The Financial Conduct Authority (FCA) has recently published its Secondary International Competitiveness and Growth Objective report 2024/25, outlining its progress in embedding growth and competitiveness into its regulatory framework. This report, coupled with the FCA’s press release on modernising rules to unlock investment, is intended to outline how it plans to deliver on its secondary international competitiveness and growth objective (SICGO) during the second half of 2025. It is also intended to be a 6-month progress update since the FCA’s 16 January 2025 letter to the Prime Minister, which listed 50 actions that the FCA were going to take to support the secondary objective (see Annex 1 of the Report).
In general, we get the impression that the FCA is happy with the progress it has made so far, with Nikhil Rathi describing its work as being supported by “rocket boosters” over the past year. He speaks about accelerating the pace of delivery and “ruthlessly” prioritising activities as the FCA enters its third year with the secondary objective, and repeats yet again a request for “tolerable failure” metrics from the Government.
Importantly, the FCA confirmed that it will consult on reforming the client categorisation rules before the end of 2025. The FCA states they hope to “unlock more opportunities for wealthy investors and support capital markets, driving economic growth”, and that “reviewing the rules will ensure that expectations remain proportionate when dealing with wealthy or very experienced investors.” We see this as an extremely positive step for firms, building on engagement we have had with the FCA earlier this year in response to FCA CP 24/24.
Key highlights from the SICGO Report
The FCA’s SICGO Report 2024/25 provides a comprehensive overview of its initiatives to support economic growth, increase productivity, and strengthen the competitiveness of the UK’s financial services sector. Below are the key takeaways:
1. Modernising rules to unlock investment
The FCA has introduced reforms aimed at simplifying regulatory requirements and encouraging investment. These include:
- The new Prospectus Regime: The FCA has reformed thresholds and liability rules to make it easier for companies to raise capital. This is complemented by easing barriers to retail access to corporate bonds, ensuring the UK remains an attractive destination for investment.
- Private Intermittent Securities and Capital Exchange System (PISCES): A regulatory framework has been established for PISCES, enabling private companies to access new investors and scale up more effectively.
- Simplified Listing Rules: The FCA’s reforms have created a disclosure-based listing regime, making the UK’s rules competitive with other global jurisdictions. While overall listings have been low due to global trends, the FCA reports increased interest in new listings under the reformed framework.
2. Supporting innovation and productivity
The FCA has prioritised innovation as a driver of productivity in financial services:
- Digital Securities Sandbox: Launched to allow firms to test regulatory changes in real-world scenarios, the sandbox has already accepted six applicants, including digital securities depositories and hybrid entities.
- AI Lab and Open Finance Initiatives: The FCA has launched an AI Lab to support responsible AI development and financial innovation. It is also working on an Open Finance roadmap to expand data-sharing beyond payments, enabling personalised financial services and SME funding.
- Regulatory Sandbox and Innovation Pathways: These services continue to support firms in testing novel products and navigating regulatory requirements. In the past year, the FCA received 52 applications for its regulatory sandbox and 79 for its Innovation Pathways service.
3. Reducing regulatory burdens
The FCA is actively working to streamline its regulatory processes:
- Retiring outdated guidance: Over 100 pages of outdated guidance and supervisory publications have been retired, reducing compliance costs for firms.
- Simplified reporting requirements: The FCA has consulted on simplifying transaction reporting rules and capital requirements for investment firms, aiming to reduce regulatory burdens while maintaining market integrity.
- Consumer Duty simplification: The FCA has outlined plans to streamline its Consumer Duty requirements. Later this year the FCA will pilot dedicated guides for smaller firms to better understand their obligations.
4. Enhancing competitiveness
The FCA has taken steps to boost the UK’s attractiveness as a financial centre:
- International Presence: The FCA is establishing offices in the United States and Asia-Pacific to support global investors and promote the UK as a financial services destination.
- Open Banking and Variable Recurring Payments (VRPs): The FCA is working to expand Open Banking and establish an independent operator for VRPs, giving consumers greater control over payments and reducing costs for businesses.
