UK FCA regulatory priorities reports for wholesale markets and wholesale buy side

The UK Financial Conduct Authority (FCA) has published its regulatory priorities reports for the wholesale markets and wholesale buy side sectors. These reports replace the FCA's previous portfolio letters and aim to provide a clearer and more consistent articulation of regulatory expectations.

The FCA's priorities for the wholesale markets sector for this year are to:

• Improve the resilience of firms and markets; given the elevated risk environment, the FCA expects firms to raise standards of operational resilience and third-party and technology risk oversight, ensure trading controls are robust, and bolster liquidity management and financial resilience.
• Enhance efficient, competitive and innovative markets; the FCA expects firms to engage with its market reforms and transparency initiatives and prepare for modernised trading and post-trade infrastructure, including T+1 settlement and digitalisation of market processes.
• Enable the safe and responsible adoption of new technology; firms are expected to engage with regulatory sandboxes and industry initiatives, and implement robust governance arrangements including clear accountability, risk management, and oversight for the use of artificial intelligence, distributed ledger technology, quantum computing and other new technologies. Firms are also expected to manage third-party and data risks.
• Prevent financial crime and market abuse; the FCA expects firms to strengthen surveillance, data quality, governance and controls to identify, prevent and report financial crime and market abuse risks.
• Ensure firms effectively manage conflicts of interest and conduct oversight; firms should be able to show that they identify and manage conflicts so that decisions and behaviours consistently support fair client outcomes and identify conduct risks early and escalate and address them to prevent harm, with clear accountability and assurance.

The FCA's priorities for the wholesale buy side sector for this year are to:

• Evolve regulation to foster growth and innovation and serve changing consumer needs; firms are expected to establish clear accountability, risk management and oversight for the use of new technologies.
• Deliver good outcomes to consumers; firms are expected to embed the consumer duty, apply a consumer lens to products and services, provide clear communication to investors and maintain strong oversight of appointed representatives.
• Reinforce consistent, high standards across private market investing; firms are expected to review and update governance and processes for valuations, ensure robust processes are in place for identification, management and mitigation of conflicts of interest, and align product development frameworks for retail products and retirement solutions with consumer duty expectations.
• Preserve market integrity and resilience to disruption; firms are expected to strengthen operational resilience, maintain robust incident response and recovery plans, assess and manage dependencies on material third party providers, strengthen governance frameworks and ensure that strong systems and controls are in place to detect and prevent market abuse.

Buy side firms are also encouraged to read the FCA's pensions and consumer investments regulatory priority reports.

The reports list actions the FCA intends to take under each priority heading. Each also discusses 'other areas of focus' for the FCA this year.

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