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FCA Business Plan 2021/22: Wholesale

  • United Kingdom
  • Financial services and markets regulation
  • Mergers and acquisitions
  • Financial services
  • Financial services - Asset managers and funds


The FCA's Business Plan 2021/22 sets out its priorities for the next year and is arranged into four key themes: Change, Consumers, Wholesale and All Markets. Read our full summary of the FCA Business Plan 2021/22 >

Reviewing primary and secondary markets rules

The FCA has recently consulted on modifying the Listing Rules applicable to Special Purpose Acquisition Companies (“SPACs”), with a view to making the UK a more popular venue for the listing of SPACs, following high levels of SPAC activity in the US market for some time and the introduction of more favourable rules in EU jurisdictions, such as the Netherlands and Germany.  The outcome of this consultation is awaited, but the FCA has indicated that new rules will be forthcoming this summer.

The FCA is also consulting on changes to the listing regime, following Lord Hill’s UK Listing Review report and the Kalifa review of Fintech.  The areas under review include permitting dual class share structures on the premium segment, significantly increasing the market capitalisation threshold and reducing the free float requirement from 25% to 10%.  The FCA has also opened up the discussion and is considering a further consultation on the wider UK listing regime and its structure.

Head of the PLC Advisory group, Partner Stephen Nash, comments:

“The FCA’s recent consultation on changes to the UK listing regime sets out some of the most fundamental changes in this area for many years.  These proposed changes, alongside those to facilitate the listing of SPACs, are all intended to make London a more attractive venue for listing, particularly for technology-led businesses.  The challenge is to do this whilst preserving the UK’s reputation for high standards of corporate governance and investor protection.”

See our client briefings:

The FCA has also amended the Listing Rules to require disclosures on a “comply or explain” basis aligned to the Task Force on Climate-related Financial Disclosure (“TCFD”) recommendations for premium listed companies, and is consulting on the same for standard listed companies.

Head of Clean Energy and Sustainability, Partner Michelle T Davies, comments:

“The requirement for TCFD disclosures is the next step in the UK Government’s roadmap to require all UK listed companies and large asset owners to report in line with the TFCD recommendations by 2022.  We are seeing these requirements extended to a broader range of companies, starting with those which are listed, but even larger private companies are expected to be in scope by 2022-23.”

See our client briefing “FCA consults on enhancing climate-related disclosures by standard listed companies”.

Completing the transition from LIBOR

An orderly transition away from Libor has become a cause célèbre for the FCA and indeed for Nikhil Rathi, in his first year as chief executive; for through this transition, key FCA principles for wholesale market regulation will be tested with consequences for firms, markets and ultimately, individuals, if the challenges are not met.  Key to the FCA’s business plan in this area is using the new powers of the Financial Services Act to effect an orderly transition, including:

  • Consulting on creating a ‘synthetic’ rate for genuinely tough legacy sterling and yen exposure, with a view to providing some flexibility to firms and markets after the December 2021 deadline
  • Working with various US authorities to secure an extended panel bank basis for legacy US Libor exposure until mid-2023
  • Working with the PRA and Bank of England to monitor and drive firms transition plans
  • Sponsor and support appropriate collective action to move away from Libor

Head of Legal Projects at Konexo, Brett Aubin, comments:

“While there have been many encouraging signs and indeed good common sense deployed by the FCA over the last 6 months, the first big delivery challenge for the transition away from Libor is fast approaching.  Banks in particular are struggling to get the bulk of their sterling client outreach and negotiation materially completed before the 30 September deadline.  There are complex reasons why this is the case, most notably, corporate counterparties arriving late to the Libor dialogue are getting overwhelmed by the volume and complexity of the requests and negotiations appear to be stagnating.  

“Regardless of who is to blame, this is a challenging time for both the FCA and PRA; if they fold too quickly on the 30 September deadline in the face of these head winds, it could be seen to place other tough deadlines at risk.  If, however they are not seen to be engaging and consulting on genuine market challenges, that could undermine broader market commitment to the Libor transition.  Effective usage of the new powers in the Financial Services Act will be key here to navigating a way through this but there is not much time to complete the consultations.  An interesting two months ahead!”

