The Financial Conduct Authority carries out regular ‘thematic reviews’ into areas of the financial services industry. Here we examine what these reviews entail, what might prompt one and the potential implications for your firm if a review is announced within your sector.
Why does the FCA carry out thematic reviews?
Its thematic reviews are a central element of the regulator’s activity. On the FCA website it says that they ‘form a significant part of our approach to supervision’.
Thematic reviews are used by the regulator to ‘assess a current or emerging risk relating to an issue or product across a number of firms within a sector or market’.
The review will usually aim both to identify the current issues and find out what is happening in that market, and to identify potential solutions to address these issues. You might also hear the FCA’s thematic reviews referred to as ‘issues and products’ work or ‘cross-firm’ work.
The thematic review process can be applied to a wide range of situations, firms or groups of consumers. They are often instigated in response to concerns about a particular sector failing to abide by the regulator’s ‘Treating Customers Fairly’ (TCF) ethos or other key tenet of their regulatory guidelines. A recent review into closed-book providers specifically identified failings in firms’ TCF approaches (our blog, has more on this subject).
The idea of the review is to allow the regulator to investigate key risks that have been flagged to or spotted by the FCA. If specific risks are identified, further detailed work is carried out into the particular area of concern.
Thematic reviews are just one of the tools in the FCA’s supervisory ‘toolbox’, alongside its risk management approach, operational framework, mystery shopping activities and Skilled Persons’ Reviews. The regulator may also seek attestations from senior management in firms with specific issues, and put in place enhanced supervision for firms where they have particular concerns.
Who carries out the FCA’s thematic reviews?
The regulator has a specialist team of experts to carry out its reviews. The FCA states that this enables them to ‘tackle complex issues by deploying resource appropriately and efficiently’.
What does an FCA thematic review comprise?
The thematic team will carry out desk research into the issues identified, as well as conducting site visits to individual firms, and will work with industry practitioners and trading professional bodies to understand current practice, concerns and potential solutions.
It is the prospect of site visits that tends to cause firms the most anxiety. The thought of an FCA visit to your organisation is a stressful one, although there are many things you can do to prepare, as our blog on preparing for a visit from the FCA explains. By keeping up with the FCA’s news – perhaps by signing up to the monthly Regulatory Round-up the regulator emails out – you can keep abreast of any forthcoming thematic reviews and stay aware of activity in your sector.
Although, of course, a review in your sector by no means guarantees that the regulator will be knocking on your door, keeping tabs on the areas they are shining a light on can only help. And more widely, staying up-to-date with the areas exercising the regulator’s mind will give you an advantage when it comes to devising policies and a compliance framework that is in line with current FCA priorities.
The FCA’s thematic reviews are a core part of their supervisory approach. For any regulated firm wanting to remain on the right side of the regulator, understanding what they entail and how they might affect you is vital.
If a thematic review in your sector does result in a visit for your firm, how should you prepare for the best outcome? Our guide, How to prepare for an FCA visit - written by compliance expert, Christopher Hall - has a wealth of tips and advice for firms in this situation – and will also be of interest to any firm wanting to ensure they are following best practice approaches. You can download a free copy here.
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.