On 14 July FCA CEO Nikhil Rathi gave a speech at the Peterson Institute for International Economics, setting out a helpful overview of the FCA’s intended future approach to its aspects of its regulatory responsibilities. In addition to emphasising cross-border co-operation, Mr Rathi elaborated the following focus areas:
- The Regulatory Landscape: Mr Rathi suggested that the FCA may diverge from the EU’s regulatory landscape to, among other things, bolster global reach of the UK’s wholesale markets.
- Proactive Approach: The FCA will pursue a more proactive approach. Apparently the FCA have been re-designing their “operational platform” to “address the threats, mitigate the shocks, and embrace opportunities [and] [n]ot just address issues after significant harm or risk has become embedded.” Mr Rathi highlighted that where the FCA does not have the necessary powers, they are using their influence and other means to affect change, including securing agreement from Google, which would stop non-FCA verified firms from advertising financial products on its platforms.
- Technology: The use and regulation of technology will be a key focus. Mr Rathi confirmed that the FCA had already (a) moved some of its core systems to the cloud enabling the transfer to a new regulatory data platform; (b) developed an automated tool to test firms’ systems and assess their ability to identify sanctioned entities effectively, and (c) automatically scans 100,000 websites daily for fraudulent or scam activity. As to regulation of technology, the FCA is part of the Digital Regulation Cooperation Forum, who are working on a new approach to digital regulation. The FCA will also be publishing a discussion paper with the Bank of England setting out potential new measures to address systemic issues with the resilience of services provided by a small number of critical third parties, including cloud providers.
- Crypto: The FCA will be deepening ties on financial innovation with the US, and has already exchanged views on crypto-asset regulation and market developments, including on stablecoins and the exploration of central bank digital currencies. The UK, along with the US and Singapore also announced the launch of the International Organisation of Securities Commissions (“IOSCO”) taskforce on decentralised finance and crypto market integrity risks.
- ESG Regulation: The FCA will be supporting the case for regulating ESG data and ratings. Having published a response to ESG integration in capital markets, it will soon release its Sustainability Disclosure Requirements.
- Diversity and Inclusion: The FCA has introduced rules for listed companies requiring declarations of diversity metrics against common targets on a “comply or explain” basis. This includes that at least 40% of the members of boards are women, at least one of the senior board positions is a woman and at least one member of the board is from a non-white, minority ethnic background. Mr Rathi confirmed that the FCA considers diversity a regulatory issue, and will be considering where additional regulatory intervention is required.
- Consumer Protection: The FCA’s new consumer duty (covered in our recent blog) will ensure that all firms take account of the actual impact of their services and product suitability on consumers. The consumer duty is focused predominantly on four outcomes, being that: (a) products and services must be fit for purpose, and be designed to meet consumers’ needs; (b) consumers must receive fair value; (c) communications must support and enable consumers to make informed decisions; and (d) a level of support is provided that meets consumers’ needs throughout their relationship with the firm. The Consumer duty will be phased in from July 2023.
Ashley Alder, the current CEO of the Hong Kong Securities and Futures Commission and Chair of the IOSCO Board, will be joining the FCA as its new Chairman in January 2023 and will no doubt have a significant role to play in driving forward aspects of this future regulatory agenda.