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Sarah Pritchard just delivered a warning. The FCA’s deputy chief executive told the Investment Association’s Private Markets Summit 2026 that transparency gaps could wreck investor confidence faster than actual losses. And she’s got proof: a major US private credit firm recently capped withdrawals after billions in redemption requests flooded in. The firm blamed “negative sentiment” rather than bad loans, but that’s kind of the point—investors panicked because they couldn’t see what was actually in the portfolio.
Pritchard said stress in markets is pretty much guaranteed. What matters is whether the system can handle it. The FCA now backs the Bank of England’s new system-wide exploratory scenario, or SWES, which will test how private markets function when things get ugly. The initiative aims to give regulators a full picture of market behavior under pressure. Pritchard made clear that conduct risks—the kind that hurt investors and damage market integrity—matter just as much as financial stability risks, even though they’re different animals.
Valuation processes are under the microscope.
Valuation Controls Face Fresh Scrutiny
The FCA published a report in March 2025 that set expectations for how firms should govern valuations. That work didn’t stop there. The regulator is still engaging with firms to push industry-wide improvements, and it’s watching to see whether those changes actually stick. A separate review of conflicts of interest is underway, with findings due later this year. The goal is to make sure firm decisions line up with what’s best for investors over the long haul, not just what’s convenient for the firm.
The US withdrawal freeze made the FCA’s point better than any report could. When a big private credit firm suddenly limited redemptions, it sent a signal that something might be wrong—even if the loans themselves were fine. Investors didn’t have enough visibility into the portfolio to know the difference. So they bolted. The firm said the rush came from bad vibes, not actual problems with underlying assets, but the damage was done. Confidence collapsed because transparency wasn’t there to hold it up.
Pritchard thinks the fix is pretty clear. Firms need robust controls and they need to communicate changes in valuations quickly and clearly. She said confidence doesn’t crack when values shift—it cracks when investors don’t get timely explanations for why those shifts happened. The FCA wants firms to build trust by showing their work, not by hoping nobody asks questions.
Conflicts of Interest Under Review
The conflicts review will dig into how firms manage competing interests within their operations. The FCA wants to see whether conflicts compromise decision-making, and whether firms are putting investor interests first. That’s a big deal in private markets, where opacity can hide a lot of problems until they blow up. The review’s findings will come out later this year, and the FCA expects firms to actually use those findings to change how they operate.
The FCA’s approach is basically early detection. Pritchard said many issues in private markets come from lapses in first-line controls—the basic checks that should catch problems before they spread. By identifying where those controls might fail under pressure, the FCA hopes to shore up the system before stress hits. The regulator is talking to firms now to see how they’re incorporating feedback from the valuation and conflict reviews. That ongoing dialogue is supposed to drive real improvements, not just box-ticking.
The SWES initiative fits into that same strategy. The Bank of England will run scenarios to see how private markets might behave when conditions get rough. The FCA is supporting that work because it gives regulators a system-wide view, not just snapshots of individual firms. Pritchard stressed that understanding the whole picture is crucial, especially as private markets grow and become more interconnected with the rest of the financial system.
Pritchard also pointed out that conduct risks can undermine market trust even when financial stability isn’t at immediate risk. If investors think firms are hiding conflicts or playing fast and loose with valuations, they’ll pull their money. That’s what happened with the US private credit firm—sentiment turned negative because transparency was lacking, and the firm had to slam the brakes on withdrawals to stop a full-blown run.
The FCA’s March 2025 report on valuations set clear expectations for governance. Valuations need to be robust, well-documented, and able to withstand scrutiny. The regulator wants firms to communicate any changes clearly and justify them with solid reasoning. That’s not just about preventing panic—it’s about building a culture where investors actually trust what they’re being told. Pritchard said the FCA will keep engaging with firms to make sure those standards become standard practice, not just aspirational goals.
The US incident serves as a reminder that private markets can’t rely on assumptions of stability. When billions in redemption requests hit a firm, it’s usually because investors lost confidence in what they couldn’t see. The FCA’s focus on transparency and robust controls is meant to prevent that kind of confidence collapse. Pritchard wants firms to show investors what’s in the portfolio and explain why values change when they do. Without that visibility, even good portfolios can trigger bad outcomes.
The conflicts of interest review will look at how firms actually handle these issues day to day. The FCA wants to know whether conflict management frameworks work in practice or just look good on paper. By examining real decision-making processes, the regulator hopes to ensure that investor interests don’t get sidelined when conflicts arise. That review’s findings will give the FCA—and the industry—a clearer picture of where improvements are needed.
Pritchard emphasized that the FCA’s work is about preemptively identifying weak spots. The regulator doesn’t want to wait for the next withdrawal freeze or confidence crisis to figure out where controls failed. By setting clear expectations now and following up with ongoing engagement, the FCA aims to make private markets more resilient. The goal is a system that can handle turbulence without falling apart, and that starts with firms getting the basics right: transparent valuations, managed conflicts, and clear communication with investors.
The FCA is also concentrating on how firms communicate with investors when things change. Pritchard said timely explanations matter more than stable values. Investors can handle volatility if they understand what’s driving it. What they can’t handle is being left in the dark. The regulator wants firms to prioritize that kind of transparency, building confidence through openness rather than hoping stability will last forever.
The private credit firm’s withdrawal cap showed what happens when transparency fails. Investors couldn’t verify whether the portfolio was sound, so they assumed the worst and tried to exit. The firm blamed sentiment, but sentiment doesn’t turn negative in a vacuum—it turns negative when information is scarce and trust is low. The FCA’s push for robust controls and clear communication is designed to prevent that kind of spiral, keeping private markets stable even when broader conditions get choppy.
Frequently Asked Questions
What is the FCA’s SWES initiative about?
The SWES, or system-wide exploratory scenario, is a Bank of England initiative supported by the FCA to test how private markets function under stress and provide regulators with a comprehensive view of market behavior.
Why did the US private credit firm cap withdrawals?
The firm faced billions in redemption requests and limited withdrawals to prevent a full-blown run, attributing the rush to negative sentiment rather than actual problems with its loan portfolio.
When will the FCA publish its conflicts of interest review?
The FCA’s review of conflicts of interest in private markets is expected to be published later in 2026, with findings aimed at ensuring firms prioritize investor interests.
