Summary of FCA Strategy 2022 – 2025

Chief Executive, Nikhil Rathi has set out the FCA’s strategy in a short introduction to the “Our Strategy 2022-2025” publication. It explains how authorisation applicants and existing firms will face higher scrutiny, resulting in more intervention and enforcement which will focus on results and outcomes rather than processes.

The FCA will have 3 primary focal points over the next few years:

1. Reducing and preventing serious harm to consumers
   The use of data to assess problems as they arise, enabling the FCA to act sooner and hopefully prevent harm from occurring.

1. Setting and testing higher standards
   The outcomes-based approach will rely on implementation of various measures including the new Consumer Duty regulations.
2. Promoting competition and positive change
   The FCA has recently introduced new listing reforms and is building a scalebox (sandbox).

Focus 1: Reducing and preventing serious harm.

Firms unable to meet minimum standards implemented by the FCA continue to put consumer as risk, and will be removed from the market.

Improving firm conduct measures, targeted consideration of capital requirements and early intervention will attempt to prevent systemic harm.

Firm failure is a constant risk, which will be addressed by reviewing at the authorisation gateway and through appropriate early oversight. Firms will be expected to have strong arrangements to protect client money and assets and to be able to recover from disruptions.

Appointed Representatives carry-on regulated activity under the responsibility of an authorised firm. The FCA will clarify and strengthen the responsibilities and expectations of principals and increase the amount and timeliness of information received on principals and their AR’s. The FCA will focus on principals and AR’s effective oversight, particularly in respect of their business models.

The FCA will focus on detection of fraud, money laundering, sanction evasion and terrorist financing to improve market integrity. Subsequent sharing of intelligence with partners and the removal of FCA regulated fraudsters from the financial system will be pursued.

Assertive action on market abuse will be achieved by enforcing issuers of securities to make more timely and accurate disclosures, thus improving transparency in financial markets.

Focus 2: Setting and testing higher standards.

The new Consumer Duty has been introduced to address the concerns surrounding poor treatment of consumers. The FCA will further target customer vulnerability and reducing harmful outcomes for this group.

Firms must meet higher standards for financial promotions in addition to publishing more risk warnings. By banning incentives to invest, and greater monitoring of certain cryptoassets promotions will further set higher standards.

The FCA has committed to building trust in the market for sustainable investment products, supporting integrity in the ESG ecosystem, encouraging improvements in ESG data, promoting well-designed, credible, and effective net-zero transition plans, consulting on a new regulatory framework and data requirements to accelerate the pace of change on diversity and inclusion.

New rules and guidance will strengthen operational resilience. Firms’ operational resilience, business continuity and incident response plans, cyber security and third-party management will be assessed and tested.

Focus 3: Promoting competition and positive change.

Changes to the legislative framework the FCA currently operates may change with a proposed new statutory secondary objective on growth and competitiveness.

The FCA will consider reform rules for when a prospectus is required and its contents, transparency in equity markets, and the creation of a new sandbox for new markets models of infrastructure models.

The FCA will work proactively with the Digital Regulation Cooperation Forum (DRCF) and the Competition and Markets Authority (Ofcom) and the Information Commissioner’s Office (ICO) to respond to technological developments, and provide help with digital regulatory policy. 

Further detailed information can be found in the 2022-23 business plan