Yudu - Journey to the FCA

ENSURING FIRMS CONTINUE TO MEET OUR STANDARDS

This approach is driven by what we call sector risk assessment, which looks at what is currently and prospectively causing poor outcomes for consumers and market participants. It will use data analysis, market intelligence and input from the firm assessment process, as well as working closely with our new Policy, Risk and Research area (see Chapter 5).

1.The Firm Systematic Framework (FSF) This is designed to assess a firm’s conduct risk, and aims to answer the question:

Are the interests of customers and market integrity at the heart of how the firm is run?

It will do this by using a common framework across all sectors, which is targeted to the type of firm. The common features involve:

• Business model and strategy analysis (BMSA): to give a view on how sustainable the business would be in respect of conduct, and of where future risks might lie – linking to the Business Model Threshold Condition check we will carry out at the authorisations stage.

• Assessment of how the firm embeds fair treatment of customers and ensures market integrity in the way it conducts its business. The assessment has four modules:

– governance and culture – to assess how effectively a firm identifies, manages and reduces conduct risks;

– product design – to determine whether a firm’s products or services meet customer needs and are targeted accordingly;

– sales or transaction processes – to assess firms’ systems and controls; and

– post-sales/services and transaction handling – to assess how effectively afirm ensures its customers are treated fairly after the point of sale, service or transaction, including complaints handling.

• Deciding what actions are required by the firm to address issues we have identified.

• Communication to the firm, setting out the assessment and actions required.

The assessments will help us come to a view about the extent to which the firm embeds fair treatment of customers and integrity in the way it is run. This, at the most intensive end of assessment, covers the product lifespan from design through to sales and after-sales handling. The assessment of governance and culture will be crucial, as these are key factors that drive whether a firm treats its customers fairly and can achieve the consumer outcomes set out through the TCF initiative.

For C1s, we will carry out firm-by-firm business model and strategy analysis, in the context of the market they operate in. For C2s, we will take a group of similar firms in the same industry sector to identify common risks. For C3s, we will look at a sample of firms’ business models across a sector.

[GRAPHIC]

Stage 1 Are the interests of customers and market integrity at the heart of how the firm is run?

Governance and culture – to assess how effectively a firm identifies, manages and reduces conduct risks

Product design –to determine whether a firm’s products or services meet customer needs and are targeted accordingly

Sales processes – to assess firms’ systems and controls

Stage 2

Post-sales/services and transaction handling – to assess how effectively a firm ensures its customers are treated fairly after the point of sale, service or transaction, including complaints handling

THE

Foreword by

John Griffith-Jones Introduction by

Martin Wheatley: Our vision for the Financial Conduct Authority

Chapter 1:

The creation of the FCA: Spotlight on some of our new powers

Chapter 2: Protecting

the perimeter Chapter 3:

Ensuring firms continue to meet our standards

Click HERE to give us your feedback on this Chapter

Chapter 4:

Taking action against firms that do not meet our standards

Chapter 5: Building our

understanding of the markets

Chapter 6:

Maintaining effective relationships

Chapter 7:

Accountability, transparency and measuring our success

Annex A:

Specific questions for consultation

THE