The Approach of the FCA

As will be known, the FSA is scheduled to disappear at the end of next year as the UK moves to a new model of regulation (for a reminder of the changes please see Regulatory Roundup 27).

The vast majority of firms (the paper quotes 24,500: page 11 provides an analysis by business activity) will fall under the Financial Conduct Authority (FCA) for both conduct and prudential supervision, so the release by the FSA of the FCA’s approach to regulation will be of interest to most firms.

We are promised that the FCA will intervene earlier before risk crystallises; have greater powers in product intervention; and be able to demand immediate withdrawal of misleading financial promotions. It is interesting to note that the FCA will focus more closely on wholesale conduct than the FSA.

The new regulator will have a single strategic objective: to protect and enhance confidence in the UK financial system. It must also have regard to six regulatory principles(chapter 3 of the paper provides further detail).To this end, the intention is that the FCA will build upon the FSA’s ‘credible deterrence’ approach in strengthening the enforcement function to achieve better outcomes for consumers and across markets. The FCA will place particular focus on firms’ culture as a potential root cause of poor outcomes for retail and wholesale consumers and will expect governing bodies to set and maintain a culture that provides an appropriate degree of protection for consumers.

We are told that the purpose of the paper is to ‘inform public debate and facilitate stakeholder engagement’ and as such the FSA welcomes comments by 1 September (contact details are on page 3).