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The FCA …where are we now..?

In April last year the UK welcomed the introduction of a new regulatory structure governed by new principles and said to have been enhanced by new powers with some hesitation. On turning one, we look at the FCA’s first year in action, the extent to which it has succeeded in distinguishing itself from its predecessor and what financial advisors and the wider industry can expect to see in the year ahead.

The First Year

On 31 March 2014 the FCA released its Business Plan for 2014/15. Its firm position is that it has made good progress in advancing its objectives, embedding consumer protection, market integrity and the promotion of competition. From inception in April last year it has issued fines in excess of £543,000,000. This, along with the multiple warning notices and bans which have also been issued, demonstrate the firm approach which is being adopted against those who fall foul of regulation.

The FCA has also stepped up its probe on “boiler room” fraud, conducting a record 20 dawn raids in 2013, where, under warrant and in the presence of police officers, the FCA has carried our searches of businesses and individuals’ premises. Coupled with investigations into Libor and Forex activity and insider dealing and market misconduct arrests the FCA has demonstrated its focus on taking on an increasing number of criminal cases where necessary to do so.    

Reviews, guidance and rules have also been launched in quick succession over the year, with a view to forming a robust framework and implementing the new regime without delay. Although these steps demonstrate the efforts being made by the regulator to firmly put in place a new regime and structure, the impact of some of these changes is yet to be seen and there will need to be a focus on implementation in the year ahead in order for changes to take full effect.

Whilst in certain areas there is clear evidence of progress having been made, some IFAs in the industry are of the view that when dealing with mis-selling and other misbehaviour in particular, the FCA continues to adopt a reactive rather than proactive approach which results in action being taken only when it is too late.  

The introduction of the “super-complaint” which was expected to address exactly such concerns and intended to strengthen the voice of financial consumers has been somewhat underwhelming to date. A super complaint is a complaint by a designated consumer body alleging that features or a combination of features of the market for financial services in the UK is significantly damaging the interests of consumers.  Complaints are expected to cover issues arising from characteristics of certain financial products or services, as well as conduct of FCA authorised entities. Consumer bodies were given the opportunity to apply for designation which would entitle them to bring super complaints to the FCA’s attention last year. Although the industry expected a much greater uptake, the only organisations given super-complainant status are; Which?; Consumer Council Northern Island; Citizens Advice and the Federation of Small Businesses. Some may be surprised that so few have been granted with super-complainant status and the fact that the FCA has advised us that no super-complaints have been received thus far. On the other hand, others view this as a positive outcome, as those appointed are known and experienced establishments which will be more focused and less likely to progress any unfounded and/or unsubstantiated complaints. 

The Year Ahead

Satisfied that the first year has seen the concept of good conduct prioritised in businesses across the City, the FCA is keen for all firms to continue to place the interests of consumers at the heart of their business models in the FCA’s second year.

The focus on the year ahead will be to continue to broaden its regulatory scope as well as implement the Financial Services (Banking Reform) Act 2013 which is said to introduce greater accountability and transparency across the industry by changing the way in which authorised persons will operate.

Compensating consumers following the PPI and interest rate hedging product mis-selling scandals remains a priority and with a view to avoiding similar scandals going forward it intends to ensure that key reforms in the investment advice and mortgages market are realised to their full effect.

The key message in the FCA business plan 2014/15 in relation overcoming mis-selling scandals is; “We will continue to embed our risk-based supervision model through proactive structured assessment of firms, event-driven work (i.e. dealing with emerging problems) and thematic reviews. These will be on sectors or products that may put consumers at risk, or on areas where we believe market participants are conducting themselves in ways that may threaten the integrity of markets.”

Although hopeful that the necessary framework and controls have been put in place to cut the risk or wholesale mis-selling and other scandals arising in the future, implementation will continue to be the true test for the year ahead.


For further information please contact Charlotte Adol, Senior Solicitor on 0207 280 8925.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.