Today (2 July) saw the Financial Conduct Authority publish its annual report for 2014-2015, detailing everything from executive pay to progress with adviser communications.
Here we dig a little bit deeper into the 140-odd page document to reveal some of the points you might have missed on first glance.
1. The facts and figures
The FCA made a loss of £58.3m in the 12 months to 31 March 2015, compared to a £29.3m loss in 2013/14.
It stated that this was in line with expectations and blamed it on consumer credit costs and losses made by its staff defined benefit pension scheme.
The scheme in question made an actuarial loss of £33.4m, compared with £26.4m in 2013/14, after its discount rate dropped to 3.40 per cent from 4.40 per cent during the year.
The City watchdog’s deficit stands at £24.9m, caused by the timing delay between set-up costs of £30m for consumer credit activities, according to the report, along with the recovery of these over a 10-year period.
Income from fines rose significantly to £1.42bn in 2014/15, from £432.1m in 2013/14, although £1.36bn of this was paid to the Treasury, with £42.6m going to the regulator to cover enforcement costs, which will apparently be returned to fee payers in the following year.
2. Executive pay
Of course, this brings us on to the thorny issue of pay for the top dogs, something especially painful given the recent 10 per cent rise in adviser’s regulatory fees.
As reported earlier, FCA chief executive Martin Wheatley was paid over £700,000 for the year ending March 31, compared to £610,000 last year - the increase being mainly down to him waiving his bonus following the closed-book scandal in 2014.
Former director of supervision Clive Adamson, who resigned in January after being embroiled in same the life and pensions press briefing debacle, received a total pay package of £438,000 last year, up from £364,000 over the same period in 2014.
Meanwhile, head of enforcement Tracey McDermott was paid £475,000 during the last 15 months, up from £329,000 during the last period.
Mr Wheatley’s statement in the annual report noted that the regulator will continue to invest in its staff, “as having the best people with the right skills is crucial to us meeting our objectives”, adding that in terms of the Davis review that followed the closed book issue, the regulator has evolved to better meet challenges and expectations.
3. Protecting consumers
The regulator reported that it had been working with various agencies to tackle risks to consumers through enforcement actions and awareness campaigns.
“We are targeting unauthorised pension introducers, who appear to play an integral role in pension transfers to high-risk unregulated assets,” the report read, adding that it has assisted with criminal investigations conducted by partner agencies and continues to identify opportunities for joint operations targeting “pension fraudsters”.
The FCA noted that it has continued to work on understanding the behaviour of consumers, in order to tackle the firms and individuals who have abused consumer trust, prioritising improvements in consumer credit, insurance and savings.
4. Focus on market integrity
Several in-depth reviews conducted last year provided clear findings and recommendations for addressing cultural and behavioural issues in markets, according to the report.
Risks examined in the wholesale markets included conflicts of interest; information flows; electronic trading platforms; trading culture; effectiveness of front office supervision; front office controls; automaton of trade execution and financial crime.
The Fair and Effective Markets Review – a joint project between the FCA, the Bank of England and the Treasury – increased the number of benchmarks that come under the FCA’s regulatory scope, while wider EU policy implemented a series of European Directives that aim to build a European-wide model of regulation.
5. Increased communications with advisers
The FCA stated that over the year it has increased communications with advisers through conferences and seminars, adding that it considers this a particularly effective method of engagement and has received positive feedback from participants.
“Over the last year we have been involved in many external enagagements, for example compliance workshops, risk awareness workshops and various conferences, which has seen us present to around 13,000 firms, helping to make our expectations of them clear.”
ruth.gillbe@ft.com
