21Sep

The Financial Conduct Authority has published its Annual Report for the financial year 2019/20. The regulator says that its highlights from the 12-month period include:

  • Assisting 3.4 million consumers and thousands of businesses affected by coronavirus
  • Continuing to prepare for the UK’s withdrawal from the EU, and the end of the transition period at the end of this year
  • Driving change in the culture of financial firms with the extension of the Senior Managers and Certification Regime
  • Seeking to educate consumers on scam prevention
  • Improving protection for users of high-cost credit, including the introduction of a price cap on rent-to-own products, which the FCA says will save some of the UK’s most vulnerable consumers an estimated £19.6m a year
  • Imposing 15 financial penalties on firms totalling over £224 million
  • Ensuring £135 million in compensation was paid to customers for disclosure failings on enhanced annuities

The report identifies eight key priorities for the FCA that apply across all sectors it regulates:

  • Firms’ culture and governance – here the FCA mentions issues such as whether firms have remuneration systems that encourage staff to act in the correct way
  • Firms’ operational resilience – here the FCA notes that change management is the greatest cause of technology incidents that are reported to them, and also that incidents frequently occur at third party service providers
  • Financial crime
  • Fair treatment of existing customers – much of what the report mentions here relates to competition and pricing issues
  • Innovation, data and data ethics
  • Demographic change, including changes in the employment and housing markets
  • The future of regulation – here mention is made in the report of the possible introduction of a ‘duty of care’ requirement in the near future
  • Climate change and green finance

The report then goes on to describe what the FCA sees as its priorities in seven of the specific business sectors it regulates:

  • Wholesale financial markets – the regulator wants to see markets that operate in such a way that makes it difficult to commit market abuse and financial crime
  • Investment management – the FCA wants to see clearer cost disclosure, better performance reporting and clearer descriptions of investment fund objectives
  • Pensions and retirement income – mention is made here of the efforts the FCA has made to improve pension transfer advice standards and the new requirements for non-advised drawdown customers to be provided with ‘investment pathways’ documentation
  • Retail banking and payments – the FCA says it expects payments services firms to have safeguarding arrangements which allow them to properly identify client funds and hold them separate from other funds; and the regulator also comments on currency transfer service providers promoting unachievable exchange rates and making unfair claims about competitors
  • Retail lending – in this section the report mentions the rent-to-own price cap; measures to assist mortgage prisoners to switch to better products; new rules for handling customers in persistent credit card debt; and new rules to ensure ‘buy now pay later’ customers are better informed and are not charged backdated interest on sums they repay during an offer period
  • General insurance and protection – here the FCA mentions new rules and guidance to assist consumers with medical conditions in finding suitable insurance, and the report also mentions the possible remedies the regulator may introduce to tackle poor competition and high prices affecting many home and motor policyholders
  • Retail investments – the main issue mentioned here is the marketing of mini-bonds, including restrictions on their marketing, and measures to ensure consumers are better informed of the risks. The FCA is also focussed on supervising the quality of firms’ investment advice in general, especially when this involves higher risk products

Perhaps slightly confusingly, the FCA includes claims management companies under the ‘retail lending’ category. The report says that the financial year saw the FCA supervise the client money procedures and the financial promotions of a number of CMCs, and that it used its powers to ban a number of promotions being used by firms.

The Covid-19 section of the report mentions the measures taken to protect consumers, such as requiring firms to offer interest free overdrafts and payment freezes; but also highlights that the FCA offered some concessions to firms, such as extensions to implementation dates of SM&CR requirements.

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 of the facts, circumstances or legal position may change after publication of the article