The UK’s Financial Conduct Authority (FCA) published its 2021/22 Business Plan on July 15, setting out its future role, priorities, and how it intends to deliver them. The FCA’s website contains a summary and full copy of the business plan.
FCA Chief Executive Nikhil Rathi said that over the next year “[the FCA] will be more innovative, more assertive and more adaptive.”
The comprehensive business plan is in six sections. The four key sections are:
- The FCA’s Role
- Consumer Priorities
- Wholesale Market Priorities
- Priorities Across all Markets
The FCA’s Role
The FCA states that its two key tasks are “to make markets work better and to stop and prevent serious misconduct that leads to harm.” In order to achieve this, the FCA is doing a number of things, including investing in new technology and increasing its focus on the use of data.
The FCA is putting a clear focus on protecting consumers. Some of the FCA’s key proposals are:
- Increased monitoring of how firms support consumers in financial difficulty
- Working with the UK government to implement a new regulatory gateway for financial promotions
- Proactive reviews of payment services firms to identify those at risk of poor financial strength
- Introduction of pricing and automatic renewal remedies to ensure fair value in home and motor insurance products
- Potential rule changes on firms’ duties to consumers, based on responses to the current consultation that ends on July 31, 2021
Wholesale Market Priorities
Market integrity is a key focus for the FCA in relation to wholesale financial markets. Some of the FCA’s key proposals in this area are:
- Updating rules to suit UK markets while maintaining internationally consistent standards, including updating listing rules in relation to Special Purpose Acquisition Companies and Climate Related Financial Disclosures
- Simplification of pre- and post-trade transparency rules in securities and derivatives markets
- Completing the transition from LIBOR
- Increased supervision to ensure that environmental, social, and governance (ESG) properties of funds are presented in a fair, clear, and not misleading way
- Introduction of a long-term asset fund for confident investment in less liquid assets
- Increased focus on pension products, in particular value for money
- Increased supervision on firms’ due diligence and oversight of appointed representatives
Priorities in All Markets
The FCA also wants to work on a cross-market basis to tackle wider issues and influence change, including:
- Increased focus on diversity and inclusion and ESG requirements
- Proactive surveillance and monitoring to reduce fraud
- Introduction of the Investment Firms Prudential Regime
- Proactive monitoring of firms’ implementation of operational resilience requirements and compliance with impact tolerances
The FCA is also piloting a scheme to remove authorisations where firms are not undertaking activities that they have been authorised to undertake – a “use it or lose it” approach.
Impact on Firms
The business plan is comprehensive and makes it clear that the FCA will be focusing on a number of areas and may be introducing a number of new requirements for firms to comply within the short and medium term.
With the proposal of a much more proactive and data-driven FCA, firms may see changes in the amount of contact and oversight from the FCA. Newly authorised and fast-growing firms should expect to receive increased oversight. There may also be changes in the way that the FCA collects data from firms, including automation of collection – with a view to reducing the costs of data.
Firms will need to assess whether they are undertaking their authorised activities in order to retain their authorisations under the “use it or lose it” pilot.