While requests for information and assistance between the SEC and FCA are generally kept confidential, there are numerous known examples where the two regulators have worked collaboratively on cross-border cases.
For example, in the so-called JPMorgan ‘London Whale’ trading case, both recognised the co-operation provided by the other in their respective press releases, while the FCA’s Enforcement Annual Performance Report for 2019 lauded the assistance of the SEC in the Total Debt Relief Ltd investigation as an example of the value of its relationships with foreign regulators.
Level playing field?
While the SEC is generally regarded as the more successful enforcement agency, it is important to remember that US securities laws are among the broadest and most regulator-friendly in the world.
The FCA is acutely aware of the comparison, but, in simple terms, if one agency has more potential offences available to it than another does, it should be no surprise that more enforcement outcomes follow.
Notwithstanding this, it is clear that the FCA can learn plenty from its US counterpart, which is often quicker out of the blocks on key issues.
For example, the US has been blazing a trail on cryptoassets, which the UK has been slow to follow. So far, the FCA has concerned itself solely with perimeter issues, identifying whether companies involved in cryptoasset businesses may be carrying out regulated activities without authorisation.
Although guidance on where cryptoassets fall within the FCA’s scope was published at the end of last month, if any enforcement is taking place it has yet to reach the public eye.
However across the Atlantic, and while the FCA has been navel gazing, the SEC has already launched and completed a number of enforcement action related to cryptoassets, including imposing civil penalties for a securities offering registration violation involving initial coin offerings.
The FCA should be concerned not only with how far it is behind the SEC on enforcement of the current cryptoasset market, but with how well-equipped it is to deal with its rapid evolution.
Assuming that the cryptoasset market becomes subject to its own dedicated regulatory provisions in the near future, this will give rise to a whole new set of concerns for all agencies.
Given the battle faced in detecting and preventing misconduct and manipulation in established financial markets, how will the FCA cope with enforcement on a completely new technological plane?
Cryptoassets present an increasing challenge that requires a novel approach to cross-border regulation. The FCA needs to act decisively if it is to remain an equal partner and not a sidekick in the transatlantic pact.
In conclusion, while the special relationship between these two regulators is alive and well, the FCA should not be afraid to make further efforts to work even more closely with its American counterpart.