FCA adopts business plan and risk outlook for the year ahead

On Monday April 1, 2013, the Financial Services Authority (FSA) ceased to be, being split into two new regulatory bodies for the financial services industry, the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA). In news that will interest many of the clients of the company secretarial services of London Registrars (http://www.london-registrars.co.uk), the FCA has equipped itself with a business plan and risk outlook for its governing of the industry in the year to come.

The FCA has stated that its approach to supervision will be much more risk-based, which it says will make it a much more proactive, decisive and earlier-acting regulator than the FSA. The authority will place a particular emphasis on the assessment of longer-term risks, which it says arises when firms fail to invest in innovative new products to meet society’s changing needs, as well as when sales forces are withdrawn and there are not enough new firms entering the industry for adequate competition. Such an approach will interest many of those firms with an interest in achieving the best corporate governance.

Martin Wheatley, Chief Executive at the FCA, has reiterated that firms have a responsibility towards their customers and the financial services industry as a whole, commenting that they “need to ensure that they are putting the consumer and the integrity of markets at the heart of their business models and strategies [for example] making cultural changes which promote good conduct; establishing oversight around the design and innovation of products and services; and ensuring they are transparent in their dealings with consumers”.

It is so that the FCA better knows how to assess market conditions and identify future risks that the risk outlook has been established, while the job of the business plan is to outline how, over the coming year, these risks are to be managed. The risks that the FCA has identified as the biggest over the year to come include firms failing to design products or services that are in the long-term interests of consumers; an over-reliance on payment and product technologies; and structures that lack oversight and pose risks to consumer protection and market integrity, among other risks that will interest clients of process agency services.

Also now identified by the new regulatory body are its more exact priorities with regard to its business plan in its first year in power, including a renewed focus on consumers’ needs to ensure the alignment of firms’ strategies with the production of appropriate outcomes, as well as taking strong enforcement action to ward off the possibility of future market abuse. There will also be a continued focus on ongoing misconduct, covering such controversies as Payment Protection Insurance, Libor and interest rate swaps.

Wheatley has said that the new regulator is well-prepared and “will be much more transparent, so we can learn from our mistakes”. London Registrars (http://www.london-registrars.co.uk) will keep its many company compliance clients up to date with the latest developments relating to the FCA and its work.

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