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FCA publishes business plan reminding firms of focus areas

Bank of England exterior

Bank of England exterior, March 2024. Image by Peter Dazeley via Getty Images.

The UK’s Financial Conduct Authority (FCA) has published its business plan for 2024-25, providing an accessible and useful reminder to firms in the financial sector of the FCA’s ongoing regulatory focus areas, an expert has said.

The plan re-states the FCA’s 13 public commitments which will form the basis for its work over the coming financial year, focusing on aiming to reduce and prevent financial crime, putting the needs of consumers first, and strengthening the UK’s position in global wholesale markets.

Jonathan Cavill, financial services and regulation expert at Pinsent Masons, said: “Firms can review almost at a glance the FCA’s ongoing work on its commitments. The FCA’s business plan for 2024-25 is the final year in the regulator’s 3-year strategy, a flagship programme launched by Nikhil Rathi in 2022 focusing on regulatory results and looking across a multi-year timeframe.”

The FCA introduced its 13 commitments in its 2022 strategy with the recent business plan setting out ongoing work for each commitment. The FCA has now identified three priority areas for the coming year: reducing and preventing financial crime, putting consumers’ needs first, and strengthening the UK’s position in global wholesale markets.

“For these three commitments, shown in a ‘card index’ style format, the business plan shows not only ongoing work as it does for all the other commitments, but also the outcomes the FCA wants to achieve and new work it will start in the 2024-25 timeframe,” Cavill said.

Commitment 1, reducing and preventing financial crime, flags a data-led approach to identifying potential harm with the FCA continuing to act assertively on scams and fraudulent websites. According to the regulator, the financial services sector is to take the lead on this although other sectors have a part to play as well. Outcomes set out include slowing the growth of investment and payment fraud and reducing money laundering.

As well as deploying its powers against those committing and enabling financial crime, the FCA’s continuing work within this commitment includes focusing on proactive assessment of anti-money laundering systems and controls for firms considered to be higher-risk; using data to identify firms that could be susceptible to receiving proceeds of crime to ensure they do more to stop the movement of such funds; and strengthening supervision of firms’ sanctions systems and controls. New work involves increasing investment in FCA systems, so data is used more effectively in tackling financial crime.

Commitment 2, putting consumers’ needs first, reiterates the outcomes the FCA seeks under its consumer duty – including to act in good faith towards consumers, to avoid causing consumers foreseeable harm, and to enable and support consumers to pursue their financial objectives. The FCA also wants to see appropriate access to financial services being maintained with firms providing support for consumers to manage their debts. The plan notes the FCA’s wider work in this area in respect of cost of living, financial inclusion, access to cash and addressing consumer difficulties in accessing financial products and services. This year, there will be a review of how firms treat customers in vulnerable circumstances. The FCA will look at unit-linked pensions and long-term savings products, with a particular focus on charging transparency in value chains, and how quickly insurers respond to claims.

In commitment 3 – strengthening the UK’s position in global wholesale markets – the FCA states that it aims to make the UK “one of the top markets of choice” where innovation is encouraged and has a regulatory framework that evolves with opportunities and risks. As part of this, the FCA will begin work on supporting the industry on its transition to ‘T+1 settlement’ of trades this year. Ongoing work includes the FCA’s primary markets reform programme, concluding the Listing Regime review, proposals for a new public offer and admission to trading regime, consulting on regulatory changes so there can be more options for how to pay for investment research, consulting on the commodity position limits regime, finalising the design and implementation of a consolidated tape for bonds, and confirming final rules for the Overseas Fund Regime applications gateway. The FCA is also working with Bank of England on the Digital Securities Sandbox, which is due to open for applications in 2024.

The fourth priority highlighted by the FCA last year was preparing the financial services industry for the future with a focus on implementing the Treasury’s Future Regulatory Framework – now called the Smarter Regulatory Framework. According to the new business plan, the FCA considers its work in this area is significantly progressed although implementation work remains to be done. This ongoing work, as the FCA explains, includes moving firm-facing requirements to regulators’ rulebooks from legislation which, until the end of last year, was called “retained EU law” but is now termed “assimilated law”.

Cavill said: “This work is a key part of putting in place the new regulatory regime for financial services in the UK, post-Brexit. The government is using powers under the Financial Services and Markets Act 2023 to repeal assimilated law so it can be replaced with regulatory rules, and rewritten as necessary, for tailoring requirements to the UK market.”

Other FCA workstreams in respect of changes the Financial Services and Markets Act made to the regulatory framework include the FCA embedding its new international competitiveness and growth objective, and requirements on the regulator in respect of cost benefit analysis, reviewing its rules and accountability.

Other work commitments in the business plan include improving the redress framework, dealing with problem firms, the FCA’s environmental, social and governance priorities, and improving the oversight by principals of their appointed representatives. The FCA’s work towards enabling consumers to help themselves includes ongoing “robust” assessment of applicants seeking permission to approve financial promotions for unauthorised firms, using new data sources and acting swiftly against authorised firms issuing and approving non-compliant promotions, as well as ongoing consumer awareness campaigns and work with social media platforms and search engines. The FCA will also be publishing a response to last year’s advice-guidance boundary review.

Nicholas Kamlish, financial regulation expert at Pinsent Masons, said: “A notable aspect of the FCA’s approach to its 3-year strategy and business plans has been the regulator’s more assertive approach to securing market integrity and tackling harm to consumers. This has been bolstered by its investment in early detection and removal of scams, misleading promotions and problem firms from the market, as well as the emphasis on firms’ ability and willingness to pay redress.”

“The business plan for 2024–25 shows areas that are likely to come under the FCA’s spotlight,” he added.

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