During the Finance Magnates London Summit 2023, a panel discussion entitled: "Tightening Grip? Retail Trading Regulation in 2024" was conducted, moderated by Remonda Kirketerp-Møller, the Founder & CEO at Muinmos with key participants including Matt Smith, the CEO at SteelEye, Alexander Culley, the CEO at C&G Regulatory Solutions, and Matthew Smith, the Group CEO at Ec Markets. The dialogue covered diverse aspects of retail trading regulations, focusing on the UK, offshore jurisdictions, and global perspectives.

Market Integrity and Financial Crime Prevention

Smith of SteelEye emphasized the significance of preventing market manipulation and financial crime. Culley discussed his consultancy's role in aiding financial firms with compliance, while Smith from Ec Markets expressed his views on dream regulations.

The panel concurred on this note: "We know that trade is global, but regulation is local. One-way regulators try to deal with this is by cooperating, and unfortunately, we're also seeing cut and paste in many different jurisdictions."

The panel examined the assertiveness of the Financial Conduct Authority (FCA) in the UK, addressing topics like the new consumer duty and changes post-Brexit. The FCA's increased scrutiny and intrusive measures, including shorter notice periods for audits, were highlighted.

Culley remarked: "I think this whole thing about post-Brexit with the UK potentially liberalizing to try and attract business. I think actually our experience, certainly as consultants in the last couple of years, has been quite different. If anything, the FCA has been more assertive, more intrusive than it's ever been. You know, since I've actually been working compliance, I think back sort of 10 years ago, you would get maybe a month's notice before a visit. Now, some of our clients, they're getting 24 hours’ notice before a call."

Relocation to Offshore Jurisdictions: Branding, Regulatory Credibility, and Challenges

The conversation shifted to financial firms relocating to offshore jurisdictions and the associated challenges, including brand reputation and regulatory credibility. The emergence of Dubai as a financial hub was also discussed.

The panel delved into the challenges posed by varying regulatory approaches in different jurisdictions. The use of offshore locations to attract businesses, the role of reverse solicitation, and potential shifts in regulatory attitudes were explored.

Dubai's growth as a financial hub and the associated regulatory framework were discussed, along with challenges faced by firms operating in both the UK and Europe.

Insights were shared on strategies adopted by financial firms to navigate regulatory changes, emphasizing local licenses, consumer protection measures, and compliance with evolving rules.

The discussion concluded with reflections on the dynamic and complex nature of retail trading regulations, highlighting challenges and strategic considerations for firms operating in various jurisdictions.

Later in the conversation, concerns were raised about offshore jurisdictions, with a focus on the regulatory environment in places like St. Vincent, Mauritius, and Seychelles. Questions were posed about the legitimacy of operating from such jurisdictions and the potential for regulatory changes.

Smith of Ec Markets said: "I'm not saying you're making one that offshore brokers are more susceptible to bankruptcy than onshore brokers. [I'm just wondering] and obviously, a smaller broker is going to have a struggle to build up a sufficient pot of money to be able to pay people out in compensation."

Smith of Ec Markets expressed concerns about the regulatory approach of some offshore locations, emphasizing the need for businesses to have a genuine presence in the jurisdictions where they operate. The discussion hinted at a potential shift in regulators' attitudes, with an increased focus on businesses proving the legitimacy of their operations.

He added: “In 2010, the [FSA] Seychelles had 2 Securities dealers, in 2016 it had 13 and in 2022 it had 130, and I think in 2023 we're up to 160.”

In response to the concerns about the offshore setup, Smith of Ec Markets, suggested that regulators are questioning the legitimacy of businesses operating from certain jurisdictions. He mentioned discussions with the FCA on this issue, pointing out that regulators are increasingly interested in where and how institutions are operating.

The conversation also touched on the regulatory challenges faced by businesses in offshore jurisdictions, drawing parallels with past issues in locations like Cyprus. The fear was expressed that regulators might demand businesses to demonstrate a genuine license or permission from the jurisdiction where they operate, indicating a potential tightening of regulations.

Evolution of AI: Applications and Challenges in Finance

In the latter part of the discussion, there was a transition to the topic of artificial intelligence (AI) and automation in the financial industry. Smith of SteelEye, expressed his fascination with the subject and discussed the role of generative AI in regulatory compliance. He shared anecdotes about the use of AI, emphasizing the importance of intelligent and meaningful deployment.

Smith of SteelEye briefly touched on the evolving nature of AI and its applications, encouraging the audience to embrace it while using it intelligently. He discussed the use of generative language models and the challenges of prompt engineering to get the desired answers.

He said: “I remember when I was young, using a calculator in an exam was taboo; you could not do it. Well, actually, why would you remove that tool from the human to get the answer as fast as possible? If I find out you used ChatGPT, okay. If you gave me a [wrong] answer because you've asked the wrong question in the wrong way, then I'm going to give you a zero."

The conversation on AI concluded with Smith's (SteelEye) advice for the audience to educate themselves, learn how to use AI intelligently, and embrace it as a tool for positive change. He highlighted the role of AI in regulating markets and encouraged responsible use.

The panelists also addressed questions about AI going wrong, with Smith of SteelEye sharing humorous examples. The discussion concluded with insights into the regulatory focus on AI, with Culley mentioning a recent discussion paper by the FCA and Bank of England. The potential framework of accountability principles and concerns about financial crime and biases in AI were highlighted.

In summary, the Finance Magnates London Summit 2023 panel discussion covered a wide range of topics, from retail trading regulations and challenges in offshore jurisdictions to the evolving landscape of AI in the financial industry. The insights provided by the panelists shed light on the complexities and opportunities within the financial regulatory space.