If you’re regulated by the Financial Conduct Authority, it makes sense to keep up with your regulator’s priorities – as there’s a strong chance they should be your priorities too.
As we start a new year, we take a look at some of the things likely to be top of the FCA’s ‘to do list’ – and what you can do to make sure you stay compliant with their rules.
What is the FCA going to be focusing on this year?
As ever, the regulator has a wide range of priority areas. Many of these were shared in its 2019/20 Business Plan; others have emerged since that was published in April.
In the Authority’s 2019/20 Business Plan, Andrew Bailey said that ‘Dealing with Brexit will be the most immediate challenge we face’.
In its first ‘Regulation Round-up’ of 2020, the FCA said that as a result of the upcoming departure of the UK from the EU, due on 31 January, it is ‘making changes to our Brexit implementation activities’. Relevant affected firms have been contacted, and the Authority has updated the Brexit section of its website.
In September, we asked how prepared the financial services industry was for Brexit. If you feel you have more to do to plan, you might want to read the FCA’s final instruments and guidance for a no-deal Brexit and the draft directions under its Temporary Transitional Power.
- Treating customers fairly
This has long-been a focus for the regulator, and 2020 promises to continue that.
Just last week, the Authority published an update on the work it’s doing to respond to the Citizens Advice super-complaint regarding the so-called ‘loyalty penalty’ consumers face and the resulting Competition and Markets Authority recommendations.
This was also evident in the regulator’s actions in 2019, when the collapse of London Capital & Finance put misleading promotions in the spotlight and fairness made news again when the FCA fined asset manager Janus Henderson £19m for misleading 4,700 retail investors and charging them unfair fees.
If you want to make sure your approach complies with the regulator’s TCF rules, you can read our blog on how to ensure you are treating customers fairly.
- The claims management industry
The FCA took over regulation of claims management firms on 1 April 2019. Since then it has taken a tough stance. Its actions since taking responsibility for the sector include:
- Sending CMCs a ‘Dear CEO’ letter in June last year to remind them of their obligations under the FCA regime.
- Launching a new co-operation agreement with the Competition and Markets Authority aimed at improving competition in claims management.
- Announcing a number of new rules in relation to financial promotions.
- Fining claims management firm Professional Personal Claims Limited £70,000 for misleading consumers through its websites and printed materials.
If you work in claims management, you need to get to grips rapidly with your new regulatory regime, including ensuring your financial promotions meet the FCA’s rules. Our free Financial Promotions Checklist might be a useful read.
Crypto-currencies have made many headlines over recent years – and not positive ones.
On 10 January 2020, the FCA took over supervision of anti-money laundering and counter terrorist financing (AML/CTF) for businesses carrying out certain cryptoasset activities under the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs).
Any UK business conducting specific cryptoasset activities falls within scope of these regulations and will need to comply with their requirements, which include registering with the FCA, risk assessment, having sufficient policies and controls, and carrying out due diligence and customer monitoring.
If you’re responsible for claims management compliance, you can find out more on the regulator’s dedicated cryptoasset webpage.
The FCA’s commitment to protecting consumers from financial mis-selling was a key element of its 2019-20 business plan.
Integrity is a clear focus for the regulator, as part of its work to minimise risk to consumers. This risk focus was evidenced again in November last year, with the FCA’s temporary ban on the promotion of speculative mini-bonds.
Record fines issued in 2019 show that the regulator is not afraid to act on mis-selling – and other compliance breaches – when it sees them.
- Embedding SMCR
The Senior Managers and Certification Regime came into force on 9 December for all solo-regulated firms. This means that most financial services firms are now subject to the Regime.
Has your firm adopted all the changes required to comply? This isn’t simply a tick-box exercise – as a compliance consultant noted, ‘the Regulator is focussed on promoting healthy cultures where the tone from the top leads people to take personal responsibility’.
If your firm could do more to create and embed this sort of ethos, our 5 steps to creating a culture of compliance might be a useful read. And if you need a refresher on the SMCR, you can read our blog, SMCR extended to 47,000 firms – what do you need to know?
- Making best use of technology and innovation
The ways that technology and innovative approaches can be harnessed to improve regulatory compliance has long been a topic of interest to the FCA.
In the five years since the launch of its ‘Project Innovate’, around 700 firms have used the services of the Authority’s innovation initiatives, including the Regulatory Sandbox and Global Financial Innovation Network.
Its work is far from done, though. In a speech in November, the regulator’s Nick Cook noted that the Authority ‘must adapt’ to keep pace with technology-led change in the markets it regulates.
RegTech – referred to by Cook in his speech as ‘the sleeping giant of the financial services world’, has huge potential to help to improve regulatory compliance. This is just one of the areas where we can expect to see the FCA focus in this and future years.
An interesting year ahead for the financial regulator
It’s clear that the FCA has a number of priority areas in its sights for 2020. And it has its own internal challenges too: with Andrew Bailey moving on to head up the Bank of England and Chris Woolard announced just today as the new interim FCA chief, the regulator will need to adapt to the approach of a new leader.
Keeping abreast of the FCA’s shifting priorities is vital for any regulated firm. Avoiding compliance breaches requires that you know what the Authority demands of you; hopefully this round-up has helped.
If you want more advice and tips on building a compliant culture in your firm, you can download a copy of our whitepaper, How to embed a compliance culture into your business. You can get a free copy from our resource library.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.