Rathi cautions companies as FCA increases enforcement efforts

Financial Conduct Authority Chief Executive Nikhil Rathi has issued a stern warning to firms to bolster their controls as the regulator escalates its enforcement efforts on market abuse and operational failures. During the Goldman Sachs EMEA Head of Trading Conference, Rathi emphasized the increased prosecutions being pursued by the FCA to combat insider trading and market manipulation. He highlighted the pivotal role of trust in financial markets to uphold the UK’s position as a global financial hub, especially amidst growing market volatility and rapid technological advancements.

Rathi underscored the FCA’s commitment to tackling operational weaknesses that disrupt markets, citing a substantial £27.7m fine imposed on a Citigroup entity for failures in systems and controls that led to a significant market disturbance due to a trader’s erroneous sale of $1.4bn worth of equities. Despite the regulator’s stringent enforcement approach, Rathi reassured that the FCA remains dedicated to implementing regulatory reforms that foster growth and competitiveness. Recent initiatives include new prospectus rules, a simplified public offer platform for capital raising, and revisions to remuneration regulations.

The FCA is also advancing plans for a fixed income consolidated tape and the introduction of T+1 settlement by next year. Rathi acknowledged the UK’s robust presence in global financial markets, specifically in foreign exchange trading, international debt issuance, and derivatives markets. However, he cautioned that the financial ecosystem must swiftly adapt to ongoing technological and structural shifts to remain resilient. He stressed the importance of being proactive in anticipating frequent changes, emphasizing the necessity for the UK to be prepared for rapid transformations.

Furthermore, the FCA is intensifying its monitoring of emerging risks such as artificial intelligence and cryptoassets. Rathi encouraged wholesale market entities to leverage the regulator’s innovation services, including regulatory sandbox and AI testing programs. He expressed a desire for increased participation from wholesale trading firms in these initiatives. Moreover, plans are underway to unveil the framework for crypto regulation in early summer, ahead of the launch of a new regulatory gateway in September.

Rathi affirmed the FCA’s commitment to strike a balance between robust enforcement actions and regulatory reforms aimed at preserving the competitiveness of UK markets. He emphasized evidence-based decision-making over ideology to guide the regulator’s future endeavors. In conclusion, Rathi’s address highlighted the FCA’s strategic focus on strengthening the financial regulatory framework, enhancing market integrity, and fostering innovation while upholding the UK’s position as a leading financial center on the global stage.