A shift to outcomes focused regulation will “better support innovation and changing markets”, according to Sarah Pritchard. executive director of markets and international at the Financial Conduct Authority.
Speaking at TheCityUK event today (May 20), Pritchard said the FCA’s shift to outcomes focused regulation is “deliberate” and will support the UK’s growth and competitiveness and help markets remain efficient.
“We want to take the opportunity of the reform that is underway, to be as future-facing as possible,” she stated.
“I do not want us to be regulating problems of the past - rather using the lessons from the past to help us set the framework and outcomes that we want to see - balancing our objectives for the future to support markets as they develop.”
She offered up the example of AI and stated that, in this area, the FCA will not be regulating for regulation’s sake and will instead be guided by its outcomes-driven approach.
However, Pritchard acknowledged the regulator must provide “certainty” and encourage the safe adoption of AI in UK finance markets, and said it must also look at digital infrastructure, resilience, consumer safety, and data.
Pritchard emphasised the importance of this transition due to the current size and scale of the UK financial sector, pointing out that it employs more than 2.5mn people and produced £278bn of economic output - 12 per cent of the entire UK’s economic output.
Therefore an efficient and effective capital market “underpins the success of the financial sector”.
She added the FCA is “committed” to making sure regulation supports the UK’s position in global wholesale markets as well as facilitating the UK’s economic growth and international competitiveness.
“As we look to our ambitious agenda for regulatory reform - we start from a strong place”.
Capital markets reform
Additionally, as the FCA takes the opportunity of the new smarter regulatory framework, Pritchard said it is busy working on incremental changes where change is sensible to support its objectives.
She added the FCA’s work seeks to support transparency through disclosure of relevant, prompt and quality information to investors.
“This would strengthen investors’ abilities to make decisions and support price formation, market participation and confidence in markets,” she stated.
One of the FCA’s proposed reforms seeks to give asset managers and others greater flexibility on how they buy research.
Pritchard said this greater choice should suit forms of varying business models and sizes, thereby helping them to promote competition.
“It will allow the ‘bundling’ of payments for third-party research and trade execution, and would exist alongside those already available, such as payment from an asset manager’s own resources or from a dedicated account,” she said.
“The new plans are also compatible with rules governing research payments in certain other major jurisdictions, making it easier for asset managers to buy research in the same way, across borders.”
Changing world
Pritchard additionally stated that, while the regulator concentrates on supporting a healthy and efficient market sector in the UK, “we cannot ignore what seems to be an increasingly turbulent geo-political world”.
