The FCA set out in its Business Plan 21/22 how it is changing to improve performance and meet future challenges.  Read our previous article setting out a few of the key areas.

Firms can learn from the progress to date on one of the key areas …

The Early Oversight Function (EOF): stronger oversight of newly authorised firms

The results from the first stage of the EOF’s pilot are starting to emerge. The first stage of the Early Oversight Pilot process started in Q4 of 2021 and of the 30 firms selected to be in the pilot, some are still in the first stage of the process, others have managed to complete this stage and have a two month break before the FCA’s next stage will be rolled out.

The interaction throughout this stage included firms completing a questionnaire and providing three sets of data, in a specific format, each covering a one month period. Alongside this firms met with the FCA at the start of the process, throughout where the FCA required to discuss the information provided, and again at the end of the process.

It appears that the time taken to complete this stage is significantly reduced if the firm provides accurate information and the firm displays a good awareness and knowledge of the FCA requirements.

The FCA is gathering feedback from the pilot participants and will use it to shape the process for the 200 firms that will be included in the second year, thereafter all newly authorised firms and firms who have changed their permissions/business model will be automatically included in the process. It is expected that a firm will be in the process for 2 years, possibly 3 years.

These findings indicate the approach being taken by the FCA and the importance placed on accuracy of data and what the data indicates about the firm, worth bearing in mind as we consider another key area from the FCA Business Plan 21/22.

Using new approaches to find issues and harm faster

To enable it to act earlier to prevent or stop misconduct and strengthen its holistic firm assessment, the FCA intends to automate more of the data collection and better analyse data across systems, using advanced analytical techniques to proactively identify and prioritise firms or harms for investigation. Therefore, going forward the FCA will be scrutinising the information provided by firms in greater detail.

Firms have been completing returns for the FCA for several years now with little or no comment regarding the information provided. This is set to change; these returns will now be under greater scrutiny with more of the information interrogated in different ways.

Going forward it is more likely that a firm will be asked to clarify data, explain trends etc. Some of these requests may reveal a misunderstanding in respect of the information required, others will require further detail before it can be established whether any action is required.

As has been evidenced in the Early Oversight Pilot, we believe that accurate, timely data submissions will reduce the possibility of FCA interaction from when the planned technology advances have been implemented.