WEBVTT - FCA's Walls Talks UK Deregulation, 'Golden Age' For The City

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<v Speaker 1>We're going to turn back to the UK now. The

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<v Speaker 1>Chancellor at Rachel Reeves has canceled a plan speech to

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<v Speaker 1>the London Stock Exchange this morning. She's due to attend

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<v Speaker 1>an address from Downing Street from the Prime Minister instead,

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<v Speaker 1>but she was due to mark the introduction of new

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<v Speaker 1>rules for raising capital on London's markets aimed at making

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<v Speaker 1>them more competitive. It's been dubbed a new golden age

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<v Speaker 1>for the city. Joining us now to discuss Simon Wall,

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<v Speaker 1>who's the executive director from Markets to the Financial Conduct Authority. Simon,

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<v Speaker 1>good morning, Good to see you in studio today. Talk

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<v Speaker 1>us through then the changes coming into force from today.

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<v Speaker 1>This is about cutting red tape.

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<v Speaker 2>Yeah that's right. I've just hot fitted it over from

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<v Speaker 2>the Stock Exchange this morning where they had that big launch.

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<v Speaker 2>These reforms are called Poatra, which is not the snappiest,

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<v Speaker 2>but there's real substance behind it. There's two things i'd highlight.

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<v Speaker 2>One change is to prospectuses. So when companies who are

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<v Speaker 2>already listed raise new capital on the Stock Exchange, they

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<v Speaker 2>used to have to issue a new prospectus at twenty percent.

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<v Speaker 2>We've raised that all the way to seventy five percent,

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<v Speaker 2>making it cheaper, easier and quicker to raise new capital.

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<v Speaker 2>And then the event this morning was all about the

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<v Speaker 2>debt side. We used to have a restriction where if

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<v Speaker 2>a company issued debt in denominations of below one hundred

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<v Speaker 2>thousand there was additional red tape. There are additional forms

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<v Speaker 2>to fill in. We look to that. The people who

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<v Speaker 2>were supposed to read it weren't and it was really

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<v Speaker 2>restricting participation for retail. So we've stripped it away. We've

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<v Speaker 2>made it just the same over one hundred thousand to below.

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<v Speaker 2>We're actually really enthusiastic the people retail in the UK

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<v Speaker 2>may start investing in bonds from as little as a pound.

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<v Speaker 2>So there was real energy in the room today, notwithstanding

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<v Speaker 2>that the Chancellor couldn't make it really good speeches and

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<v Speaker 2>the whole of London's fixing come market out to support

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<v Speaker 2>the new rules.

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<v Speaker 3>So yeah, so changes on perspectives, changes on the debt side,

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<v Speaker 3>as you just mentioned as well. What other areas you're

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<v Speaker 3>looking at is is there still still more to come in,

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<v Speaker 3>more that you can do.

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<v Speaker 2>Yeah, Suddenly, I'd say we're halfway through a program of

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<v Speaker 2>really ambitious reform to UK capital markets. I'd say that

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<v Speaker 2>each part is different, but the real hallmark is looking

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<v Speaker 2>at those areas where we have preemptive checks often but

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<v Speaker 2>not only inherited from the EU and replacing them with disclosures.

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<v Speaker 2>That's always when it's right and when there's enough information

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<v Speaker 2>out there for the market. Our preference is to remove

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<v Speaker 2>a gate, whether it be a check from the regulator

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<v Speaker 2>in some cases for shareholders and replace it with disclosures

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<v Speaker 2>and show a bit of faith in the price formation process.

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<v Speaker 1>What is the metric that you're judging the success of

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<v Speaker 1>these changes? Are the number of IPOs in London.

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<v Speaker 2>There's a lot of things. Man, I should stress that

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<v Speaker 2>we're doing this across all of the UK, different asset classes,

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<v Speaker 2>so it's not only focused on equities. Obviously, today's reform perspectives,

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<v Speaker 2>it's a major element in equities. We've set out our

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<v Speaker 2>own north Star metrics as the FCA alongside our strategy.

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<v Speaker 2>Those are big things. We've got UK exports, we've got

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<v Speaker 2>the contribution that financial services makes to the overall GDP

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<v Speaker 2>of the country, but obviously there's a lots of other

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<v Speaker 2>factors that go into that. For these particular reforms, yeah,

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<v Speaker 2>we'll look at the speed with which companies can raise money.

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<v Speaker 2>We will look at in time IPOs whether this makes

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<v Speaker 2>it even more attractive to list and raise in the UK.

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<v Speaker 2>The early signs are good, but of course, as implied

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<v Speaker 2>in your question, there are loads of other factors that

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<v Speaker 2>go into that. We just want to make sure the

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<v Speaker 2>regulation is an asset to the UK rather than attraction.

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<v Speaker 3>Yeah, I mean, I guess to inject to notice skeptism here.

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<v Speaker 3>I mean, you know all very well talking about UK

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<v Speaker 3>markets hitting record highs, as you know, I think the

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<v Speaker 3>Chancellor probably would have would have done, and you know,

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<v Speaker 3>talking about a new golden age former chance to talking

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<v Speaker 3>about a big bang two point eight. But can you

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<v Speaker 3>understand why there, you know, where there can be a

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<v Speaker 3>degree of skeptism form people in the city who hear

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<v Speaker 3>politicians talking big but maybe don't necessarily feel that they've

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<v Speaker 3>delivered all that much.

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<v Speaker 2>I mean, you've quoted things there from the chances of speech.

