Any firm hoping for a reduced regulatory burden as a result of Brexit, or any other factor, may be disappointed if the recent remarks from Andrew Bailey are to be believed. The Financial Conduct Authority (FCA) chief executive gave a speech at Bloomberg in late April entitled ‘The future of financial conduct regulation’.
Mr Bailey began by referring to the FCA’s Mission, which was issued in 2017, and here he commented:
“What we did with The Mission was to set out a much-needed framework to explain and interpret why we regulate conduct across the markets for finance. At the heart of it was a very simple point – but simple is I believe a source of strength – that we always and only regulate in the public interest, and we must always and only do just that.”
Next, he admitted that “light touch” regulation had been in place prior to the financial crisis of the late 2000s, and suggested that, at that time, the ‘public interest’ required the regulator to place the emphasis on the interests of firms and their owners and management. Mr Bailey described the 10 years or so since the crisis as “a decade of re-regulation” and said there were now “very strong public forces pushing for stronger protection in society.”
Emphasising the FCA’s desire to act in the public interest, Mr Bailey then turned his attention to vulnerable customers, saying some consumers needed more guidance and assistance from firms than others, by saying:
“Parliament has given the FCA a statutory objective to protect consumers, but our governing legislation also acknowledges that consumers should take responsibility for their decisions. This avoids the moral hazard that otherwise regulation encourages irresponsible behaviour. But, clearly, some consumers are better able to take responsibility than others. A high-level definition of vulnerability would suggest that it is in the public interest to ensure more protection, and place less reliance on consumer responsibility, for those who are vulnerable. That is what we seek to do.”
Regarding Brexit, Mr Bailey again expressed the hope that there would be a transition period – the alternative to this is a ‘cliff edge’ scenario where the UK crashes out of the European Union without a deal. He promised that during any transition period, the FCA would continue to work with their counterparts in the EU countries in developing financial legislation. In the longer term, after the end of any transition, he said that this close co-operation would continue.
The next topic addressed by the FCA chief was the recently published response to the Discussion Paper on a possible duty of care for authorised firms. He said that this initiative had been launched because “some parties have expressed concern to us that our regulatory framework, including our Principles for Business, may not be sufficient or applied effectively enough to prevent harm to consumers.”
Mr Bailey went on to say that if the FCA was to impose a duty of care requirement, then this would lead to “a fundamental change within firms, moving them to ask, ‘is this right’, rather than, ‘is this within the rules’?” Firms were also warned that this could allow the FCA to take action where it saw evidence of consumer harm, even if the existing rules and/or principles had not been breached.
This theme was also explored in the conclusion to the speech, when Mr Bailey stated:
“An organisation that prioritises being within the rules over doing the right thing will not stand up to scrutiny for long. My aim is to see that mentality deeply embedded in the culture of firms. As the duty of care debate shows, there are strongly held views on consumer harm, and its incidence. The post-Brexit system cannot and should not seek to deny or ignore them.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article