Although the recently published Financial Conduct Authority business plan does not contain any specific policy proposals, it does set the direction of travel that the regulator will take over the coming year.
Above all, it shows that the FCA has been listening to our industry. Encouragingly, many of the proposed areas of focus reflect recommendations and representations Pimfa has made to them on our industry’s behalf, particularly on issues we raised in our papers on the Future of Supervision and Regulation.
Effective oversight has been a major issue for us and the introduction of a more robust gateway for new businesses indicates a commitment to looking at companies more holistically, ensuring that, once authorised, they are not allowed to introduce harm into the market by the requirement for higher standards and more intensive interrogation of business models at the point of authorisation.
Post-authorisation, the FCA has committed to the introduction of regulatory nurseries to ensure that businesses remain compliant, enabling the regulator to identify potential harm much earlier on.
Better use of data was a key point of our Future of Supervision paper in early 2020 and part of the FCA’s proposed approach to improve the standard of supervision is to make better use of data and, in particular, that data that it already gathers from firms.
We expect the FCA’s data strategy to begin to show itself over the coming 12 months and this should manifest itself in the FCA being able to identify harm quicker, increasingly making data-collection systems more automated and building market intelligence in a way that has so far been difficult to achieve. We will input at regular intervals as these systems emerge.
We believe that the regulatory perimeter needs redefining. In our work supporting the Gloster review, as well as broader work around the Financial Services Compensation Scheme, we have consistently argued that, while there is scope for the FCA and government to look at extending their influence beyond the current perimeters, the regulator nevertheless needs to be emboldened to act in instances where consumer harm is occurring outside of the perimeter.
To this end, it is very welcome that the FCA has committed to better use of data in identifying harm that exists outside of the perimeter, closing legislative loopholes and gaps that allow businesses to operate outside of the perimeter and working collaboratively with other stakeholders to prevent harm from crystallising outside of it.
Anger at the damaging level of FSCS levies also appears to be addressed. The FCA is currently reviewing its compensation policy framework and has committed to reporting on this within the next 12 months.
It is currently unclear whether or not this will take the form of a wider consultation or policy announcement; however, we are encouraged that many of the proposals that we have set out to the FCA, on the FSCS in particular, appear to be reflected in their business plan.
The above is not a comprehensive list of work the FCA intends to undertake and we expect the regulator to set out further measures in line with its recent call for input into the consumer investment market in the coming year.
More broadly, the FCA has indicated that it will review rules of primary and secondary markets and we continue to work closely with them and government on how the rules can be more effective and targeted following our exit from the EU.
It will also be pushing ahead with its recent consultation on the consumer duty. Pimfa is currently engaging with the FCA on this and continues to consult businesses on their views.
These are, of course, aspirations on behalf of the FCA and we will continue to hold it to account to ensure that these aspirations are met and discharged in a manner that makes it easier and more cost effective for businesses to operate in an ever-changing regulatory environment.
We need to keep a continuing watchful eye on regulatory costs that impact businesses and ultimately the clients they serve.
Liz Field is chief executive of Pimfa
