Our very own Maddie Delboy at Apricity Compliance has reviewed the latest FCA business plan and shares her thoughts below.

This morning Nikhil Rathi introduced his first business plan as chief executive of the FCA. This year’s business plan was pushed back from its normal April release to today, but it’s fair to say there has been nothing ‘normal’ about the last year (and a few months). Considering the current context of a global pandemic, the tone of Nikhil’s introduction to the business plan launch was very positive and he took the time to reflect and recognised the resilience of global markets.

The introductory speech to the business plan included words such as ‘forward-looking, proactive and purposeful’. All words you would want to hear associated with the financial services regulator. Humbly, Nikhil admitted the FCA would never be a ‘zero-failure regulator’ but reassured the audience that they are aware of areas they need to improve, and how to learn from previous mistakes.

The differences of the FCA present and future, versus the FCA past we all knew are;

  • More innovative
  • More assertive
  • More adaptive

Looking at the business plan itself, the regulator addresses what it deems to be the biggest issues in the financial services sector, and also how they will address them.

Their broad focus for this year is;

  • Consumer Duty – more to come on this soon from Apricity.
  • Enhance market integrity.
  • Focus on fraud, financial resilience, operational resilience, improving diversity and inclusion, enabling a more sustainable financial future and international cooperation.

We are already aware the regulator is conducting a past business review on 60 firms active in the defined benefit space, they will continue their work in this space and increase where they feel required. Their objective is to ensure customers can identify if they have received unsuitable advice, how to get redress. Then also the regulator has said it will look at enforcement action where necessary. Welcome news to all I’m sure – if done in a timely fashion.

In addition to defined benefit pensions, the regulator has also addressed cause for concern with regards to high-risk investments and financial promotions. In order to address this, the FCA is really going to put emphasis on what they have already raised in CP21/13: A new consumer duty.

As expected, one area of focus in the business plan is supervision. This year however the regulator is changing their traditional angle slightly to focus their attention on Appointed Representatives (ARs). ARs have always fallen slightly under the regulatory scop radar due to the reliance on the principal firm, but the FCA has addressed that targeted supervision of these firms is needed. They have also hinted that there may be future legislative change on the back of the supervisory work.

The business plan also states that they are going to look at the authorisation process for firms, stating they may be ‘turning down more applications for authorisation’. Anyone who has been through the process recently will know it is a rather comprehensive and timely process. The FCA has announced that they have 100 new hires working just on authorisations so we would expect that process to become more detailed, but for good firms, still ultimately doable. If you are looking at going directly authorised, please feel free to get in touch.

All of the above reaffirm the objectives of the regulator, and exactly how they plan to ensure their objectives are being met in the financial services sector.

One announcement in the business plan that requires special attention, and one that will provoke a sigh of relief from firms, is the regulator’s objective of reducing the FSCS levy. Over the last few years, these levies have reached unimaginable heights and have left firms frustrated (at best). The business plan states that over a ‘multi-year period’ it hopes to stabilise, and reduce the levy with the introduction of firms who possess a greater risk to the market, having to hold additional capital.

The energy associated with this year’s business plan is exactly what has been needed after the last year (and a bit). The intention of the regulator, and the admittance of fault, is welcome and we look forward to seeing Nikhil Rathi and the whole of the FCA deliver.

If you have any questions, please do get in touch.

Maddie Delboy – Compliance Consultant