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<v Speaker 2>It's not not my place to comment on. All I

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<v Speaker 2>would say is that the program of reform taken together,

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<v Speaker 2>each individual thing contributes to both the whatever it does,

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<v Speaker 2>but also the spirit in the city. I would say

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<v Speaker 2>the energy in the city is good. At the moment.

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<v Speaker 2>We are the second largest market in the world unambiguously

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<v Speaker 2>with the world leader in drivetied markets community markets EFFS.

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<v Speaker 2>So there's of strength. But it's a competitive world out there.

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<v Speaker 2>We're competing with all sorts of established and competitive markets.

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<v Speaker 2>So we need to keep this challenge of mindset. But

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<v Speaker 2>I'd say the mood is good, but you're right to

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<v Speaker 2>have some caution. There's a lot of things we need

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<v Speaker 2>to be on this road for a long time.

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<v Speaker 1>The FCA is talked about the dialing up risk, meaning

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<v Speaker 1>that more things will go wrong. What kind of things

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<v Speaker 1>are you preparing for and when does the risk cross

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<v Speaker 1>a red line for you when you're thinking about changes

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<v Speaker 1>to regulation.

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<v Speaker 2>Yeah, it's a good question, difficult in the abstract. I mean,

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<v Speaker 2>the first thing I would say is everybody in the

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<v Speaker 2>city and wider into politicians are talking about a move

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<v Speaker 2>away from risk, aversion this sense that we need to

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<v Speaker 2>optimize risk rather than just reduce it. But the proof

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<v Speaker 2>of the pudding is in the eating. Much gets much

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<v Speaker 2>harder when you talk about specific risks and making sure

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<v Speaker 2>that the societal appetite is there. One of the things

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<v Speaker 2>that we're really keen to support is more retail participation

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<v Speaker 2>in capital markets probably defined lots of initiatives the ones

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<v Speaker 2>I mentioned today, but also targeted support a way of

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<v Speaker 2>bridging the gap between full fat financial advice and what

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<v Speaker 2>people use at the moment. But the more retail invest

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<v Speaker 2>in capital markets, we have to accept that sometimes you

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<v Speaker 2>lose money. This is about the medium term, the long term,

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<v Speaker 2>rather than the short term. And I'm not sure that

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<v Speaker 2>the societal appetite is yet established. I think we've made

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<v Speaker 2>great strides, but we need to be on this path

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<v Speaker 2>for three, four or five years for people to say, Okay,

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<v Speaker 2>the UK has really got it, and i'd apply that.

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<v Speaker 2>Of course, a whole range of the reforms we're doing.

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<v Speaker 2>Each of them have downside. These aren't always low hanging fruit,

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<v Speaker 2>but we try and get that out clear and try

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<v Speaker 2>and get it into society so that when the downsides happen,

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<v Speaker 2>we can hold our nerve and keep going forward.

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<v Speaker 3>Yeah, I mean, maybe one specific risk we could talk

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<v Speaker 3>about then, given that greater appetite for risk, and also,

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<v Speaker 3>as you said, the desire to see more retail participation.

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<v Speaker 3>Obviously huge theme in markets and in finance at the

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<v Speaker 3>moment is the explosion in private markets that we're seeing

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<v Speaker 3>Wall Street, you know, hugely excited about the opportunity of

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<v Speaker 3>selling some of these alternatives to the wealthy and also,

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<v Speaker 3>you know, to retail investors. Does that kind of you know,

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<v Speaker 3>full fat approach to risk in retail participation? Does that

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<v Speaker 3>fully apply when it comes to private markets? And you know,

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<v Speaker 3>Granny is investing in Pee and all sorts, so you.

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<v Speaker 2>Give me an opportunity. There are actually three things went

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<v Speaker 2>out today. I didn't think i'd get the third run across.

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<v Speaker 2>But there's a public offer platform where we're saying, if

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<v Speaker 2>you're a private company you want to raise more than

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<v Speaker 2>five million pounds as a one off, here's a structure,

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<v Speaker 2>and actually that structure seeks to adress the point you're raising,

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<v Speaker 2>which is putting a little bit more due diligence in

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<v Speaker 2>to protect retail in those investments. We have pisces coming

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<v Speaker 2>down the track, and new type of trading venue again

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<v Speaker 2>for private companies, a sort of bridge between the private

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<v Speaker 2>markets and the public markets. Your bought a question. There

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<v Speaker 2>are no easy answers on these things. I think private

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<v Speaker 2>markets as an asset class, so it's been booming and

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<v Speaker 2>many good returns available, but the absolute heart of it

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<v Speaker 2>is a is reduced liquidity that's almost the thing about

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<v Speaker 2>private marketing, as they're not public and the valuations are

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<v Speaker 2>less frequent and in many ways harder. So I'm not

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<v Speaker 2>averse in any means by measures to get that into

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<v Speaker 2>retail portfolios, but there is no you can't pretend that

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<v Speaker 2>it's liquid, So I'm skeptical about people use the term democratization.

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<v Speaker 2>It does raise my eyebrows sometimes because private markets need

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<v Speaker 2>to retain the features of private markets. So I think yes,

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<v Speaker 2>in safe ways, including the long term asset funds, the

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<v Speaker 2>perfectly reasonable part of people's portfolios, but we just need

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<v Speaker 2>to make sure that it's done in a responsible way.

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<v Speaker 1>Okay, Simon, great to have you with us. Thanks very

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<v Speaker 1>much for joining us on the program this morning.