What are the implications of the FCA’s business plan?

This is £8m down from the reported £30m stated in the Business Plan for 2018-19. The reduction may be down to the work the regulator has already done in getting the handbook ready for a no-deal scenario, but £22m suggests that there is still plenty to do this year.

On Mifid II, the FCA mentions in a number of places in the business plan that it continues to examine how firms have implemented the regulatory requirements.

In particular, Mifid II is mentioned as a sector priority for wholesale financial markets (including more work on conflicts of interest) and for the investment management sector the regulator warns that its review of Mifid II implementation “will assess how asset managers oversee the design of their products, identify their target market and monitor their products and distribution activities”.

Transaction reporting has recently been in the news, with the FCA issuing a number of significant fines on institutions for transaction reporting failures.

In the business plan, the FCA reports that it will build on its use of MiFID II transaction reporting data in its fight against market abuse and this includes monitoring for data quality by submitters and “intervening where necessary”.

Perhaps one item that has gone under the radar is the prospect of the FCA implementing a new duty of care on firms.

The FCA sees this as an important part of its commitment to keep its powers and tools under review and therefore this topic is covered in the cross-sector priorities part of the business plan, which deals with the future of regulation.

The regulator published a feedback statement to its July 2018 discussion paper a week or so after the business plan was published and a further paper is expected in the Autumn seeking detailed views on specific options for change.

Catalyst for change

The FCA has been focusing and driving individual accountability and cultural change in recent years, particularly through the introduction of the Senior Managers and Certification Regime (SM&CR) which currently applies to banks, building societies, credit unions and dual regulated investment firms.

SM&CR is seen by the FCA as a “catalyst for change and an opportunity to establish healthy cultures and effective governance in firms by encouraging greater accountability and setting a new set of personal conduct”.

The aim of the drectory is to provide a more secure system, making it more difficult for unsuitable individuals to operate where they might otherwise engage in misconduct and harm to the market.

In its business plan, a key priority for the FCA is extending the SM&CR regime to all solo-regulated firms which will come into force in December this year.