Farewell FSA!

As of 1 April 2013, the FSA will cease and a ‘internal twin peaks’ system will be established, dividing the responsibilities of the FSA between the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). The PRA and the FCA will focus on consumer protection and market regulation respectively.

The key difference will be in the way that firms are supervised. Firms that will be ‘dual regulated’, such as banks and major investment firms, will be supervised by both of the authorities, PRA and FCA, in prudential and conduct matters. The two regulators will be independent from each other with different objectives, acting separately with firms, but coordinating internally to share information.

The FCA will take over the disciplinary and conduct of business regulation of the FSA, as well as the prudential regulation of firms which are not dual regulated, such as (most) hedge funds.

For a hedge fund manager in the UK, the introduction of the FCA is not expected to have considerable impact. Matters such as authorisation of firms, conduct of business and capital adequacy will be moved directly from the FSA to the FCA. Asset managers should nevertheless be aware of increased powers by the FCA, which will relate to suitability, enabling it to suspend product sales. It is also expected that the FCA will have more focus than its predecessor on systems and controls of asset management firms, and in particular from a financial crime perspective. The FSA had noted that the asset management sector is a major component of the financial services industry in the UK and will therefore be scrutinised.

Generally, the FCA is expected to be a more “forward-looking regulator” aiming to “prevent customer detriment”.

The real challenge is however sure to come with the AIFMD in July…

Regulatory Hosting

Laven offers a UK regulatory hosting platform which provides clients with the opportunity to conduct regulated activities as an Appointed Representative (AR).


Follow us on LinkedIn for company updates and the latest news.

Recent articles