Ashley Alder, Chair of the Financial Conduct Authority (FCA), recently delivered a speech at the Investment Association’s Annual Dinner, in which he emphasised the importance of proportional regulation in the UK financial landscape.
The FCA Chair outlined that proportionality “means different things to different people”, he stressed its importance to foster market integrity and competitiveness within the UK market for both large and small scale firms alike.
He stated: “I think that a conceptual framework along these lines should influence how regulation operates when assessing how to tackle risks of harm without imposing unnecessary burdens on firms.
“So, proportional regulation, together with ways in which regulation can drive innovation, lies behind much of our thinking about investment management. In discussions with a range of stakeholders it’s actually been hard to nail down the specifics of how conduct regulation can drive international competitiveness and growth.
“But, I think a smarter approach to proportionality, whilst always maintaining high standards, is closely related to competitiveness.”
These talking points then bled into Alder’s remarks on asset management and the feedback the financial regulator received on the paper on updating and improving the UK regime for asset management.
Three main priorities were established from this feedback; making the regime for alternative fund managers more proportionate, updating the regime for retail funds, and third, supporting technological innovation.
Since the FCA was granted oversight of crypto and digital asset regulations this year, the financial watchdog has been active in its pursuit of investor- and consumer-facing protection.
This largely pertains to the recently launched crypto marketing and promotion rules – which alerted 146 incidents on its first day – as well as launching a digital sandbox to help foster collaboration and innovation.
Alder notes the FCA has seen a groundswell of support for distributed ledger technology (DLT) and its use cases and reveals they are working on a blueprint for fund tokenisation as it relates to asset management.
He shared: “On innovation, the discussion paper touched on how fund managers might adopt distributed ledger technology to offer fully digitised funds to the public. Since then, we’ve been working with the Technology Working Group, which sits under the Treasury’s Asset Management Taskforce, on a blueprint for fund tokenisation. The working group will publish this later in the year.
“Many firms see use cases for DLT, even if direct marketing of tokens may be some time off. So, we’ve already held a tech-sprint with the industry to test policy initiatives and the rule changes needed to support work on fund tokenisation.
“We’re also building in extra capacity to support innovation as we set out our plans for regulatory reform, well aware of the pace of change.”
To round out the speech, Alder states that he and the FCA “fully appreciate” the investment management industry in the country as the UK financial continues to grow from the slumps it suffered last year.