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The Financial Conduct Authority (FCA)


May 01 2013

The Financial Conduct Authority (FCA)

Reason for issue:         Update and reminder.

Action required:           Read and ensure your CPD record in your Training Log is updated.

       

Background

From 01 April 2013, regulation of financial services in the UK was transferred from the Financial Services Authority to two new bodies, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

  • The PRA will be responsible for the prudential regulation of all deposit-takers (banks, building societies and credit unions), insurers and certain designated investment firms;
  • The FCA will be responsible for conduct regulation of all firms and will also have responsibility for the prudential regulation of firms that do not fall under the PRA’s scope.

Most smaller firms that advise consumers on investment, mortgage or insurance products will be supervised by the FCA.

FCA Objectives

Unlike its predecessor, the FCA has a single strategic objective:

  • To protect and enhance confidence in the UK financial system.

However, it also has 3 operational objectives:

  • Securing an appropriate degree of protection for consumers;
  • Promoting efficiency and choice in the market for financial services;
  • Protecting and enhancing the integrity of the UK financial system.

In addition:

  • it will have a duty to act in a way that promotes competition; and
  • it must act to minimise the extent to which regulated businesses may be used for a purpose connected with financial crime.

FCA Activities

The FCA will:

  • Supervise the conduct of approximately 26,000 financial firms;
  • Regulate the prudential standards of some 23,000 firms;
  • Help firms keep to the rules and maintain high conduct standards;
  • Intervene if firms treat consumers unfairly;
  • Protect consumers.

FCA Supervision

Firms are categorised as C1, C2, C3 or C4, where C1 relates to large banking and insurance groups with very large number of retail customers and C4 covers smaller firms including most intermediaries.

The FCA will be concentrating on looking after the Consumer and in doing so, will be maintaining as well as developing the Treating Customers Fairly (TCF) initiative set up by its predecessor.  This approach forms part of the FCA’s supervision framework where they will assess a firm’s business model, governance and culture, expecting TCF to be embedded and at the heart of how the business operates.

Other aspects of FCA supervision include a reaction to events or issues, either after happening or emerging and continued thematic work on topics identified for further investigation.  The FCA also has new legal powers to intervene earlier than its predecessor where products or promotions might be seen as causing harm to the Consumer.

Other organisations

The FCA remains supported by other bodies within the regulatory framework:

  • Financial Ombudsman Service (FOS) - set up to resolve individual disputes between consumers and financial businesses;
  • Financial Services Compensation Scheme (FSCS) - the compensation fund of last resort for customers of authorised financial services firms;
  • Money Advice Service (MAS) - responsible for helping consumers understand financial services in the UK.

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