REGULATORY UPDATE
and help us respond more quickly to market needs.” The hope is that if firms consistently focus on delivering good outcomes, this will result in diminished need for regulatory changes and reduce the long-term cost of regulation.
Tougher: The FCA intends to be tougher on firms who seek authorisation to operate in the UK. It is doing this by using data more systematically to ask firms under supervision more rigorous questions, using its enforcement and intervention powers more actively and pushing boundaries where required.
Consumer Duty and responsibility: While reiterating the need for consumers to take responsibility for choices and decisions, the FCA recognises that they need support due to a ‘knowledge imbalance’ between firms and consumers. Informed consumers are empowered consumers, and this, when combined with FCA action, drives up standards, it says. It cites the new Consumer Duty [finalised guidance published in July 2022, with rules coming into force on a phased basis in July 2023] as an affirmative programme to enhance the standard of care and customer service that firms will have to provide consumers.
The Strategy also highlights the importance of diversity and inclusion across the sector. This is relevant specifically for conduct considerations, which feeds into the betterment of UK markets as a whole. Initiatives will be supported by metrics to enable transparency and monitoring.
FOCUSES AND COMMITMENTS Commitments break down each focus into initiatives which will aid in the delivery of the focus objective.
Focus 1: Reducing and preventing serious harm The six commitments intended to be met as part of this focus:
1. dealing with problem firms 2. improving the redress framework 3. reducing harm from firm failure 4. improving oversight of appointed representatives
CISI.ORG/REVIEW
5. reducing and preventing financial crime
6. delivering assertive action on market abuse.
The commitments listed to support the reduction and prevention of serious harm can be framed as:
Prevent harm: Financial crime and market abuse are areas for continued consideration and the FCA will engage with firms, as well as develop its own capabilities and collaborative efforts with partner organisations such as the National Economic Crime Centre and the Office for Professional Body Anti-Money Laundering Supervision. The FCA also notes a continued commitment to improving the oversight of appointed representatives.
Reduce harm: The FCA will continue taking action against firms who are breaching threshold conditions, and ensuring firms are cancelling their unused permissions. It will also ensure authorised firms have policies in place to deal with failure (e.g. by embedding the Investment Firms Prudential Regime) and developing policies for cryptoasset regulation. And it wants to ensure redress remains a priority, for example with regards to claims management companies or complaints. Some examples of FCA actions taken
in this space include the creation of and recruitment into new roles to shut down problem firms that do not meet basic regulatory standards. The FCA will target those already authorised firms with the most potential to create harm. It will protect consumers from potential
This session on CISI TV provides an introduction to Consumer Duty, before concentrating on the key areas that firms should be considering.
cisi.org/consumer- duty
fraud and/or poor treatment, and create a better market, by harnessing data to assess problems and act on them more quickly, aiming to prevent harm from occurring in the first place. An example of this is the FCA focus
on the British Steel Pension Scheme (BSPS) defined benefit pension transfer mis-selling review and redress scheme and the examination of high-cost credit. On 31 March 2022 the FCA published proposals for a compensation scheme for BSPS members. Its consultation paper CP22/6 (closed 30 June 2022) proposes to deliver £71.2m of compensation to former BSPS members who received unsuitable advice to transfer out of their defined benefit pension between May 2016 and March 2018. Shortly before Christmas 2021, the
FCA set out expectations of firms who gave advice to BSPS members in a ‘Dear CEO’ letter. In a rushed policy statement (PS22/4), it imposed, in effect, a sector-wide asset retention applicable to all firms with five or more cases in the scope of a potential redress scheme. The FCA (ably assisted by the
Financial Services Compensation Scheme and Financial Ombudsman Service) has run a range of activities to support former BSPS members, including writing to 7,700 former BSPS members and holding face-to-face events. The political pressure is such that the FCA seems determined to compel a review, having failed to encourage ‘enough’ complaints.
Focus 2: Setting and testing higher standards The four commitments intended to
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