Recent FCA Updates - September 2021
In this article you'll find a summary of recent updates from the FCA and the impact of these on regulatory compliance.
FCA Chief Executive warns the Pandemic could have a bigger impact than the financial crisis
While appearing on the FCA’s podcast, Nikhil Rathi noted parallels between the financial crisis and the pandemic, particularly around “volatility in markets and the role of the financial sector in supporting the economy to recover from those crises.” Remarking that major issues on the horizon in the form of technological change, Brexit and climate change are also potentially challenging, Rathi suggested that these challenges offer real opportunities if the industry and the regulator get it right. He noted that the pandemic “caused considerable strain to household finances across the country” with FCA research showing that “over 4million more vulnerable people coming out of this pandemic whose lives have been impacted by what has happened”, and that as the economy recovers, the priority will be protecting consumers and supporting the economy.
Rathi was clear that he assesses the actions of the FCA to support consumers during the pandemic to have been the right route, and that it proves that the FCA can make a significant difference.
In this, then, Rathi seems keen to highlight that there is a big difference between this crisis and the last – the FCA will be proactive where the FSA was not, and will act in ways that it thinks will best keep the industry working during challenging times.
He also notes that the Regulator is open to “feedback” and will “listen and learn”.
2020/21 Enforcement Data
The FCA’s Annual Report shows that during the 2020/21 period, financial penalties decreased by just over 15% from the previous year. Case type data shows a clear decrease year on year in case movement in retail conduct, financial crime and market manipulation cases, while pensions and investment scams, retail lending and misleading statements remained roughly similar to the previous year. Ongoing unauthorised business cases increased during 2020/21.
Case outcomes changed slightly to those in previous years, with cancellation of permissions/withdrawal of approvals representing 72.8% of the total outcomes for the year, down from 81.1% during 2019/20. Fines remained roughly in line with previous years, representing 6.8% of total outcomes in 2020/21, compared to 6.9% in the previous year. The FCA note that “the majority of cancellation of permissions outcomes relate to consumer credit firms failing to pay fees or submit regulatory returns.”
Prohibitions increased during 2020/21, representing 10.2% of case outcomes compared to 5.5% in the previous year. The FCA can make an order to prohibit an individual from performing a specified function if they find that that individual is not fit and proper. A single case study appearing in the enforcement data focuses on the prohibition of an individual for non-financial misconduct, drawing attention to the FCA’s intention to take action against those who demonstrate a severe lack of integrity in breach of the Fit and Proper criteria, even when actions are not directly linked to financial services, with the Regulator noting that “we consider that financial advisers who demonstrate a propensity to abuse their position of power pose an inherent significant risk to the consumers they advise”.
FCA Decision Making Process – Consultation Paper
The FCA’s plans to shift how they make decisions are laid out in a new Consultation Paper. The process is billed as part of their Transformation Programme, which sets out their new approach to dealing with firms and individuals who do not meet their required standards.
To facilitate the faster response aim, the FCA will need to streamline their decision making and governance and so they want to move some decision making from the Regulatory Decisions Committee to the Executive. In practice, this means that some lower-level decisions will be made by staff, rather than by Committee, including imposing a new requirement or varying firm permissions; making a final decision on authorisation or approval; removal of permissions in straightforward cancellation cases and the decision to commence civil and criminal proceedings.
The RDC would then focus on contentious enforcement cases that would likely involve sanctions or disciplinary measures. The Consultation closes on 17 September and a Policy Statement is due for publication around November 2021.
Pre-Paid Funeral Plan Regulation
The FCA has made updates to its webpage setting out what funeral plan providers and intermediaries need to do before FCA regulation begins on 29 July 2022. The FCA has confirmed that there will be differences in their rules for providers – firms that enter into funeral plan contracts with consumers or carry out those contracts, and intermediaries – firms that advise on plans or arrange them, which can include funeral directors and will writers.
The webpage stresses the need to begin working towards regulation as soon as possible; any firm that is not authorised will not be able to continue doing business.
The new rules are set out in the FCA’s Policy Statement. Applications for authorisation will need to clearly show that the firm is ready, willing and organised to be authorised, meets the Threshold Conditions and show how management meets the FIT test. Poor quality applications or those with missing information will be returned.
To prepare, firms should also consider how the Senior Managers and Certification Regime will affect them. The Authorisations gateway opens on 1 September 2021. Firms wishing to apply should note that applications made after 1 November 2021 will be subject to a 40% fee increase.
Supporting Customers in Financial Difficulties
With the FCA’s focus on how the pandemic will affect the financial wellbeing of a significant proportion of UK adults, ensure that your staff are clear on the identification and support of customers in financial difficulties. Our dedicated course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers.
This online course, priced at just £15, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.firstname.lastname@example.org.