FCA speaks on private market growth.. and motor finance

Nikhil Rathi, speaking at the Investment Association, spoke of the growth of private markets and the FCA’s support for initiatives that get companies the best options for financing.

In an interesting segue, he moved from discussing baking banana bread to the Court of Appeal judgment on motor dealer commissions. After the Court of Appeal’s ruling that the lenders must repay the commissions, he noted unsurprisingly that both lenders in the case intend to appeal to the Supreme Court. He said he hopes that the Supreme Court will come to a quick decision so everyone can move forwards. In the meantime, the FCA is focusing on ensuring that customers are treated fairly and that the motor finance market continue to function well. It is currently considering requests from the industry to expand the current pause on dealing with complaints relating to discretionary commission arrangements also to cover other types of motor finance commission.

Reverting to private markets, he looked at how well advanced the FCA’s reforms to public markets are and at the growth in private market AUM which has almost trebled in the decade to 2023. But this is nothing to what has happened in the US. He said the investment management industry needs to decide whether it wants to move in the direction the US has taken, and that they need to consider:

• whether private markets present risk or opportunity;
• both product and technological innovation – he particularly noted that the FCA has so far authorised 9 umbrella LTAFs, a number of which support zero transition. But the FCA is very open to making the wider regime more flexible and proportionate than the PRIIPs regime was. On technological innovation, asset managers can adopt the blueprint the FCA has worked on with the IA for tokenisation;
• value and fees, with the need for a more holistic approach to what assessment of value really means;
• how the FCA can help with an “enabling and proportionate” regulatory approach; and
• harnessing the talent and skills to understand private companies in greater depth.