On 17 April, the Financial Conduct Authority (FCA) has published its Business Plan 2019/20, which sets out the FCA’s main areas of regulatory focus for the year ahead.
The FCA states that its immediate priority is supporting a smooth transition post-Brexit, and ensuring that the withdrawal from the EU is implemented in a way that delivers on the FCA’s operational objectives (i.e. market integrity, consumer protection, and competition).
The other cross-sector priorities are stated as:
- EU Withdrawal and International engagement
- Firms’ culture and governance, which includes supporting culture transformation within financial services
- Operational resilience, including outsourcing to third party service providers
- Financial crime and anti-money laundering (AML)
- Fair treatment of existing customers
- Innovation, data, and data ethics
- Demographic change, and intergenerational differences
- The future of regulation
- A review of costs/benefits of regulation for smaller firms
Sector priorities are across:
- Investment management, with the implementation of new requirements for asset managers, and further assessment of Packaged Retail and Insurance-based Investment Products (PRIIPs) requirements on the agenda
- Retail lending and final proposals to reform overdraft markets
- Pension and retirement income
- Retail investments, with further review of advice suitability and rules on Contracts for Difference (CFDs)
- Retail banking
- General insurance and protection, and publication of findings from the General Insurance Distribution review
- Wholesale financial markets , which includes overseeing compliance with the Market Abuse Regulation and MiFID legislation
Strategic challenges, where the FCA states it wants to anticipate and influence market development, are in relation to:
- Innovation, data, and data ethics
- Demographic change
- Future of regulation
The research agenda, which sets out broad areas of research for 2019/20 relevant to the FCA’s mission, includes:
- Household finance, and consumer behaviour
- Securities markets: microstructure, integrity, and stability
- Competition, innovation, and firm behaviour and culture
- Technology, big data, and artificial intelligence
- Regulatory efficiency and effectiveness
The FCA states that it is keen to engage with academics, and to combine economics, statistics, behavioural science, and market data and intelligence.
In the introduction to the Business Plan, Andrew Bailey, FCA’s CEO, writes:
“Financial services and consumer needs are evolving rapidly. We have committed to ensuring that our regulation keeps pace. This Business Plan pinpoints the steps we are taking to ensure the way we regulate maximises our effectiveness while minimising the costs to firms and, ultimately, consumers. We are committed to ensuring both the strategic direction of financial regulation and our operational response delivers a more dynamic, agile and efficient environment for UK consumers and firms.”
Annex 1 to the Business Plan includes an update on market-based activities, which includes publication types and timings. It is noted that by the beginning of 2020 a Discussion Paper to review the FCA Principles for Business is expected.
This Business Plan indicates that the FCA has a challenging workload, and confirms that:
- Managing change in a global market
- Promoting accountability and culture
- Protecting consumers from harm, particularly the vulnerable are at the core of the FCA’s work.
Why is the FCA Business Plan important to you?
It gives the industry (over 59,000 firms and 152,000 approved persons) better understanding of what they can expect from the FCA in the coming year. Although culture and governance, financial crime and AML, operational resilience and fair treatment of existing customers have been priorities for a number of years, they are likely to continue as such.
Compliance officers and boards should engage in ensuring their firms meet FCA requirements and expectations. An initial to-do-list could include initiatives and steps aiming to:
- Demonstrate awareness of the FCA expectations on culture, reflect this in day-to-day practices, and make specific improvements where shortcomings are identified
- Ensure a smooth implementation of the Senior Managers’ Certification Regime
- Confirm the adequacy and effectiveness of internal systems and measures to prevent financial crime, keeping in mind the on-going debate around corporate criminal responsibility for economic crime
- A review of internal arrangements related to leadership, people management, and remuneration practices
- Consider the provision of information to prospective and current customers, and whether customers can easily compare products and services, and switch between them
- Ensure a safe, ethical, and compliant use of data, underpinned by transparency and accountability
- Review the assessment of suitability for advisory services, and disclosures
- Test cyber resilience, work on weaknesses in identifying and detecting cyberattacks, and (possibly) compare with their peers
Should you wish to discuss any of the points covered in this blog, and get a better understanding on how to comply with FCA expectations, please do not hesitate to contact us.