Financial Conduct Authority  

Will the FCA's new powers really tackle consumer harm?

Douglas Cherry

Douglas Cherry

Steward also confirmed that the FCA has no powers to prosecute fraud, even in relation to those businesses it regulates.

When it comes to scams targeted at financial services consumers, the FCA is largely impotent and is reliant on under-resourced agencies, dealing with a plethora of other crimes, to tackle it.

With law enforcement agencies experiencing scarcity of resource, it is unsurprising that fraud is investigated on a risk and/or impact-based approach.

Typically, the larger the fraud, the more likely it will be investigated, although meaningful investigation is never guaranteed in any case.

Businesses faster to react

In reality, it is regulated businesses themselves who are investing a significant amount of time, energy and resource in combating fraud. Companies report swindles to the FCA, usually swiftly upon discovery.

Anecdotally, experience is that there is often a significant delay of days or weeks (and sometimes months) before the FCA takes action, such as by publishing a warning on its website drawing the public’s attention to the scam inflicted on legitimate FCA businesses. 

Delay means the horse has bolted, as the business has likely already had the offending website blocked and social media accounts shut down, such that there is no clear and present danger to consumers.

Instead, there is a belated and out-of-date warning that, when published, could cause confusion or mislead consumers, more so than protecting them.

Therefore, do the proposed changes to remove out-of-date regulatory permissions have utility? Yes, they do. Are they an effective and impactful answer to fraud and scams on the consumer public? No. The problem is much larger than accurate permissions on the FCA public register.

Douglas Cherry is a partner at Reed Smith