On 7 April 2022, the Financial Conduct Authority (FCA) announced its Business Plan for 2022/23, setting out a three-year strategy to improve outcomes for consumers and in markets throughout the UK. Over the next three-years, the FCA will focus on achieving 13 commitments which relate to:
1) Reducing and preventing serious harm:
- dealing with problem firms – removing firms that do not meet the FCA’s minimum standards from financial services markets;
- improving the redress framework – so it is fairer for consumers and firms in a global context;
- reducing harm from firm failure – to minimise wider fallout;
- improving oversight of Appointed Representatives – to reduce poor conduct;
- reducing and preventing financial crime – by joining up the FCA’s actions across sectors and working with partner agencies on a ‘whole system’ response; and
- delivering assertive action on market abuse – by increasing the resilience of financial services markets and detecting and taking decisive action
2) Setting and testing higher standards:
- putting consumers’ needs first – with a focus on the proposed new Consumer Duty and the outcomes consumers get;
- enabling consumers to help themselves – through targeted action to make sure promotions are clear, fair and not misleading;
- a strategy for positive change – by delivering the FCA’s recent environmental, social and governance (ESG) strategy; and
- minimising the impact of operational disruptions – by testing firms’ resilience to inevitable operational disruptions.
3) Promoting competition and positive change:
- preparing financial services for the future – by tailoring FCA rules to better suit UK markets in a global context;
- strengthening the UK’s position in global wholesale markets – so that the UK is one of the leading markets of choice for issuers, intermediaries and investors alike; and
- shaping digital markets to achieve good outcomes.
When describing how it will address problem firms the FCA mentions, among other things, that it will conduct a small number of complex Threshold Conditions test cases to determine whether its aims are supported by current legislation and policy and where necessary seek to make changes to support its ambitions. It will also develop an automated approach for identifying simple Threshold Conditions breaches.
In terms of putting consumers’ needs first, the FCA reminds firms that it will publish the feedback statement on the proposed Consumer Duty alongside any finalised rules and guidance by the end of July 2022. It will also work closely with firms and their trade bodies, consumer organisations and wider stakeholders during the Consumer Duty implementation period to help identify and work through examples of good and poor practice that assist stakeholders to apply the Consumer Duty.
As for minimising the impact of operational disruptions, the FCA states that together with the Bank of England and the Prudential Regulation Authority it will launch a discussion on critical third parties later this year. The Discussion Paper will propose an oversight regime for the supervisory authorities to set resilience standards, a testing approach and enforcement powers for critical third parties. The regulators will use the responses to the Discussion Paper to inform a consultation in 2023.
In relation to strengthening the UK’s position in global wholesale markets, the FCA will begin a programme of market studies on market data, starting with trade data. It will also review and update the wholesale markets regulatory framework including Primary Market Effectiveness and Wholesale Market Review projects. Furthermore, it will review and develop with HM Treasury appropriate regimes for overseas firms to access the UK markets.
The FCA have also published its outcomes and metrics for the first time and will be holding itself accountable against these.
In its strategy, the FCA distinguishes between 2 levels of outcomes:
- Consistent topline outcomes the FCA expects financial services markets to deliver – these stay the same from year to year and enable the regulator to measure how it delivers its statutory objectives over time. There are 4 consistent topline themes the FCA expects from financial services, which cut across the markets and sectors it regulates – fair value, suitability and treatment, confidence and access. The FCA uses these 4 themes to help it define consistent topline outcomes for consumers and wholesale markets. The FCA will review these outcomes over time to ensure they remain suitable. In particular, if the Future Regulatory Framework Review’s proposed new secondary long-term growth objective is confirmed, the FCA anticipates incorporating an outcome that aligns with it.
- Commitment outcomes, which the FCA sets over a 3-year period and reviews each year – the FCA has set out 13 commitments in its Business Plan (see above) that explain how it is joining up its actions to help create the conditions for financial services to deliver the outcomes it expects. The FCA has set out its proposed metrics related to these commitments and have linked these to its topline themes.