The Financial Conduct Authority (FCA) has set out how it regulates authorised firms in two documents entitled ‘Approach to Supervision’ and ‘Approach to Enforcement’.
The Approach To Supervision, and the Approach to Enforcement, both begin by stating how consumer protection is at the heart of the FCA’s activities, by saying:
“Consumers need to have confidence in these services and the firms that provide them. They expect the market to be fair, open and competitive. They also have high expectations of those who regulate these firms.”
Whilst the FCA is the regulator of financial services in the UK, the organisation expects firms to take the lead when it comes to complying with the rules. Here, the Supervision document goes on to say:
“The firms that we regulate and their people are responsible for ensuring that they act in accordance with our principles and rules. We expect firms and their employees to meet these standards and hold them to account when they fail to meet them.”
Later in the document, mention is made of the Senior Managers and Certification Regime, which will soon apply across the entire financial services industry. Under the Regime, firms are responsible for ensuring that individuals carrying out important roles are competent to do so, and that they display the required standards of integrity.
The effect that the culture within firms can have is recognised when the document states:
“We also know that firms’ culture shapes the conduct outcomes for consumers and market. So we aim to assess and address the drivers of culture including firms’ leadership, purpose, governance and approach to managing and rewarding its employees.”
The FCA says that its supervisory priorities include:
- The cyber resilience of firms
- Clients being given unsuitable advice
- Consumers being granted credit they cannot afford to repay
- Vulnerable consumers not being treated appropriately
- Clients not being given enough information about the products they purchase, including information about product risks
The Approach To Enforcement explains the variety of tools at the regulator’s disposal when it identifies issues of concern:
“Issues may span a sector or a number of firms, and we may wish to use a combination of powers and functions to address a problem. This may be through informal guidance, investigation, or early intervention as well as using powers and functions to take civil, criminal and/or disciplinary action.”
The Enforcement document lists a number of things which the FCA believes all come under the banner of ‘misconduct’, and include:
- Misconduct resulting from a lack of integrity
- Failings in systems and controls, including issues with firms’ governance and senior management
- Mis-selling of financial products
- Acting in an anti-competitive manner
- Financial crime
- Unauthorised activity
A consultation on the two documents runs until June 21 2018, and authorised firms and other interested parties are invited to submit their comments to the FCA.
Andrew Bailey, FCA Chief Executive said:
“The most visible parts of the FCA’s work, supervision and enforcement are critical to helping us fulfil our objectives. For supervision this means overseeing regulated firms to identify, prevent or reduce harm to consumers and markets. And for enforcement our overriding principle is to provide substantive justice, aiming to achieve fair and just outcomes in response to misconduct and to ensure our rules and requirements are followed.
“We hope today’s Approach documents outline clearly and in a transparent way, exactly how we fulfil our objectives through supervision and enforcement activity and why we make the decisions in the manner that we do. We are committed to continually improving our models and driving progress.”
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