Annual funding for new UK regulators rises by 15%

New UK regulator the Financial Conduct Authority (FCA) on Tuesday announced its annual funding will be £432.1m ($661m), and £559.8m ($857m) when combined with dual regulator the Prudential Regulation Authority – a total 15% rise from the 2012/2013 Financial Services Authority (FSA) budget.

“We are introducing new approaches to the way we do much of our work, becoming much more proactive and consumer focussed,” said the FCA in a release. “Much of the increase in AFR is the result of the additional resources needed to ensure the FCA delivers on its new objectives.”

The FCA said it will focus on tackling market abuse with strong enforcement action, hep ensure strategies are aligned with consumers’ interests and address on-going misconduct.

Monica Gogna, partner at law firm Pinsent Masons, said: “The FCA’s first annual funding requirement highlights the regulator’s aim to create a more “proactive approach” to regulation, this is reflected not just in the increase in fees for high impact firms and medium sized firms but also with the confirmation of the FCA’s wish to increase the size of its front line supervision staff.”

Wait for FSA case officer increasing, says IMS

The split of the UK Financial Services Authority (FSA) into two different bodies is upping the waiting time for new hedge funds to receive a case officer for their application package, according to regulatory consultant The IMS Group.

Splitting of the FSA into the Financial Conduct Authority and Prudential Regulation Authority are leading to many processes taking longer, said the release. IMS had said earlier in 2013 that initial contact from the FSA, the allocation of the case officer and receipt of first comments, was as much as four to six weeks. Now, it said, managers can expect to wait eight weeks.

A London-based prime brokerage professional said the officer allocation process had risen to four to six weeks but that – depending on how easy the strategy was to understand – this may not hinder the overall processing time.

The FSA revealed to HFMWeek in October in a Freedom of Information Request that managers already have to allot almost double the time it took four years ago to be authorised. Asset managers took an average of 11.6 weeks to become an authorised fund in 2008, compared with 12.2 in 2009, 19.2 in 2010, 20.4 in 2011 and about 21.4 weeks in 2012.

In an email to Hedge Compliance, a spokesperson for the FSA said “This is a function of staff availability and volume levels; it is not driven by the on-going regulatory reform work,” he said. “Whilst some applicants this year may have had to wait eight weeks before being assigned a case officer, the oldest case yet to be assigned was received just over four weeks ago.”

He added: “We continue to look for ways in which we can reduce the time it takes for an application to be assigned to a case officer, and subsequently considered against the threshold conditions.”

FSA denies claims of rising thematic HF reviews

Hedge funds should be prepared for more frequent thematic reviews by the UK financial regulator, with abuse systems and transaction reporting current focuses, say regulatory consultants, although an FSA spokesperson has denied the claim.

As the UK Financial Services Authority (FSA) moves to its new ‘twin peaks’ model, which will see the creation of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in early 2013, the number of reviews that look at specific issues or products across a range of large, medium and small firms is expected to rise.

“We’re going to see a lot more of these thematic reviews,” Richard Scrivener, consultant at London-headquartered Bovill, told Hedge Compliance. “Whether the FCA chooses to focus specifically on hedge funds for a particular  thematic review will depend, for now, on the level of perceived risk the products pose to customers and ultimately to the regulator’s objectives,” said Scrivener.

However, a spokesperson for the FSA said it wouldn’t be the case to say they have stepped up because of twin peaks and that thematic reviews are one of a number of supervisory tools utilised. “Intensive supervision of firms and sectors has been around for a number of years already,” they said.

Thematic reviews could involve a few weeks work for hedge fund compliance officers with the help of an external source, in preparation of an FSA-called meeting, according to Peter Moore, group director of the IMS Group.

He added that it was usually easy to gauge ahead of time what theme the FSA was examining by looking at its enforcement actions. Moore said the FSA was currently working on examining market abuse systems and transaction reporting, for example.

“I have the impression the industry was being invited to deduce that these reviews were increasing from various FSA speeches this year,” he said.