Thursday, July 04, 2013

U.K. FCA Charts New Philosophy of Judgment-Based, Real Time Financial Regulation

The main duty or Government remit of a securities regulator is to ensure that the financial markets work well for all the market participants, said Martin Wheatley, the Chief Executive of the U.K. Financial Conduct Authority. In recent remarks, he noted that the FCA has developed a forward-looking and judgment-based philosophy of financial regulation to ensure the well-functioning of the markets. The FCA will employ real time regulation and eschew box-ticking and regulation based on historic data collection. The FCA espouses regulation that is outcome-based and employs the tactic of early intervention.

Mr. Wheatly clarified that a market that works well has to work for all players in the market. But it is not a market where consumers never lose money, he said, since markets are about risk and in the appropriate product, consumers may gain or lose. It is also not a market where firms never make money, since the provision of services is rarely free and firms have to be allowed to make a profit. Thus, a market that works well has profits for good firms and exits for bad ones, along with innovation and choice for consumers and good products that meet consumers’ needs and not bad products that simply obscure cost or risks.

Specifically regarding the asset management industry, Mr. Wheatley pledged that the FCA will work closely with hedge fund managers and other asset managers in a productive, predictable and transparent relationship that supports growth by delivering innovation and valued services to clients. In practice, this means the FCA will work alongside all participants, including the Government and asset managers, to support the market and to allow asset managers to contribute to the economy. It also means the FCA should be easier to access and engage with in critical areas like fund authorization and implementation of a new policy like the E.U. Alternative Investment Fund Managers Directive (AIFMD).

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