On 7 April 2022, the FCA issued two key documents. The first was their three-year strategy to improve outcomes, the second was the FCA Business Plan for 2022/23.
Below we outline some of the key messages and provide our thoughts on what this means for firms.
Strategy Document – 2022/25
Let’s start with the new Strategy Document 2022-25.
Over the next three years, the FCA are strengthening their focus on:
1. Reducing and preventing serious harm
2. Setting and testing higher standards
3. Promoting competition
The strapline is still there: a more innovative, more assertive, more adaptive regulator.
The FCA still plan on being tougher on firms who want authorisation to operate in the UK and will continue using data more systematically to supervise firms, utilising their enforcement and intervention powers where required in a more timely and agile way. A key focus of the strategy is shutting down problem firms, which do not meet basic regulatory standards. The FCA is recruiting 80 employees to work on the initiative, which will protect consumers from potential fraud, poor treatment and create a better market.
Rightly so, there is much self-reflection from the FCA, particularly concerning the ongoing transformation. The FCA’s data strategy is to be applauded however this is still in its infancy. Neither the industry nor the regulated community is yet to see the benefits of this critical initiative.
They have outlined a revised operating model to focus more on the problem and on results rather than being driven by processes. The FCA has taken a more holistic and outcomes-focused approach than has been seen previously. This and other documents issued since Nikhil Rathi, Chief Executive of the FCA, came to power highlight a change and greater focus on accountability within the FCA. This is to be welcomed.
The outcomes and metrics ensure focus and direction and enable the FCA to assess how well it is performing against its areas of strategic focus. The FCA statement accompanying the publication states that the regulator will, for the first time, hold itself accountable for published outcomes and performance metrics. Did someone say better late than never!?
For many in the industry, we also eagerly await the publication of the FCA Business Plan.
FCA Business Plan – 2022/23
This year the Business Plan should be read in conjunction with the Strategy document and the programme of work outlined in the Regulatory Initiatives Grid (published in November 2021) which gives details of FCA’s planned regulatory programme. For those familiar with the Regulatory Initiative Grid, there is little new news in the Business Plan.
Dealing with problem firms – removing firms who do not meet FCA minimum standards
Improving oversight of Appointed Representatives (ARs)
Reducing and preventing financial crime
Implementation of the new Consumer Duty
Ensuring financial promotions are clear, fair and not misleading
Testing a firm's resilience to inevitable operational disruptions
Shaping digital markets to achieve good outcomes
Additionally, the FCA has provided an update on its transition to a data-led regulator, its national locations strategy, and its ongoing commitment to improving its diversity and inclusion.
Considerations for firms
The FCA is clear in its outcomes focussed approach.
Its expectation of firms and individuals is that they follow the spirit of the rules and guidance, not just the letter.
The FCA has reiterated its intention to be a more assertive regulator. This comes out loud and clear in the Business Plan and aligns with the Board's desire to take ‘legal risk’ where its actions are intended to “prevent imminent consumer harm.”
The FCA has shifted its approach to focus more on outcomes. Many firms have been on this journey for some time. We would encourage firms to continue evolving their thinking to align to outcomes, which will increasingly be required as part of the implementation of the new Consumer Duty.
There is no new information on the Consumer Duty, however, the focus and importance the FCA places on the new Consumer Duty is obvious and forms a significant part of the FCA's future regulatory and supervisory approach.
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