On 15 July 2021, the FCA published its long-awaited annual Business Plan for 2021-22. The new Plan restates the FCA’s aim to become a forward-looking, proactive regulator under the leadership of Nikhil Rathi and sets out the organisation’s priorities over the next 1-5 years.
There has been a clear shift away from the very defined and detailed ‘sector’ focus seen in previous years to achieving key outcomes across all financial services markets and sectors. This shift in approach appears to align with the regulator’s stated commitment to becoming more innovative, assertive and adaptive. Consequently, the FCA’s new role will involve its willingness to test the limits of its powers, keeping up with rapid changes in technology, modernising its use of data and technology to identify and react to harm quickly.
This month’s newsletter summarises the key priorities and themes, including some of the regulator’s upcoming initiatives from the business plan.
The FCA plans for a greater focus on regulatory authorisations, with a more robust gateway for new firms. A more rigid, more straightforward application process will be implemented, including increased scrutiny of firms’ financials and business models. One of the FCA’s plans for this includes a ‘regulatory ‘nursery’ in which newly authorised firms will be subject to increased oversight to identify potential harm early.
The FCA wants to ensure that firms provide better outcomes for consumers and consumers are better able to make informed decisions by targeting five specific outcomes:
- Enabling consumers to make effective decisions investment by strengthening the rules for firms that approve financial promotions, particularly for high-risk investments. Upcoming work includes launching a 5-year campaign to inform consumers about high-risk investments (including protections) and publishing a dedicated Consumer Investment Strategy document.
- Ensuring consumer credit markets work well by establishing measures for borrowers to be treated fairly and get affordable products that meet their needs. This will involve monitoring firm support to customers in financial difficulty and reviewing rules on debt advice.
- Making payments safe and accessible. The FCA will work with key stakeholders to maintain access to cash, and the government will work with the regulator to develop additional legislation in the payments space.
- Delivering fair value in a digital age by ensuring all customers, especially those with vulnerability characteristics, have fair access to good value products and services.
- Progressing proposals for a new Consumer Duty to raise standards in firms’ treatment of consumers.
In wholesale markets, with a focus on market integrity, the FCA’s priorities include:
- Following the UK’s exit from the EU, the regulator further develops plans to improve primary and secondary markets while maintaining high standards and internationally consistent standards equivalent to those in the EU.
- Continuing to support the smooth transition away from sterling LIBOR to alternative risk-free rates.
- Tackling market abuse and financial crime by continuing to monitor transaction data reported to the FCA, assessing STORs and pursuing whistle-blowing reports and other intelligence.
- Improving asset management and non-bank finance to ensure firms offer products that provide value, meet investors’ needs and provide appropriate protections.
- Increased supervision of Appointed Representatives operating in wholesale markets and intends to consult on changes to the Appointed Representatives regime.
Finally, the FCA will seek to effect changes across the sector in the following key areas:
- Diversity and inclusion
- Environmental, Social and Governance (ESG)
- International Cooperation supervisors and global standard-setting bodies
- Financial resilience and resolution
- Operational resilience