Regulation  

FCA willing to take on legal risk in firm crackdown

FCA willing to take on legal risk in firm crackdown

The Financial Conduct Authority board has said it is willing to take ‘legal risk’ where its actions are intended to “prevent imminent consumer harm”.

Board minutes published yesterday (June 8) and dated to April 29 outlined that the board was briefed on the context surrounding the FCA’s legal risk appetite.

The board was briefed on the current organisational approach to legal risk, and on the concerns around whether the organisation had sufficient appetite for taking such risk. 

It said: “It was noted that the FCA operated within the rule of law and should not engage in actions which are not legally defensible. 

“However, a willingness to take legal risk, especially in situations where the law is unclear or FCA action is intended to prevent imminent consumer harm, was entirely appropriate.

“The board therefore did not consider that the existence of legal risk should prevent the FCA from taking such action.”

The minutes from the meeting said the board supported proposals to recalibrate the degree of legal risk the organisation was willing to take, how to implement this in practice and the inclusion of legal risk appetite in the FCA’s own risk framework.

Last month at a Treasury Committee evidence session FCA chief executive Nikhil Rathi said the regulator was thinking about how it can streamline decision making to speed up the process.

He said: “That will include thinking about whether we have the right structures in place to make some of the regulatory decisions in our Regulatory Decisions Committee, or whether we should be making more decisions at the executive layer to allow the regulatory decisions committee to focus on the big enforcement cases and process them as speedily as possible.   

“There is some significant work under way there. We will also introduce new protocols in the organisation about how we approach legal risk.”

He said the “the gateway into the FCA is one significant area of risk.

“We are considering how we can introduce what we call the probation or nursery period for new firms coming in, so that when they first arrive into regulation, we have our arms around them somewhat more than we did historically,” he added.

Rathi also said the regulator was not “overstretched” as he outlined plans to create a more efficient working model.

Earlier this year, FCA chairman Charles Randell said the regulator needed to change “in order to transform the FCA to be as effective as it can be in this new world”.

sonia.rach@ft.com

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