The investment fund management industry faces serious challenges in the wake of the coronavirus crisis – and a conversation must begin over how to protect it, the interim chief executive at the UK’s Financial Conduct Authority has said.
Christopher Woolard spoke during a webinar hosted by The Investment Association, the asset management trade body.
According to the script posted on the FCA’s website, Woolard started by outlining why there was reason to be proud of the regulator’s efforts to protect the market so far.
“We moved quickly to provide the regulatory environment in which financial services firms could concentrate on serving their customers by delaying and deferring regulatory change where we could,” he said.
“We promoted the smooth running of the financial markets so businesses continue to have access to raise money and support jobs. We provided clarity on our expectations of those listed companies that need to turn to capital markets. We have also – along with colleagues in Europe, the US and in Hong Kong – been strong advocates for these markets remaining open.”
Woolard also applauded the fund management industry for showing “considerable resilience in the face of volatile market conditions” – but noted that there would still be challenges ahead.
He said that while the government, the Bank of England and the FCA itself had helped businesses weather the storm, and that loaning to bridge the crisis was necessary, debt would not last in the long run. “These businesses need equity,” he said.
He noted that many of the companies listed on the London Stock Exchange had managed to raise £14.7bn in equity between April and June this year, 194% the amount raised in the same period last year.
Woolard also identified another key to ensuring the stability of the industry going forward by introducing rules that “balance and meet the needs of both issuers and investors.”
“This is vital,” he said. “High standards, properly monitored, and if necessary enforced, give investors the confidence to invest.
“At the heart of these requirements are fundamental protections for investors. Without them markets would not work. But that does not mean that we cannot ask how the rules should be calibrated. There is a question about whether some elements of the framework inhibit rather than promote opportunities for issuers and investors.
“For instance, issuers whose securities are traded every day must, rightly, meet continuous disclosure requirements. These are fundamental to preventing market abuse and supporting investor confidence in traded prices.
Woolard also said that the FCA would “welcome a discussion on whether and how” companies that are too small to trade every day could best access capital market.
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