LeapRate Interview: Former IG Group UK MD Tim Hughes joins FCA regulation advisory firm ionStar


Following his tenure at multi-asset British electronic trading company IG Group (IGG:L) which spanned over fourteen years, Tim Hughes has assumed the position of Managing Director at FX industry regulatory consultancy ionStar.

Based in London, ionStar specializes in providing professional services consultancy to FX companies with regard to compliance and regulatory aspects according to Financial Conduct Authority (FCA) rules.

Prior to assuming his leadership position at ionStar, Mr. Hughes’ extensive career at IG Group culminated in his standing as Managing Director since May 2010, preceded by a five year stint as Group Head of Sales Trading which followed his initial role as a Senior Sales Trader which he held for four years after joining IG Group in 2000.

In terms of background, ionStar’s origins remain considerably unorthodox. In 2012, Liz Hughes, a full time professional mother, realised that her situation is not unique and set up a business bringing similarly experienced professionals back to the market place in a flexible way and with a proper work/life fit. She wants herself – and the Network – to have their cake and eat it too.

ionStarThis year, Mr. Hughes joined his wife’s business having recognised that ionStar offers a ground-breaking solution to a significant and largely unrecognised market failure: that firms cannot efficiently access much-needed skills and that experienced individuals have severely limited professional options.

In order to detail the ethos behind ionStar and future objectives, LeapRate discussed matters in detail with Mr. Hughes, who began by clearly establishing the rationale behind ionStar, its origins, what attracted him to it and how his leadership position completes the firm’s corporate position.

ionStar provides commercially-minded, clear, actionable compliance advice for businesses in the financial services sector. We deal with clients’ FCA compliance issues, reducing regulatory and reputational risk and freeing up their time to focus on other important elements of their business.

ionStar operates a network of experienced compliance professionals who are largely unavailable through traditional employment routes. This is because they desire flexibility that leading City firms cannot offer. Our consultants operate remotely and on a project-by-project basis with all work quality controlled by ionStar before delivery to our clients.

The Challenge, according to Mr. Hughes is that financial firms are overloaded with regulatory and compliance work, not all of which can be accomplished with internal skills or existing headcount; most of which could be completed remotely when briefed properly, given to the right people and managed effectively.

“Thousands of compliance professionals with a wealth of experience remain on the market side-lines, inaccessible to the firms who so need their help. Professional mums, having taken time out to raise children they have a ready-made skillset and the scope and willingness to work if that work can be offered in a way which fits with their lives, commitments and priorities.

23% of mothers do not return to work after maternity leave; 16% of the highest qualified mothers do not return (Source: DWP, 2009/10)” stated Mr. Hughes.

Mr. Hughes cites the ionStar Solutionin that the company operates a network of independent compliance professionals and engages individuals and teams on client assignments to solve regulatory and compliance problems and issues. Clients gain access to an otherwise inaccessible talent pool whilst benefitting from ionStar’s project management and oversight.

“How we do this is by offering professionals what traditional firms do not,” adds Mr. Hughes. “We offer a genuine way to work flexibly, remote from client offices, saving clients’ desk space and allowing our professionals to choose the working environment in which they best perform. Our Network not only allows us to get straight to the right professionals for each assignment, it offers our professionals a similar support structure to working in conventional office-based departments. And with extensive use of secure cloud technology to work collaboratively, connectedly and video call as easily as having any office conversation, our professionals are more productive than their office-bound peers.”

Balance, Happiness & Productivity

“Half of us find balancing work and life difficult and nearly a half of fathers want to spend more time with their children” Mr. Hughes opines. “Working from home is at an all-time high in the UK (4.2m/13%) and has been shown to increase productivity by up to 22%. Happiness and productivity are correlated; a simple mood stimulus (a comedy clip) was shown to improve subsequent performance by 10%.”

