Financial Conduct Authority Business Plan for 2021 /22
The Financial Conduct Authority have published their Business Plan for 2021 / 22. The plan sets out the Regulator’s rationale for major changes to how it regulates. The FCA says that its objectives remain constant, but that it must adapt to a quickly changing world – including new technologies, customer needs and how they engage with the economy.
Acknowledging the effects of major events over the previous years – Coronavirus, Brexit, technology advances and the drive to a greener economy, the FCA says it aims to become more proactive: by being more innovative in its use of data and technology to act decisively, being more assertive and testing the limits of its powers and being more adaptive in learning quickly and then adapting its approach.
This new approach will see the FCA take more risks to act quickly to stop harms where they are identified. To do this, it will shortly consult on proposals to streamline decisions about authorisation and some supervisory and enforcement actions.
These elements will be supported by three focus points for 2021/22 – to take forward the four consumer priorities and the new Consumer duty, to enhance the supervisory approach to specific issues, and to focus on 6 of the most important cross-market issues, fraud, financial resilience, operational resilience, improving diversity and inclusion, enabling a more sustainable financial future and international cooperation.
From an enforcement perspective, the FCA will aim to ‘intervene in real-time more often to prevent harm to consumers and market integrity’, including potentially turning down more applications for authorisation, and through ‘taking assertive enforcement action where there is serious misconduct’, and in acting quickly and assertively to stop immediate harm, and imposing sanctions to punish and deter.
They will use new data technology and capabilities to find and stop harms as they happen, prioritising issues which will have the greatest positive impact through stopping firms from trading if the issue warrants it, through imposing penalties, or securing redress for consumers.
The FCA suggests that this more assertive approach should reduce the overall costs of dealing with both firms and individuals that fail to meet the standards expected.
A new ‘use it or lose it’ exercise will pilot the removal of firm permission where the firm is not carrying out regulated activities, which the FCA suggests might also limit the ‘halo effect’ where a firm’s unregulated activities are given a façade of trustworthiness by virtue of the firm having permission to undertake regulated activities.
Another key area is information provided to consumers. Using the core principle that consumers should take responsibility for their choices and decisions, the FCA aim to develop customers’ ability to make these choices by driving an improvement in the information they publish for consumers.
One of the ways that the FCA aims to enable consumers to make effective financial decisions is in improving how they ‘detect, triage, disrupt and take enforcement action to help reduce fraud and harm’. Citing the success of the ScamSmart campaign, the regulator will roll-out a new multi-year investment harms campaign. It will also publish more data about firms, which it suggests will influence firm conduct. There will also shortly be a consultation on relevant Handbook changes resulting from new legislation on approving financial promotions, which will see firms being required to pass a new regulatory gateway before they can approve financial promotions for unauthorised persons.
To meet the aim of ensuring that consumer credit markets work well, a key area that has only increased in importance over the previous year, the regulator wants to achieve four outcomes – ensuring that affordable credit is available to consumers, that they do not become over-indebted with credit they cannot afford, that consumers can find products to meet their needs, and that consumers are able to take control of their debt at an early stage when they fall into financial difficulty.
The FCA will continue to monitor how firms provide tailored support for those in financial difficulty, but will also undertake in-depth work to assess whether consumers are getting fair and appropriate outcomes, including customers with characteristics of vulnerability and will take targeted action against firms that do not meet expectations.
The Regulator has also identified the potential for significant harm resulting from advice given by a small sample of firms that package debt, and so will consider future policy changes after an investigation over the summer.
Within the high-cost credit market, the focus will be on ensuring firms properly assess consumers’ ability to repay and that firms treat those who fall into arrears fairly when collecting their debts.
Wholesale market priorities include work to review the FCA’s rules in primary and secondary markets for better tailoring to the UK, LIBOR transition, fair value in asset management and non-bank finance, enabling effective choices in pensions and limiting problems relating to Appointed Representatives. Priorities across all markets include an enhanced fraud strategy, a strategy to enable firms that will not affect market stability that are not financially resilient to fail in an orderly manner, and to encourage operational resilience leading to a reduction in incidents and the level of harm they cause.