In a paper detailing FCA responses to industry feedback on its ‘Journey to the FCA’ document published in October 2012, the regulator said although it has previously confirmed the process it will follow when deciding whether to publish details of warning notices, it is rethinking this following a further consultation between March to June 2013.
The watchdog had said in March it would “normally” publish information on warning notices unless a firm could prove it would likely lose staff, or even go under altogether, as a result. Reputational damage alone would not prevent publication as “this is an inevitable consequence of publication”, it said.
However, a strong response to this latest consultation paper saw widespread concern in the industry over the risks of reputational damage to those who might later be found not to be in breach of FCA rules.
The FCA said it expects to publish its final policy later this year.
The response document published by the regulator also revealed its approach to several other elements of the stated post-Financial Services Authority approach that have been the subject of industry concern.
FCA to investigate ‘value for money’
The FCA clarified its position to ‘value for money’ for consumers, in response to feedback that its plans would undermine free market principles and set it up as a ‘price regulator’.
The FCA revealed that while it does not expect to set price controls in the same way as a utility regulator, it is ‘investigating’ this area as part of its competition.
It said it will be “very interested” in pricing and margins as an “investigative part of its competitions mandate” and will regularly collect this information in market studies and other work.
The regulator emphasised that, in certain circumstances, interventions over value for money may be “useful to minimise harm to consumers”. This follows on from calls from consumer organisations for the watchdog to look more closely at pricing and charging.
FCA to develop ‘value for money’ framework for itself
There has been much written recently about regulatory fees, with the advisory sector enduring another 13 per cent year-on-year increase after the April switchover from the FSA.
Firms said in their feedback would like to better dialogue about how regulatory bodies set fees and the FCA said it has discussed with its stakeholders the possible alternatives to the current model for recovering the costs of regulation.
The FCA said it is aiming to produce detailed proposals in autumn 2013 - and that it is also seeking to develop a “value for money” framework, which will be published in due course.
It added in its response that the value it delivers to stakeholders will be a “key measure” of its performance as a regulator.
The National Audit Office is currently conducting a review into the FCA’s value for money, which is due in early 2014.
Pre-approvals
The FCA document also saw it re-iterate its dismissal of industry calls for a general pre-approval approach, after intermediaries in particular said this would make their lives easier.
While the regulator stated it does authorise some products, such as undertakings for collective investment in transferable securities (Ucits) and accepts that a market-wide pre-approval option might help to “control risks and mitigate consumer harm”. However, it said it questions whether it is “practicable, efficient or desirable to do so”.
The city watchdog stated that it does recognise and support industry initiatives such as the industry-led Simple Products Steering Group, which published its final report in March 2013.
The report recommends the introduction of a set of simple products standards and a small suite of simple savings and protection insurance products. The FCA said it supports an approach where firms choose to have their products independently accredited by a body such as the British Standards Institution.
Skilled persons
The FCA responded to criticism over new powers to appoint skilled persons directly to report on matters within a firm, with the costs of that being met by that firm. The powers have proven controversial due to figures showing the use of such powers and therefore the cost to firms is rising.
The FCA described this new tool as “valuable”, as it allows the FCA to directly appoint skilled persons where, “a greater degree of control and oversight is needed due to the sensitive nature of the matter concerned”.
The regulator said it uses this supervisory tool to help meet specific supervisory objectives, particularly as this puts the responsibility on firms to deal with issues themselves.
However, the FCA warned this will “not be a substitute for regulatory judgement... which will continue to be the responsibility of our supervisors”.
Competition
The regulator said it is currently undertaking a review of competition-related risks in financial services markets and in early autumn 2013 it will be announcing in which markets it will be launching market studies.
The regulator has also launched its first market study, looking at competition in sales of add-on general insurance products. The FCA expects to publish its results by early 2014.