When asked whether ionStar is witnessing a lot of demand for starting FCA regulated brokers, or whether existing foreign brokers are looking to add FCA licensing, Mr. Hughes stated “Both, although the majority of domestic start-ups that we’re talking to are in the peer-to-peer space. Currently most broker interest is from businesses which are already regulated brokers outside of the EU. Particularly given the economic upturn and the resurgence of London as the global financial hub, many foreign brokers are now looking to add an FCA regulated entity to their business. It is less clear-cut how exactly they can best achieve this aim though. Most have the resources to buy an existing business but – given the current buoyancy in the broker market – few are for sale, meaning they have to go the ‘build it’ route. We draw upon the particular experience of professionals in our Network to deliver either scenario.”

Regulation is currently something of a moot point worldwide, with the FCA having recently embarked on its restructuring to cope with the modern financial ecosystem, the NFA having banned credit cards in the US, and Russia pushing forward for full-scale FX regulation. It is therefore interesting to note what major changes to FX regulation the FCA may make in light of the recent developments.

Regulatory changes kept in perspective

FCA_logoOn this point, Mr. Hughes explained “Interestingly, almost all of the more Draconian regulatory limitations have been enacted outside of the UK. This is consistent with the FCA’s approach (see below) where greater emphasis is on regulated firms adhering to requirements such as TCF and KYC. So long as these are satisfactorily observed then there should be no need for blanket bans on certain aspects of the market. So, I would be surprised if the FCA changed tack in its approach however the implicit bargain is that regulated firms behave. The FCA continues to illustrate that it is willing to fine for clear breaches.”

When going further into detail and elaborating on Mr. Hughes’ view on the FCA’s regulatory remit, compared with the stringent US regulation, there is an industry understanding that if an FX firm wants to start up with FCA regulation, then as far as establishment is concrned FCA is effectively self regulatory. The British regulator asks what a broker needs to get the sort of license that the broker is requesting, then the broker provides the information. Once the broker provides this to the FCA, a license is issued on those terms, and if something goes wrong and the terms that have been agreed are not adhered to, the FCA will file a complaint and seek to prosecute the broker. As a result some brokers there have £730,000 net capital which is the minimum required under MiFID, some have £5 million, the difference being a result of how they applied for their license. this is then followed up by the FCA accepting settlements rather than persuing prosecutions and lawsuits as per CFTC/NFA.

Mr. Hughes concludes that with this conundrum, there is a difference in emphasis between the US and the UK regulatory environments. The US is more prescriptive and rules-based, the UK is more principles-based. This arguably makes the UK an easier environment for all sorts of regulated business to thrive. However, as soon as you move away from black-and-white, there will always be variation in how the same rules are applied. It is nothing new that the firms are themselves responsible for being and remaining compliant.”

With so much interest in the UK CFD and Spread Betting market from overseas firms, LeapRate asked Mr. Hughes how he views the need for regulatory professional services consultancies in the UK progressing, and how ionStar has an edge over competitors and large consultancies such as PwC and KPMG.

“We set up ionStar to provide the precise expertise that clients require at any given time and to do so in a way which focusses on results, without being constrained by how things have always been done. We will only put a professional in a client’s office if they genuinely need to be there. Otherwise our professionals work flexibly, remotely and collaboratively, in a technically secure environment, able to draw on the collective experience of ionStar’s entire network. Crucially, we provide a platform for clients to access talent which they cannot otherwise engage.
We offer tailored solutions so senior management get the answers they need when they need them, and can re-focus their energies on building their businesses” stated Mr. Hughes.

As far as the year ahead is concerned, Mr. Hughes looks forward pragmatically. “Our goal is to champion flexible working – to prove that you can have a healthy work life balance working ‘in’ the City – while delivering first class, professional services to the financial sector. In the coming year we want to build on our reputation as the go-to firm for creative compliance solutions” he concluded.

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LeapRate Interview: Former IG Group UK MD Tim Hughes joins FCA regulation advisory firm ionStar

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