On 21 October 2021, the FCA published its Annual Regulatory Perimeter Report for 2020/21.

The FCA perimeter determines which activities the FCA must authorise and what level of protection consumers can expect for the financial services and products they purchase. This perimeter is decided by Parliament and the Government through legislation. It cannot be defined as a single piece of legislation and can therefore be complex for firms and consumers to understand.

The report does the following:

  • Helps to explain what the FCA does and does not regulate.
  • Explains what the perimeter is and how it applies.
  • Describes specific issues around the perimeter and the action the FCA is taking in response.
  • Highlights where the FCA sees gaps in the legislation and where the perimeter needs to change.

In terms of where the perimeter needs to change, some of the headlights from the report include:

  • A recommendation that the Senior Managers and Certification Regime be extended to recognised investment exchanges, credit rating agencies, payment and e-money firms.
  • A recommendation that duties on internet companies in the Online Safety Bill should be extended to paid-for advertising, as well as user-generated content. The FCA also believes that the Bill should designate content relating to fraud offences as ‘priority’ illegal content and so require monitoring and preventative action by platforms.
  • The FCA is concerned that unauthorised persons are increasingly relying on exemptions in the Financial Promotion Order relating to ‘high net worth’ and ‘sophisticated’ investors (the exemptions) to market high risk investments. The FCA has seen evidence that strengthening its financial promotion rules has resulted in more unauthorised issuers using, or purporting to use, the exemptions to target ordinary consumers with high-risk investments and scams. The exemptions were last reviewed in 2005 and the FCA is concerned that they are no longer fit for purpose.

The FCA will formally discuss the report with the Economic Secretary to the Treasury later this year. Minutes of this discussion will be published, to help improve transparency around actions being taken on the perimeter.