FCA sets out vision for 'radically different' future

The UK’s Financial Conduct Authority will be more transparent over the action it takes against firms that breach market rules and regulation in the future, according to its new mission statement, but details of how it will do that remain sparse.

In the document, which was published on Wednesday, the regulator said that while it takes all enforcement powers seriously, not all breaches currently result in a formal investigation, while public sanction may be not be inevitable or even likely.

“In these cases, we think there is benefit in our working with firms to agree lessons learned and ways forward, even if the problem did not lead to us using our enforcement powers,” it said.

It added it needed to be clearer about the terms it uses when discussing enforcement action, in order to increase public confidence in its efforts.

“[Our] term ‘referred to enforcement’ is often misunderstood. We will also review our use of ‘private warnings,’” it said.

Neglected duty

The proposed overhaul of its policy framework follows criticism by some in the private funds sector that the FCA isn’t doing enough to protect investors in alternatives funds.

Its US counterpart, the Securities and Exchange Commission, has stepped up its examination of the industry and currently focuses on three categories of misconduct in private fund management: undisclosed fees and expenses; expenses that are misallocated or shifted without permission; and disclosure of conflicts of interests.

“So far, the FCA isn’t doing anything. They have a mission [to “make financial markets work well so that consumers get a fair deal”]; they have a fiduciary duty, and it’s being neglected,” Ludovic Phalippou, an associate professor of finance at Oxford University’s Saïd Business School previously told pfm.

Private markets are crucial

The importance of private equity to the proper functioning of the UK economy was highlighted by Andrew Bailey, chief executive of the country’s financial regulator, at the launch of mission statement.

Bailey said UK fund managers oversee £4.3 trillion ($5.22 trillion; €4.78 trillion) in assets and that £397 billion was raised by UK companies in issues of shares through the London Stock Exchange and by private equity between 2006 and 2014.

The FCA has opened a consultation on the document, which can be found here. It will be open until January 26, 2017.