A bit about the Financial Conduct Authority

The purpose of this blog is to provide a bit of background to the new Regulator, The Financial Conduct Authority (FCA) in terms of its statutory and operational objectives. These are the things that will shape the way that regulation will be  effected. For those of you who are participants ( willing or otherwise)  in the TC Handbook's requirements, this is a little bit of the stuff that your T & C files should be  made of.

The Government has set out the focus for the FCA as follows.

As a STATUTORY OBJECTIVE, the FCA is required to ensure that relevant markets work well and this will therefore be the focus of the FCS's work. Apparently fairly general terms, these and once more 'relevant markets' appears but we need to remember that this will be defined by the scope of FSMA. In the FCA's document published a while ago,  Journey to the FCA, three key operational objectives have been identified.These objectives focus on the integrity of the market, consumer protection and competition.

The  three OPERATIONAL OBJECTIVES are as follows:-

To secure an appropriate degree of protection for consumers.

One particular area of focus will be to place greater responsibility on providers to ensure that products only reach the customers they were designed for. The FSA had already started this work with lenders in particular and the FCA will take this on further. There will also be  greater focus on provider's wholesale activities and the FCA will have greater powers to intervene.

To protect and enhance the integrity of the UK financial system.

One very interesting point made by the FCA is that it will not " trust in the integrity of markets".The FCA will not accept that there are some areas of the market in which they should not be interested  because the sophistication of the parties enables them to look after their own interests. We have all learned from this assumption!


To promote effective competition in the interests of consumers. 

This is a particularly interesting objective on two counts. Firstly it is new to financial services regulation. It is not an objective that the FSA had specifically. In this context it should give some comfort to smaller firms on the basis that competition should mean more firms available across a range of niches and sizes. Of course the devil is in the detail! It will be interesting  to see exactly where this sits with the Competition Commission. There is a document being thrashed out between the FCA and the OFT on Competition Issues although in point of fact of course, Consumer Credit responsibility will pass to the FCA in April next year. I am also mindful of the FSA's statutory objective around financial crime and the simple fact  and existence of the Serious Organised Crime Agency (SOCA) whose raison d'etre is exactly that. I would expect the FCA to document a memorandum of understanding (MoU) to be issued between the FCA and SOCA perhaps, although there is nothing currently on the FCA site as far as I can see.

ONE STATUTORY OBJECTIVE

TO ENSURE THAT THE FINANCIAL SERVICES MARKETS WORK WELL

THREE OPERATIONAL OBJECTIVES

PROTECT CONSUMERS - PROTECT THE SYSTEM - PROMOTE COMPETITION