introduction
On 19 March 2024, the FCA published its 2024/25 Business Plan, detailing its focus areas for next year.
The FCA's focus areas for the year ahead take into account the uncertain economic and geopolitical environment and new regulatory framework.
They also build on the fact that this is the final year of FCA's 2022-2025 strategy, which sets out the following objectives: (1) Reduction and prevention of serious harm. (2) Standard setting and testing. (3) promote competition and positive change;
We review the key elements of a business plan and highlight the preparations companies should make to avoid becoming subject to FCA regulatory action, including enforcement proceedings.
FCA focus in 2024/25
The FCA's areas of focus over the coming year are:
- We protect consumers by testing whether businesses meet the high standards set by Consumer Duty, support consumers' long-term financial well-being through a review of advice guidance boundaries, and ensure that pension products meet the We guarantee that we will provide you with the right value for your money.
- We ensure market health by monitoring market risks and taking action where necessary, and we continue to invest in data and technology to support rigorous market surveillance.
- Promote effective competition to deliver good outcomes for consumers and identify where more effective competition can better deliver fair value outcomes, based on consumer obligations.
FCA's efforts
The FCA continues to deliver on its 13 public commitments, which focus on:
Other notable initiatives in the coming year include:
Other work by the FCA (not covered in this article) includes preparing financial services for the future, dealing with troubled companies, reducing the harm from business failures, and developing digital markets to achieve positive outcomes. , improving the redress framework and enabling consumer support. Minimize the impact of operational interruptions.
Reducing and preventing financial crime
The FCA referred to two national strategy documents, the Economic Crime Plan and the Fraud Strategy, and noted how their supervision and regulation play a key role in achieving national objectives of reducing and deterring financial crime. did.
The FCA said it will continue to take a data-driven approach to identifying potential harms for supervisory and/or enforcement action, including continuing to take proactive action to combat fraud and fraudulent websites. . The FCA will also use its powers through its specialist body, the Anti-Money Laundering Supervisory Authority (OPBAS), to improve standards in the legal and accounting areas.
In addition, the FCA will launch the following activities (some of which are included below) over the next year to achieve outcomes such as reducing the rise in investment fraud victims and losses and slowing the growth of formal push payments: and/or continue ( APP ) to reduce fraud incidents and losses and financial crime:
- We are increasing investment in our FCA systems to enable us to use intelligence and data more effectively in our financial crime operations and target high-risk companies and activities.
- Use that power to disrupt, pursue, and sanction those who commit and enable financial crimes.
- We focus on proactive assessment of anti-money laundering systems and controls for companies considered to be high risk.
- We use data to target companies that are susceptible to fraudulent proceeds and ensure we go the extra mile to stop illicit financial flows.
- Strengthen the supervision of enterprise sanctions system and management.
Financial crime, particularly fraud, money laundering and sanctions breaches, will continue to be a key priority for the FCA next year.
How should companies prepare?
Companies should expect their financial crime systems and controls to be scrutinized more closely, and to ensure that these systems and controls comply with relevant laws and regulations to avoid potential regulatory scrutiny. We strongly recommend that you ensure that you are compliant and meet FCA expectations.
Putting consumer needs first
The FCA said the consumer tax came into force last year on products and services that are on sale to new customers or that can be renewed by existing customers. “…represents a major shift in our expectations of companies.”. From July 31, 2024, businesses will also need to ensure that their closed products are delivering the right results to consumers.
The FCA's business plan will continue to focus interventions where the risk of harm is greatest and where further work is needed to help businesses identify and address gaps and meet higher consumer duty standards. It has said.
Among its planned activities, the FCA will assess how businesses treat customers in vulnerable situations and assess how businesses meet their consumer obligations (complaint handling and root cause analysis, consumer support initiatives, fair value and closed products). Continue supervisory duties to test (including and services). We will also continue our efforts to ensure that people with savings receive fair treatment.
How should companies prepare?
While we have not yet seen non-compliance with consumer obligations result in formal investigations or enforcement actions, we expect that the most serious violations will be prioritized for such action in the near future.
Companies must fully implement consumer obligations for their open products and services (and, for closed products and services, to ensure they are ready by the July 31, 2024 deadline). businesses should ensure that they have taken steps to enforce their consumer obligations) and that they: While they may not be delivering positive outcomes for consumers, these companies are taking timely remedial action to demonstrate to the FCA that they are acting in accordance with their consumer duty responsibilities.
Strengthening the UK's position in the global wholesale market
The FCA wants the UK to continue to strengthen its position in the global wholesale market and host markets that support the domestic economy and growth. To achieve this, the FCA will support the industry's work on T+1 payments to improve efficiency, as well as implementing a series of primary market policy reforms (publishing the conclusion of the review of the listing regime and the proposals for the listing regime). ), the plan is to foster innovation and market evolution. entry into the new public offering and trading system).
Take aggressive action against market abuse
The FCA will strengthen its ability to address market abuse, including (1) strengthening its ability to detect and track market abuse across asset classes; and (2) strengthening market surveillance and intervention in fixed income and commodities, covering both. It is said that it will be significantly strengthened. market abuse and market integrity, and (3) assist in achieving a proportionate market abuse regime for cryptoassets.
How should companies prepare?
Companies must ensure that they have monitoring systems in place to capture operations between asset classes.
Environmental, social and governance (ESG) priorities
The FCA will introduce sustainability disclosure requirements and investment labels market-wide, including anti-greenwashing rules that require all sustainability-related claims by approved companies to be fair, clear and not misleading. It is planned to be integrated into.
How should companies prepare?
This rule will only come into effect from May 31, 2024, but businesses should start thinking about how to integrate it now.
Improved oversight of Appointed Representatives (“AR”)
Although the FCA's 2024-25 Business Plan reminds major firms of their responsibility to ensure that ARs comply with FCA rules, many major firms do not have adequate oversight of AR activities. I haven't been able to do it. As a result, consumers are at risk of being misled and mis-sold, and AR fraud in the financial sector can undermine market integrity.
The FCA has referred to new rules and guidance (available here) that came into force on 8 December 2022, which will improve the oversight of AR by principals, provide more information to the FCA, and improve consumer convenience. We aim to raise standards across financial services to improve gender equality. and contribute to market protection.
Over the next year, the FCA will analyze existing data more deeply, target resources with improved data covering all ARs, and continue to strengthen its oversight and engagement with leading firms in appointing ARs. . The FCA will also continue to proactively supervise high-risk principals through its regulatory tools and take appropriate enforcement action.
How should companies prepare?
Oversight of AR by major firms appears to remain a key concern for the FCA, so major firms will need to ensure that they have adapted appropriately to the new regime.
What should companies do next?
As mentioned above, over the next year the FCA will scrutinize companies' systems and controls in key areas such as financial crime and market abuse, as well as ensuring that companies meet higher standards of consumer duty and comply with consumer obligations. We plan to confirm that this is the case. New ESG and AR regime.
Now is a great time for companies to assess their financial crime and market abuse systems and controls and customer journey processes to ensure they are appropriately adapted to the new AR regime. It is also a good time for companies to consider how to integrate investment labels with the FCA's sustainability disclosure requirements, in line with the FCA's final rules and guidance (available here). Given that these areas are key priorities for his FCA, any deficiencies could lead to supervisory actions (e.g. VREQ, VVOP) and/or enforcement actions.
If you would like us to carry out an assessment of your systems and controls, or would like to discuss how the FCA's plans for next year may impact your business and what mitigation steps you can take If so, please contact us.
