to FCA Consultation Paper CP 24/2 – ‘Our Enforcement Guide and publicising enforcement investigations–a new approach’
IIMI welcomes the opportunity to respond to the FCA’s Consultation Paper CP 24/2, Part 2. However, we do not believe that the FCA has demonstrated a sufficient need to introduce these proposals. The case for change has not been sufficiently made. Alternative approaches, which would be less harmful to smaller businesses and better align with the FCA’s competition objectives, have not been sufficiently explored before advancing these proposals.
As a representative body for small boutique investment managers, we recognise the importance of maintaining market integrity and ensuring investor protection. However, we have significant concerns about the proportionality of the proposed measures, particularly regarding the principle of “innocent until proven guilty” and the cost implications for smaller firms.
Category: Policy Papers
Dear Rachel Reeves and Tulip Siddiq, 12th December 2024
As a group of over 50 entrepreneurial specialist investment managers, predominately based in the UK, we share your vision to deliver the long-term, sustainable and inclusive growth of the financial services sector in the UK. We strongly believe that small businesses, including specialist investment firms are the engines of growth. Our membership represents over $500bn in client money and around 3000 members of staff and we work closely with the regulators, the government and the City of London supporting you with your mission to promote a competitive and world leading asset management center with client outcomes at its core.
Dear Lord Forsyth, Committee Members, 28th November 2024
As a group of over 50 specialist investment managers, predominately based in the UK, we welcome the focus of this inquiry. Led by consultation with our members, we have several constructive ideas which could help embed the objective of international competitiveness and growth. Particularly as smaller and independent managers, we fear that progress towards this objective has thus far been limited. We are hopeful that the findings of this enquiry can help address this.
We strongly believe that small businesses, including small and specialist investment firms, are engines of growth. However, there are significant costs and complexities of starting an asset management business in the UK. We are often compared with our US counterparts who have much lower barriers to entry and hence entrepreneurial businesses can be born with greater ease. Enabling the development and scaling of small businesses should be part of the scope of the FCA’s secondary objective. Regulatory costs disproportionately impact smaller
firms, given their resource and capital constraints. These raise barriers to entry and discourage entrepreneurs (unless they have access to significant pools of capital, which has implications for diversity as well as growth and innovation in our industry). It also reduces investment choice and feeds the ever-growing challenge of consolidation in our industry. We therefore welcome moves towards regulatory rationalisation, as well as harmonisation with international standards. This must, of course, be done in ways compatible with the FCA’s objectives regarding consumer protection and market integrity. We see many ways in which they can be mutually reenforcing.
It has now been over one year since The Consumer Duty came into force. We have responded to the FCA’s Call for Input on the Duty, in conjunction with our members, with a view to supporting the regulator to identify challenges that smaller asset managers have had with embedding the Duty and evolving this important piece of regulation for the benefit of retail customers.
Regulatory Reform
Following her appointment as chancellor, IIMI has written to Rachel Reeves to share some ideas for regulatory reforms with a view to promoting a competitive and inclusive UK asset management industry. This letter was written in consultation with our membership and has been shared widely within the industry.

Since the UK voted to leave the EU, the Independent Investment
Management Initiative (IIMI) has been making the case for the
UK to adopt its own globally competitive asset management
regime. In February 2023, the UK Financial Conduct Authority
(FCA) released its latest discussion paper (DP 23/2) – “Updating
and Improving the UK Regime for Asset Management” – as
part of the so-called Edinburgh Reforms, a Government
initiative designed to stimulate growth and competitiveness
in the UK’s financial services industry post-Brexit.
Under the UK’s Financial Services and Markets Bill (FSMB), the
UK Government will be given extensive powers to overhaul,
amend or retain EU regulations as it applies to financial services,
including asset management. The IIMI looks at the latest
FCA discussion paper, and shares its insights on some of the
proposals. As part of this white paper, the IIMI spoke extensively
with its diverse membership of boutique asset managers,
along with a number of external law firms and consultants

In a macro environment where revenue-generating opportunities have been fairly limited, it is no surprise that investors are searching for alpha in some of the more esoteric corners of the market. In some instances, investors – both retail and institutional – have accumulated positions in digital assets, such as crypto-currencies.
This paper by the Independent Investment Management Initiative (IIMI) argues that crypto-currencies and StableCoins need to be subject to stringent oversight and regulation. Additionally, the paper will examine some of the benefits and challenges of other digital assets – namely security tokens and CBDCs (central bank digital currencies).
IIMI’s Calls For Action
- IIMI members are sceptical about the merits of unregulated crypto-currencies, and we welcome further regulatory oversight of this marketplace, including greater oversight of crypto-asset service providers – especially in light of recent events.
- Although IIMI’s membership is largely agnostic about tokenisation, this technology has the potential to improve access to retail investment in the future.

