The UK Financial Conduct Authority published its 2024-25 business plan last week, increasing its current regulatory activities budget by 9.7% on last year to £729.1m, but industry experts say its strength is uncertain. expressing concern.
Consumer duty reform and a focus on capital markets remain high on the FCA's agenda, but the plan reveals “confusion” and lacks appropriate interventions, particularly around technology and fraud. said Gilbert Berdian, CEO of Quanto.
Among its 13 public commitments, the FCA's plan places particular emphasis on reducing and preventing financial crime, prioritizing consumer needs and strengthening the UK's position in global wholesale markets.
This year, the FCA supported the industry's efforts on T+1 payments to “improve efficiency”, implementing a series of key market policy reforms, completing a review of the listing regime and introducing new public offering and trading regimes. We plan to announce our entry proposal. FCA CEO Nikhil Rati said this when announcing the plan.
Additionally, continued investment in data and technology will support “rigorous market surveillance”, with the FCA announcing plans to develop the use of AI to prevent fraud and fraud. However, Berdian said the plan lacks clarity on digital asset regulation as well as an aggressive stance against fraud.
This year marks the final year of the UK regulator's three-year strategy.
Waiting for further intervention
Imogen Makin, general counsel at law firm WilmerHale, said this year has seen increased investment in using intelligence and data more effectively in the fight against financial crime, with the use of various authorizations and supervisory notifications to improve early access. The amount of intervention may increase.
He said companies “need to proactively review and stress test their financial crime prevention systems and controls on a regular basis to identify problems early.”
However, due to its “consumer-driven” nature, the FCA's plan does not do enough to promote the understanding and use of digital assets, nor does it adequately protect consumers from fraud, Berdian said. .
“The consumer is not the whole system,” he says. “The nature of digital finance has broken down such barriers between different segments of the financial market. As a consumer, you can trade securities and trade ETFs. You can do the same as a company. FCA powers must be broader than just consumer-focused.”
Mr Bardian referred to the UK government's upcoming legislation on automated push payment fraud and said the FCA was lacking cooperation with banks to tackle fraud. “FCA is saying: 'Yes, that is.' [banks’] You solve the problem,” he said.
He believes the regulator's plans for the year ahead could have addressed this issue as well as measures to address broader fraud. “Drastic intervention against wrongdoing means getting to the source.”
Mr Veridian said the FCA should take a “fraud deterrence perspective”, for example by considering a tougher approach to enforcement actions and involving law enforcement much earlier.
“The consequences are so great that the aim is to make the UK a less attractive jurisdiction for fraudsters,” he added.
consumer-focused
As many companies had expected, the FCA's plans will bring into force consumer obligation provisions that come into force on 31 July 2023 to establish clearer standards for consumer protection across the financial services sector. It clearly follows that.
Paul Anderson, partner in the financial services practice at law firm Squire Patton Boggs, said: “We were all expecting a big focus on the potential consequences, including increased consumer obligations and oversight.” said.
Mr Anderson said the FCA has made this clear by specifically mentioning tests to see whether the higher standards of consumer duty are actually met.
In line with the requirements of that obligation, as of 31 July of this year, whether the price paid by a consumer for a product or service is reasonable having regard to the overall benefits that the consumer can expect to receive; This is the deadline for fair valuation of companies, which is done as a way to prove that. According to FCA guidance.
Marsili Hale, a partner at law firm Fieldfisher, said she was waiting for clarification on what action the FCA would take if a product or service was reported to be unfair, but the FCA The plan does not provide details. “I didn't see anything in the plan and I haven't heard anything about what will happen in relation to the supervisory powers that FCA will have after that.” [July 31 2024],” she said.
“From a director's point of view, where are the [the FCA’s] teeth?what will happen
Does it seem unfair? Is there someone to do a secondary review?”worldwide status
The FCA's plans will also bring the UK's international reputation to the fore. Mr Anderson said the FCA remained focused on the UK's position in global markets and ways to improve it, as companies withdrew from UK listings and the IPO market weakened.
Mr Rati acknowledged domestic “challenges” and “global financial risks” and said the regulator was working to “improve the attractiveness and global reach of the UK wholesale market”.
Mr Rati said there would be further opportunities for financial services companies to invest, innovate and expand in the UK through the FCA's Sandbox and Innovation Pathways, TechSprint program and Global Financial Innovation Network.
“Perhaps most important is the review of the listing system and the move toward finalizing a new recruitment and admissions system,” Anderson said.
Gerardo Perez, CEO of Interactive Brokers (UK), said the FCA would maintain “reasonable regulation” to attract domestic and international consumers and businesses, while at the same time discouraging small and medium-sized enterprises from exiting the market. He said there is a need to strike the right balance to prevent this.
Regarding environmental, social and governance priorities, the FCA plans to advance its work on transition finance, including the enforcement of 'natural' regulatory principles.
Sustainability disclosure requirements and investment labeling regulations will be integrated across the market, including anti-greenwashing rules and guidance. Rati said the structure would continue to “expand”, starting with portfolio management discussions later this year.
“Providing fair, clear and non-misleading product information should be well understood by businesses and, as with consumer obligations, perhaps some early action by the FCA against wrongdoers is warranted. That might be expected,” Anderson said.
