The Financial Conduct Authority has quantified the value of losses that it would consider to represent a case of ‘significant’ mis-selling that would require it to issue a public report under a new statutory test, with collective losses totalling more than £150m likely to trigger a response.
The FCA has today published its approach to investigating and reporting on regulatory failure as demanded by the Financial Services Act, in which it says a range of £30m to £150m would be likely to constitute adequate thresholds for requiring action.
It adds that anything above £150m would likely be seen as ‘significant’ and prompt it to publish a report, unless the losses are concentrated almost exclusively among “large or sophisticated financial firms”. Anything below £30m would be “unlikely” to meet the test, it continues.
Between £30m and £150m the FCA says it will consider other factors, such as the characteristics of the consumers concerned, the loss per consumer or the size of the market, when deciding whether the adverse effect is significant.
The FCA said that a range is most appropriate as it means that it can differentiate between different types of customers and markets.
For both individuals and firms, the trigger should be relative to the financial resources of those suffering the detriment. If consumers are firms - for example in wholesale markets - the threshold should be higher than if consumers are individuals, the FCA explains.
Within firms, the threshold should be set higher for large financial firms than for small nonfinancial businesses. For individuals, the threshold should be set higher for those with more wealth and/or financial sophistication.
