FCA Business Plan – 2020/21

The FCA recently published its Business Plan for 2020/21. 

In the introduction, the plan highlights that much of it is in response to what the FCA sees as:

“… significant risk of harm (to consumers) … in part driven by the way consumers have been given additional responsibility for complex investment decisions, through the shift to Defined Contribution (DC) pensions and the Government’s 2015 pension freedoms …”

The FCA is also concerned that consumers are currently exposed to significant market volatility caused by coronavirus. The plan states:

“We want to make sure they are supported to make effective investment choices in a fair market.”

To this end, the FCA intends to target the following three outcomes:

  • Investment products are appropriate for consumer needs;
  • Consumers make effective decisions about their investments;
  • Firms and individuals operate under high regulatory standards and act in consumers’ interests.

Like many things at this time, the plan is subject to change dependent on the measures the country needs to take to deal effectively with the Covid-19 threat and the impact on UK and global financial markets. Indeed, the Plan has a whole section based on the subject. 

Priorities
The FCA’s key priorities over the next 1-3 years are:

  • Transforming how the FCA works and regulates;
  • Enabling effective consumer investment decisions;
  • Ensuring consumer credit markets work well;
  • Making payments safe and accessible;
  • Delivering fair value in a digital age.

It is not appropriate to try to cover all these points in this brief article. Instead, we draw your attention to the following extracts, which should provide a quick grasp of the FCA’s thought processes.

  • “Over the coming year we will be shifting our focus towards smaller firms. Many, but not all, of the 60,000 firms we regulate are committed to acting in line with our rules and principles. Some are not. We will shift our focus towards those firms that consistently fail to meet our required standards. We will move more swiftly to enforcement action against those that fail to do this and so cause harm.” 
  • “There are those that see these times as an opportunity for poor behaviour – including market abuse, capitalising on investor’s concerns or reneging on commitments to consumers.  Where we find poor practice, we will clamp down with all relevant force”.
  • “We want to ensure firms have higher standards of governance, a stronger grip over networks of individuals in their distribution chains and that the regulatory system can better tackle the significant cost of misconduct we see in this market’.

Measuring progress
The plan states that progress will be measured by assessing a variety of indicators, including:

  • Commencing assessment suitability of decumulation advice;
  • Continuing assessment of the suitability of defined benefit (DB) to defined contribution (DC) transfer advice;
  • Continuing assessment of developments in the financial support market, through the Retail Distribution Review and Financial Advice Market Review evaluations, in order to ensure they are meeting consumer needs.

 

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

There are firms that appear to believe that they are below the regulatory radar because they are small. Many of these are directly authorised so do not have regulatory input from a big network, and are not engaging with a compliance consultancy to provide appropriate guidance. In a world of rapid and continual change, it is all too easy to get out of sync with regulatory requirements if appropriate importance and attention is not given to compliance aspects.

Actively engaging with ATEB could be the key to being prepared for the shift in focus to smaller firms.

Firms need to ensure they can demonstrate robust controls, systems and procedures. With social distancing rules and many advisers and clients working from home, some firms could be experiencing a ‘quieter period’. This could present an opportunity to review business and advice processes against current compliance requirements.

Finally, ATEB is aware that the FCA has written to some firms as a follow up to its recent statements on the impact of Covid-19. Those firms have been asked to provide information on the firm’s business continuity arrangements and what steps the firm has taken to adhere to the FCA’s statement in respect of work related travel.

Action Required By You

  • Consider how the FCA’s stated priorities and concerns are relevant to your business;
  • Ensure you have knowledgeable compliance resource, including external support if appropriate;
  • Contact ATEB for further assistance if required.
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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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