Earlier this month, the Financial Conduct Authority (FCA) released its 2017-18 Annual Report and Accounts. In previous years, this document has given a good snapshot of how well the regulator has done in achieving its goals – and provided insight into future priorities.
Here we summarise the 2017-18 report and see what we can infer from it about compliance priorities for the coming year.
What does the Report and Accounts tell us?
The report demonstrates progress against the FCA’s annual Business Plan.
When we looked at the 2016-17 Report in July 2017, we said that
‘Our prediction that an emphasis on cultural compliance, innovation and accountability would continue is borne out by the 2016-17 report.
‘The regulator is keen that firms take a self-sufficient approach to regulatory compliance. At the same time, it is clear that penalties will continue to be severe for those that transgress.’
These have all been ongoing themes since then, with accountability, cultural compliance and innovation still big areas of focus for the FCA and the industry. Conduct is being addressed via – for instance – the Senior Managers and Certification Regime, which is set to be extended to almost all regulated firms.
What does the 2017-18 Report show?
- Regulation today means an eye on the future
In his introduction, Charles Randall, FCA Chair, says that ‘modern technology requires regulation that keeps pace with current developments and anticipates their evolution’. This is something we have explored before, looking at the regulator’s plans to automate regulation and examining its changing approaches to supervision and enforcement.
- The breadth and depth of regulation is ever-growing
The FCA’s remit continues to grow – for example, in 2018, it takes over the regulation of claims management companies.
- Technology is key – but must be managed
Randall says that while innovation can ‘slash costs, join up information and services and offers access to financial services to new groups of consumers’, it is also ‘a double-edged sword’ which can expose people to risk – including the risk that some consumers, particularly the vulnerable, get left behind. He extols the FCA’s championing of Fintech and Regtech and expresses a wish that these types of programme continue and grow.
- Financial crime is a focus
Globalised financial services have led to globalised financial crime. The Authority’s role in tackling this with international partners – whatever the shape or impact of Brexit – is another priority.
Three areas dominate the FCA’s work in 2018
Andrew Bailey, FCA Chief Executive, sets out in his statement the three areas that define the regulator’s work this year.
The first is EU withdrawal – making sure that regulatory regimes, and protection for consumers, operate as seamlessly once we leave the EU as they do today.
The second is regulatory change – a constant no matter what the political landscape looks like. As we plan for an exit from the EU, UK firms must continue to implement and abide by all EU legislation such as the GDPR, MiFID II and the Insurance Distribution Directive.
The third is another familiar theme: the need to treat consumers fairly. We have explored before how, by complying with this fundamental tenet of the FCA’s approach, you are well on your way to meeting the basics of almost all the regulations that apply.
Fair treatment of customers underpins the rationale behind many current and planned regulations: it could be argued that GDPR, for instance, is all about fair and proportionate data use; regulation of the consumer credit industry is designed to make it fairer, as well as more sustainable.
Meeting the regulator’s expectations
Firms that want to meet FCA expectations in 2018/19 would do well to look through the regulator’s Report & Accounts.
At 150 pages long, you may not want to study the whole thing – but a skim through it will give you a good heads-up as to the Authority’s areas of focus. Hopefully we have also given you a flavour of them here.
As we’ve said, treating customers fairly is a central theme of much of the regulator’s activity, and provides a good foundation for any other regulatory compliance.
Source: Perivan Technology
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