Email Compromise Attack

Tech innovation to underpin financial markets integrity

Posted on March 13, 2023

Estimated reading time 1 minutes

The FCA’s new discussion paper (DP) “Updating and improving the UK regime for asset management”, released this week states “We recognise our regime cannot stand still. Technology has driven substantial change in the asset management industry in recent years and will continue to do so. For example, innovations such as the tokenisation of fund units might have the potential to transform how funds work.”

The FCA, unusually, have opened responses to the DP to anyone, where usually feedback would be limited to regulated firms or specific sectors. This is because the DP covers not only regulatory change, but also enabling technological development and innovation, market integrity and investor and consumer protection. The DP is wide ranging, and it is pleasing to see technology and innovation playing an important role in what the future of the FCA and regulated firms will look like.

While the FCA wants to be supportive of innovation they are also conscious innovation can create material gaps in market integrity and ultimately harm investor or consumer protection. Conversely, innovation can provide better visibility and products to investors, while also reducing costs. The FCA talks positively about the concept of fund tokenisation, but it also wants to see technology used as a means to improve investor engagement. For instance, the FCA noted that fund prospectuses and client reporting tends to be rather underwhelming, a point technology could help redress.

Gaining visibility across a firm’s full technology stack ― not just into the network but also into the applications, database, cloud, and user and storage infrastructure ― can provide companies with the end-to-end visibility a regulated firm will require to support the planned innovation of the regulated market. Vendors are expanding their capabilities, which is leading to single platform solutions and joined up thinking that can address multiple regulatory, investor, data and security solutions alongside stakeholder needs. In fact, it is arguable that Microsoft is already at this point. This idea is being reflected across multiple sectors; pharmaceutical, industrial and automotive being good examples.

Perhaps the biggest benefit of working towards an end-to-end single provider – which is vital for a regulated market – is visibility and security. The Microsoft stack supports a diverse set of applications and tools that are designed to work together by building solutions to the firms specific requirements. It is clear that the FCA expects fund managers, many of whom are still reliant on legacy technology to some degree, to modernise their internal systems and operations. Firms which leverage best-in-class cloud, data and cyber tools will be in a strong position to navigate the UK regulatory changes as and when they are implemented.

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