On 5th April 2023, the Financial Conduct Authority (FCA) released its Business Plan for 2023/24 detailing the regulator’s priorities and work planned over the next 12 months, covering the second year of the FCA’s 3-year strategy.
The FCA’s Annual Report published later this year will report on progress made against the activities set out in the Business Plan and provide the latest data against the FCA’s outcomes and metrics.
The Business Plan sets out 3 key themes the FCA is focusing on and 13 commitments to support these themes.
The 3 key themes are:
- Reducing and preventing serious harm;
- Setting and testing higher standards; and
- Promoting competition and positive change.
The 13 commitments are grouped under the 3 key themes / areas of focus as follows, with the commitments in bold being flagged as highest priority for the FCA:
Focus 1: Reducing and preventing serious harm
- Dealing with problem firms – prioritising action against the riskiest firms and those causing most harm, the FCA plans to increase the number of firms it takes action against and expand the types of breach of Threshold Conditions that it takes action against.
- Improving the redress framework – consulting on guidance for firms on redress calculations, reviewing the rules on SME access to the Financial Ombudsman Service (FOS), making proposals to improve complaints reporting, and continuing to review the compensation framework (including compensation limits and funding class thresholds).
- Reducing harm from firm failure – a new financial resilience regulatory return is being introduced for solo-regulated firms (consulted on in October 2022 in CP 22/19), and the FCA plans to use its powers more assertively to start relevant insolvency processes.
- Improving oversight of Appointed Representatives – testing that firms have embedded the new rules for ARs (PS22/11), continuing to support HM Treasury’s work on ARs and assessing if further interventions are needed.
- Reducing and preventing financial crime – the FCA is furthering its work in the prevention of regulated firms being used to facilitate financial crime, including investing in raising standards in authorised firms to improve their abilities to detect and prevent financial crime via a strengthened gateway, more proactive assessments of regulated firms and more staff focused on investigating and prosecuting offenders.
- Delivering assertive action on market abuse – more resource dedicated by the FCA to address market abuse, continuing the FCA’s market surveillance refresh and further improvements for Persons Discharging Management Responsibility (PDMR).
Focus 2: Setting and testing higher standards
- Putting consumers’ needs first – the FCA has dedicated resources (£5.3m and additional staff) to ensure the effective embedding of the Consumer Duty, which they view as particularly important given squeezed incomes and the rising cost of living.
- Enabling consumers to help themselves – such as via the new section 21 gateway (allowing visibility of who approves financial promotions), and increased monitoring of social media by the FCA for illegal financial promotions.
- A strategy for positive change: environmental, social and governance (ESG) priorities – changes to the Listing Rules to reference the final International Sustainability Standards Board (ISSB) standards, a Feedback Statement to DP23/1 on ESG governance, incentives and competence with proposed next steps, final rules following on from CP22/20 Sustainability Disclosure Requirements (SDR) and investment labels (expected Q3 2023), and publication of the FCA’s net zero transition plan.
- Minimising the impact of operational disruptions – assessing how relevant firms are progressing to the March 2025 deadline on operational resilience, with a CP planned for Q4 2023 on reporting operational incidents, and further consultation on the critical third parties (CTP) regime to be introduced under the Financial Services and Markets (FSM) Bill currently making its way through Parliament.
Focus 3: Promoting competition and positive change
- Preparing financial services for the future – implementing the outcomes of the Future Regulatory Framework review, working with HM Treasury and other regulators on the repeal of retained EU law and replacing where appropriate with Handbook rules.
- Strengthening the UK’s position in global wholesale markets – investing in tech and data capabilities to address data gaps and ingest data quicker to oversee markets more effectively, and detect and respond to harms faster, reducing firm burden by implementing more improvements to data collections, with regulatory reforms being brought in to support this.
- Shaping digital markets to achieve good outcomes – the FCA will publish feedback on DP22/05 regarding an effective competition approach for Big Tech firms entering / expanding into retail financial services, release a Feedback Statement to DP22/04 on AI in financial services, continue to focus on digital consumer journeys, and continue to work on the future of UK Open Banking with HMT, the Competition and Markets Authorithy (CMA) and the Payment Systems Regulator (PSR).
As indicated above, a proactive approach to supervision and enforcement is an important focus for the FCA for the year to come, particularly early intervention measures to achieve their 3 key themes. This includes the creation of a new Interventions Team within the Enforcement division, which will become operational on 31st July 2023 – the main implementation date for the Consumer Duty, which remains a critical focus for the FCA in terms of preventing and reducing harm to consumers. Other major regulatory changes such as the new high-risk investment rules (PS22/10) and changes to the Appointed Representatives regime (PS22/11) continue to embed and are also aligned with this FCA focus on intervening to reduce or prevent harm.