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Reinventing regulation

Philippa Kelly looks at what might change and why in light of the results of the Financial Conduct Authority’s new study.

The Financial Conduct Authority’s (FCA) Asset Management Market Study’s interim report delivered some important messages for the industry and was not altogether complimentary. There has also been increased focus on investment management from the Financial Stability Board (FSB) which issued policy recommendations to address structural vulnerabilities in January this year. While the FSB grapples with whether, and which, asset managers should be designated as systemically important financial institutions, many investors don’t really understand what the industry does, nor how much they’re paying them to do it.

No one denies the importance of asset management in helping us take care of our financial futures and supporting business, but regulatory investigations in both the UK and the EU underlines that it remains widely misunderstood. Matters like dark pools, algorithmic trading and high-frequency trading combined with a low-return environment and greater consumer freedoms with regard to pension investments mean this confusion is perhaps more pertinent than ever before, and the FCA’s study results will be well timed. The sector has stayed out of the financial services limelight in recent years, though the FCA’s market study and extension of the Senior Managers Regime to asset managers during 2018 may change that.