Tackling market abuse and financial crime

The FCA states in its Business Plan that it wants the firms which it regulates to be effective in preventing market abuse and reducing the risks of financial crime.  The FCA explains that it will continue to monitor the transactions in financial instruments reported to it, assess Suspicious Transaction and Order Reports (“STORs”) and follow up intelligence from whistle blowers on financial crime or fraud.

The FCA measures the impact of its work to reduce market abuse and financial crime in different ways across its different portfolio of firms.  For example, it trails the volume and quality of STORs from wholesale firms and venues as an indicator of market quality and potential market abuse.  The FCA tracks the number of supervisory cases involving financial crime and other issues, including information from whistle blowers.  It also publishes annual data on market cleanliness.

Financial Services Disputes and Investigations Principal Associate, Adam Berry, comments:

“The FCA has continually reinforced its expectations regarding market conduct and the risks of market abuse and financial crime during the COVID-19 pandemic, recognising that the opportunities for market abuse are amplified in the current climate.  All market participants must continue to act in a manner that supports the integrity and orderly functioning of financial markets.  A failure to comply will likely lead to enforcement action being taken by the FCA which has reiterated that it will continue to monitor and investigate firms.”

Improving asset management and non-bank finance

The FCA wants firms to offer products that are fair value, meet investors’ needs and provide appropriate protection.  It also wants asset managers to manage liquidity in funds to avoid unnecessary risks.  To this end the FCA plans to:

  • increase its supervision of asset managers to ensure their presentation of the environmental, social and governance (“ESG”) properties of funds is fair, clear and not misleading
  • identify funds which are outliers to their peers to understand why, and work with the fund’s Authorised Fund Manager and Depositary to take action as needed
  • after its review of host authorised fund managers, follow up with each firm in relation to their progress, as the FCA identified weaknesses in governance structures, managing conflicts of interest, operational controls, and oversight of third-party investment managers
  • following the long term asset fund (“LTAF”) consultation, design and deliver the LTAF structure so that those investors with a long-term investment view who can cope with the risk of these investments can invest in less liquid assets
  • decide whether to proceed with requirements for notice periods for open ended property funds
  • following international discussion through FSB and IOSCO, consider and recommend amendments to the regulatory framework for money market funds

Financial Services Partner Julian Brown, comments:

“The FCA is rightly continuing its focus on ensuring that asset managers’ marketing and disclosures are fair, clear and not misleading, whether they relate to ESG or not.  The LTAF is one of several consultations as the FCA, supported by HM Treasury and the UK Government, seeks to exercise its new regulatory autonomy.  However, we do have a concern that the overlapping consultations do not present a coherent view for the future of funds in the UK and that while the individual proposals are welcome, they are, particularly in the case of the LTAF, perhaps less bold than they could have been.”

See our client briefings:

Raising standards in the Appointed Representatives regime

Appointed Representatives (“ARs”) can carry out specific regulated activities if a principal firm, which already has regulatory permission for those activities, takes responsibility for them.  In recent years, the FCA has seen increased problems from principal firms having poor due diligence and oversight of their ARs.

To ensure principals and ARs are competent, financially stable and ensure fair outcomes, the FCA plans to:

  • increase its supervision to reduce the most significant risks from ARs in wholesale markets
  • consult on cross-sector changes to improve and strengthen the elements of the AR regime
  • consider whether the AR regime, much of which is set out in FSMA, requires legislative change

Head of Hedge Funds, Partner Ben Watford, comments:

“The Appointed Representative market has and continues to face a number of challenges around perception and reputation.  Changes to improve principals’ ongoing oversight and due diligence of current and prospective ARs are welcome, however, the delay that getting such rules on to the statute book is not.  Hopefully this will be one of the areas of the FCA’s endeavours which are transposed from being based in statute to being based in regulation to allow greater responsiveness and flexibility in future."