FCA: 'We will innovate the way we engage with industry'

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FCA: 'We will innovate the way we engage with industry'
Sarah Pritchard, executive director, markets, at the Financial Conduct Authority

The Financial Conduct Authority is keen to innovate the way it engages with the industry and make the listing regime more accessible.

In a speech at the UK Finance and EY UK Capital Insights conference today (May 16), Sarah Pritchard, executive director, markets, at the FCA outlined some of the reforms the regulator is undertaking to better support the UK’s markets.

She explained the FCA is working with industry, government and other regulators to grow the UK's global presence as a market.

“Listings is an important part but just one part of that eco-system,” she said. 

“In saying that, we of course want to make the UK as attractive a place to list as possible, while maintaining high standards.”

This comes as earlier this month, the FCA proposed to streamline the UK's listing rules to attract a wider range of companies, encourage competition and improve choice for investors. 

The FCA has been acting to improve the UK’s position for years. 

Within months of leaving the EU, two years ago, the FCA said it significantly reformed the listing regime to boost growth and competitiveness.  

In today’s speech, the FCA said: “We want to make the listing regime more accessible, effective, easier to understand and more competitive. This will benefit both issuers and investors. 

 We are keen to try and run the ‘discussion’ element of our regulatory reform agenda differently.

“We want to make sure that UK public markets remain an attractive and trusted place to list companies, to support growth and innovation. 

“Our proposed reforms are bold but build on the changes we have made over recent years – they take into account what market participants have told us that they value in the current regime.”

Pritchard said although the reforms will make it easier for firms to list and for a wider range of companies to list, they will also lead to a shift in responsibility and increased risk for shareholders.

“We have made this clear in our proposed set of reforms – and have said that we want and need a public debate, and ideally then as wide a consensus as feasible, on risk appetite,” she said. 

“That increased risk as a result of reforms will lead to losses, as well as gains. Are we ready for it?”

She said the FCA thinks there is a “strong and pressing case” for change to refocus UK listed markets, but it wants to encourage further views and evidence on the blueprint it has set out. 

“And we want others in the ecosystem to align and play their part, alongside us.”

Innovation and communication

The regulator said alongside this, it wants to communicate better with the industry.

“As we set the plans for future regulatory reform, we will innovate in the way we engage with industry and other stakeholder groups, so that we can work to develop rules that drive the right outcomes,” Pritchard said.

“Feedback through consultation papers can be effective, but it is not always the most creative or efficient way of balancing different alternatives, or coming up with outcomes-based solutions to a set of proposals and it can be slow.”

She explained that the FCA recognises the opportunity to discuss policy proposals, with different groups who may have different perspectives, is important.

“Written input will always be key – as it is important that we are able to account for our actions, particularly under the new transparency and accountability mechanisms within the financial services and markets bill,” she added.

“But with our focus on becoming a data driven and outcomes focused regulator we are exploring new ways to engage on policy proposals alongside our more traditional consultation and discussion paper routes.”

Last year, the FCA took a ‘sprint’ approach, which had previously focused on tech issues, to the policy arena – running its first ever ‘policy sprint’ on crypto.

Pritchard said that was highly successful and it helped identify areas where there was not alignment, and those where difficult decisions may be needed.

The outputs from this sprint enabled the FCA to move at speed in support of the current UK government consultation on regulating crypto assets.

 We don’t believe in change for change’s sake. But history shows us – just like with nickel coins – that markets do not stand still.

“We are now taking this approach, of providing forums to discuss and collaborate on policy proposals, into the capital markets in support of our work on UK market excellence,” she said.

“We are starting with taking this approach on prospectus reform."

Pritchard said this is important, as the reform to the prospectus regime is another, potentially, significant moment in how UK markets operate.

“We will still retain written evidence and papers, and will still be consulting via written consultation papers, as this is important as an accountable regulator – but we are keen to try and run the ‘discussion’ element of our regulatory reform agenda differently,” she said.

“To help work this through we will be running thematic blueprints and workshops, sprints and other live events so that we can collaborate on future reform and take each issue theme by theme, focusing on outcomes and options.”

Looking ahead

Pritchard said as the FCA looks to the future, she wants the regulator to focus its regulatory efforts not only on fixing current issues with the way in which markets operate, but also to help firms and markets “innovate, digitise and thrive”.

“We are committed to upholding market integrity – making sure that regulation plays its part in enabling the UK economy to grow and thrive internationally and working to deliver against the UK’s wholesale market reforms and Edinburgh package,” she said. 

“Our new secondary international competitiveness and growth objective will come into force later this year once the financial services and markets bill receives royal assent, and we will engage with the input into the Treasury’s call for proposals for metrics that will help us and others demonstrate how we are advancing the objective."

She said the FCA will play its part to drive productivity by improving its own operational efficiency. One example of this was the reduction in the FCA’s pending caseload in authorisations. 

From their peak in December 2021 of 12,500, this has been cut by 60 per cent to 5,000.

“And we are investing in making the process smarter to make it more efficient in future,” she said.

“We have included metrics in our three-year strategy and are committed to regularly report against those targets.”

Pritchard added: “We don’t believe in change for change’s sake. But history shows us – just like with nickel coins – that markets do not stand still.

“As regulators, we need to help with that evolution. We know there is work to do in ensuring the UK remains attractive for financial services and their customers, particularly in the face of competition from ever growing emerging powers. 

“We regulators are one part of that eco-system and stand ready to do what we can.”

sonia.rach@ft.com

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