Financial Conduct Authority  

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

  • List what the FCA covers regarding Brexit, Mifid II and duty of care in its business plan.
  • Identify what the regulator notes around technological innovation and data ethics.
  • Describe what the FCA sets out about combating financial crime.

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”.

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.

A core aim of the SM&CR is to reduce consumer harm and strengthen market integrity by focusing on people, behaviour and personal accountability.

The FCA will expect firms to embrace the principles of responsibility and accountability, as well as the process for implementing the regime and effectively making it work well in practice on a continuing basis.

The SM&CR principles and rules are designed to shape good culture and represents a minimum standard for the behaviour for those working in financial services.

This means culture should continue to be instilled by the leadership of the firm who are expected to promote consistent standards of good personal conduct for all staff, and set a clear tone from the top.

The FCA believes that a “healthy culture is good for business as well as for consumers and for markets as a whole”, which is a win-win situation for firms.