FCA Regulatory Priorities for the Wholesale Buy Side: what firms need to evidence now

What happened?

The Financial Conduct Authority has published its inaugural Regulatory Priorities report for the wholesale buy-side, replacing over forty separate portfolio letters with an integrated, annual statement of expectations. The regulator is delivering a direct message: boards and senior management must assess these priorities against their business model and document appropriate action.

While the FCA positions itself as a predictable, proportionate, and pro-growth supervisor, it explicitly cautions that firms unable to demonstrate robust governance, operational resilience, and reliable decision-making will face earlier and more decisive intervention.

Why does it matter?

Supervisory scrutiny is shifting from policy interpretation to demonstrable outcomes. The regulator is less concerned with the existence of compliance frameworks on paper, and far more focused on whether they operate effectively under stress. Operational resilience is now an active supervisory test, emphasizing third-party dependencies and outsourced oversight.

Additionally, private markets face sustained valuation scrutiny. Valuation judgements, conflict-of-interest controls, and investor transparency must be actively governed, challenged, and recorded rather than handled retrospectively.

Who is affected?

This update directly affects asset managers, alternative investment fund managers (AIFMs), custody providers, and fund services providers, particularly those with retail or downstream investor exposure.

Key risks

• Ineffective Third-Party Oversight: Failing to demonstrate robust oversight, data quality control, and incident testing for outsourced services.
• Unsubstantiated Valuations: Private market asset valuations lacking explicit board-level challenge and clear audit trails.
• Diluted Technology Accountability: Introducing complex systems like AI or tokenisation without clear post-implementation accountability and risk monitoring.

Actions to take

1. Test Operational Resilience: Review resilience evidence and stress-test third-party oversight mechanisms beyond standard paper-based agreements.
2. Audit Private Valuations: Implement robust, documented processes for reviewing and challenging valuation judgements in private markets.
3. Formalise Tech Governance: Ensure explicit senior accountability and ongoing oversight controls are active for all newly deployed technologies.
4. Strengthen Escalation: Validate delegation frameworks and escalate critical risks directly to board-level management information.

Wider implications

The consolidation of portfolio letters indicates a more coordinated, data-led supervisory strategy. High-growth and innovative practices are encouraged, but only when they are built on a solid foundation of proven internal governance.

Recommendations

Firms should treat operational resilience as a core business driver rather than a check-box task. Investing in evidence-led governance and robust third-party oversight will secure compliance and enable sustainable commercial growth.