As the UK recovers from COVID-19, it is vital that the country’s highly successful asset management industry remains competitive. While Brexit has thrown up a number of operational and logistical challenges for domestic asset managers marketing into the EU, the UK’s new-found autonomy does give it much greater flexibility to shape regulation and policy as it relates to funds. The Independent Investment Management Initiative (IIMI) spoke to its diverse membership about how the UK government could potentially stimulate future growth in the asset management sector.
IIMI’s Recommendations
- The UK regulator should consider streamlining the fund authorisation process-especially for managers who are only selling their products to institutional investors.
- There needs to be greater engagement by the regulator with the industry about ways to strengthen and enhance the UK asset management sector’s position in the global market. The UK regulator also needs to replicate its peers in Luxembourg and Ireland in terms of its commitment to promoting the UK as an asset management hub.
- Reform of certain regulations – such as PRIIPs – would help support the local funds industry, as would sweeping changes to existing VAT rules.
- If such reforms are enacted, there is likely to be greater re-domiciliation of funds into the UK – a shift which could result in asset servicing jobs being created across the entire country.

Investor appetite for ESG (environment, social, governance)-focussed funds is reaching new heights, fuelled by a combination of the asset class’ perceived performance benefits; regulatory intervention; and growing fears about stranded asset risk. According to Morningstar data, ESG funds accumulated $139.2 billion in net inflows during the second quarter of 2021, bringing total AuM (assets under management) to $2.3 trillion.1 Following COP26, 220 asset managers representing $57 trillion in AuM – signed up to the Net Zero Asset Managers Initiative – in what is further indicative of the industry’s commitment to ESG.
Amid the ESG asset class’ strong growth, regulators – particularly in the UK- are keen to ensure standards remain high – following growing concerns about potential greenwashing. Greenwashing is a problem which the IIMI [Independent Investment Management Initiative] – together with its members – is looking to counter. IIMI recently polled its membership, which is comprised of leading independent asset management firms from the UK and Continental Europe, to gather their views on the recent steps taken by the UK’s Financial Conduct Authority (FCA) around ESG.
Key Points
- IIMI fully supports the FCA’s guiding principles and proposals to make TCFD reporting mandatory as it believes this will root out greenwashing.
- The UK must carefully consider the unintended consequences of potential overlap and divergence with other ESG regimes.
- With more markets increasingly adopting ESG legislation, an element of standardisation is required, otherwise, it could create further confusion. This is something that IIMI is willing to engage with regulators about.

ESG (environment, social, governance) investment practices are now being fully embraced by the global asset management industry. The COVID-19 crisis has accelerated a number of pre-existing trends and the growing investor appetite for ESG is one of them. COVID-19 has served as a stark reminder to investors about just how vulnerable our planet is to disruption. In turn, this has prompted more investors to pile into ESG-focused funds. Between April and June 2020, Morningstar found that ESG funds attracted inflows totalling $71.1 billion, turbo-charging their assets under management (AUM) to above $1 trillion. Investor demand for ESG products is only expected to grow with PwC estimating that ESG funds will hold more assets than their non-ESG equivalents by as early as 2025. PwC added sustainable and responsible investment funds could control up to €7.6 trillion in Europe in the next five years, accounting for 57% of market share, versus the 15% they have today.
Key Points
- IIMI membership largely supports the SFDR, but there are concerns in some quarters that the rules could create an imbalance between boutiques and larger asset managers.
- Some member firms have called on EU regulators to cap the amount which data providers can charge for ESG research and analytics in order to create a more even playing field between boutiques and the larger investment managers.
- The ongoing uncertainties around SFDR – namely around article 8 designation – need to be clarified.
- IIMI fully supports the principles behind an ESG taxonomy insofar as that it will be vital in eliminating the risk of greenwashing.
- It is vital that ESG standards across major markets do not diverge excessively otherwise it could lead to confusion.