The Financial Conduct Authority (FCA) has released a set of good and poor practice observations on the use of artificial intelligence across financial services.

According to ACA Group, the regulator is not introducing a dedicated AI rulebook, nor is it mandating a single operating model. Even so, the publication sends a clear supervisory message that buy-side firms with UK-regulated activities would be unwise to ignore.

For chief compliance, operating and technology officers at asset managers, the document shows how the FCA intends to apply its existing expectations on governance, accountability, resilience and consumer outcomes to AI. The central test is not whether a tool is branded as AI.

Instead, firms must be able to explain what a tool does, why it is used, who owns it and how its risks are controlled. That applies equally to investment research, portfolio construction, investor reporting, operations and internal decision-making.

The observations span the full AI lifecycle, from design through to monitoring, intervention, change and eventual retirement. In practice, this gives firms a preview of the questions supervisors are likely to raise. Businesses should be ready to demonstrate how they have identified AI use, assessed its impact, applied proportionate controls and reacted when a tool or its provider changes.

Strong governance, the FCA suggests, begins before deployment. Good practice involves defining the purpose of a use case and running a narrow pilot before scaling. Poor practice arises when firms launch first and attempt to bolt on governance afterwards, leaving ownership unclear, documentation thin and escalation routes absent.

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