The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom. It operates independently of the UK Government and is financed by charging fees to members of the financial services industry.[2] The FCA regulates financial firms providing services to consumers and maintains the integrity of the financial markets in the United Kingdom.[3]
 | |
| Agency overview | |
|---|---|
| Formed | 1 April 2013 |
| Preceding agency | |
| Jurisdiction | United Kingdom |
| Headquarters | 12 Endeavour Square London E20 1JN |
| Annual budget | £632.6m (2019/2020)[1] |
| Agency executives |
|
| Website | www |
It focuses on the regulation of conduct by both retail and wholesale financial services firms.[4] Like its predecessor the FSA, the FCA is structured as a company limited by guarantee.[5]: 140
The FCA works alongside the Prudential Regulation Authority and the Financial Policy Committee to set regulatory requirements for the financial sector. The FCA is responsible for the conduct of around 58,000 businesses which employ 2.2 million people and contribute around £65.6 billion in annual tax revenue to the economy in the United Kingdom.[3]
History
editOn 19 December 2012, the Financial Services Act 2012 received royal assent, and it came into force on 1 April 2013. The Act created a new regulatory framework for financial services and abolished the Financial Services Authority.[6] Specifically, the Act gave the Bank of England responsibility for financial stability, bringing together macro and micro prudential regulation, and created a new regulatory structure consisting of the Bank of England's Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority.[6][7]
With effect from 14 September 2019, the FCA introduced strong customer authentication rules as required by the Revised Directive on Payment Services (PSD2),[8] aiming to reduce fraud and improve security by requiring payment services providers to use two of the following three types of authentication when customers make online payments over €30 in the EEA:
- PIN code or a password
- Biometrics such as a fingerprint
- Physical device such as a phone.
The FCA published new Listing Rules in 2024, aiming to simplify the UK listings regime, marking the most significant changes in over three decades. These rules, effective from 29 July 2024, created a single listing category and streamlined eligibility criteria to encourage a wider range of companies to issue shares in the UK.[9]
Payment Systems Regulator
editIn April 2015, the FCA created a separate entity, the Payment Systems Regulator (PSR), in accordance with section 40 of the Financial Services (Banking Reform) Act 2013.[10] The PSR's role is "to promote competition and innovation in payment systems, and ensure they work in the interests of the organisations and people that use them".[11][12]
From May 2019 some victims of authorized push payment fraud are eligible to receive a refund under the Contingent Reimbursement Model Scheme,[13] a voluntary scheme overseen by the Payment Systems Regulator that provides protections for customers of signatory firms,[14] subject to a number of exclusions.
Anti-money laundering supervision
editThe Office for Professional Body Anti-Money Laundering Supervision (OPBAS) is based within the FCA.[15] It was established in January 2018 to oversee the 22 accountancy and legal professional bodies which supervise anti-money laundering compliance in view of the Money Laundering Act 2017.[16][17]
Powers
editThe authority has significant powers, including the power to regulate conduct related to the marketing of financial products. It is able to specify minimum standards and to place requirements on products.[18] It has the power to investigate organisations and individuals.[19] In addition, the FCA is able to ban financial products for up to a year while considering an indefinite ban. It has the power to instruct firms to immediately retract or modify promotions which it finds to be misleading and to publish such decisions.[20]
Furthermore, the FCA is able to freeze assets of individuals or organisations under investigation, regardless of whether they are innocent or guilty.[21][22]: 143 The authority has been responsible for regulating the consumer credit industry since 1 April 2014, taking over the role from the Office of Fair Trading.[23]
In July 2023, the FCA announced reforms aiming to curb the use of social media by 'finfluencers' to encourage the purchasing of harmful financial products by UK consumers. Among the reforms was a ban on crypto incentives, such as 'refer a friend' bonuses, a compulsion for finfluencers to have clear risk warnings and for products to have a 24-hour cooling period to give first-time investors the time to adequately consider their investment decision. The move came following a significant rise in social media promotion of financial products by finfluencers in 2022, with 14 times more having been posted than the previous year. [24]
Sectors and firms
editBanks
editThe Financial Services Act of 2012 set out a new system for regulating financial services in order to protect and improve the UK's economy.[25]
The FCA will supervise banks to ensure they treat customers fairly, encourage innovation and healthy competition, and help the FCA to identify potential risks early so they can take action to reduce the risks.
Mutual societies
editThere are more than 10,000 mutual societies in the United Kingdom.[26]: 64 The FCA are responsible for registering new mutual societies, keeping public records, and receiving annual returns.[27]
Financial advisers
editBeginning December 31, 2012, independent financial advisers (IFAs) are legally obliged to follow Retail Distribution Review (RDR) rules.[28][29] In order to be classed as an IFA, a business must offer a broad range of retail investment products and give consumers unbiased and unrestricted advice based on comprehensive and fair market analysis.[30]: 109
WealthTek Case
editIn April 2023, the FCA took action against WealthTek Limited Liability Partnership, a wealth management firm, due to serious regulatory and operational issues. The FCA ordered WealthTek to cease operations and appointed Joint Special Administrators from BDO LLP. The regulator identified potential regulatory breaches concerning client money and custody assets, as well as potential criminal offenses of fraud and money laundering. The FCA's investigation revealed a potential shortfall of £81.4 million in Client Assets and Money associated with WealthTek. As part of its actions, the FCA obtained a worldwide order to freeze assets belonging to John Dance, WealthTek's principal partner, up to the value of £40 million. In December 2024, the FCA charged John Dance with multiple offenses related to WealthTek, including fraud, money laundering, and making false representations about the firm's regulatory permissions. The charges allege that Dance misappropriated approximately £64 million of client funds between January 2020 and April 2023. This case demonstrates the FCA's regulatory and enforcement powers in protecting consumers and maintaining the integrity of the UK financial markets. [31] [32]
Leadership
editChief executive
editIn February 2011, it was confirmed that the new head of the FCA would be Martin Wheatley, formerly chairman of Hong Kong's Securities and Futures Commission.[18][33][34][35] However, Wheatley's appointment was not put in front of the Treasury Select Committee for a pre-appointment hearing. Instead, the Government stated it would put Wheatley and future chief executives forward for a pre-commencement hearing, i.e. after they had been formally appointed but before they began the role.[36]
In July 2015, Wheatley resigned his post at the FCA following a vote of no confidence by George Osborne.[37] In September 2015, Tracey McDermott took over from Wheatley as acting chief executive.[38]
Andrew Bailey was appointed chief executive on 26 January 2016.[39] After Bailey moved to become the Governor of the Bank of England, it was announced that Christopher Woolard would become the Interim Chief Executive. In June 2020, it was announced that Woolard would be succeeded on a permanent basis by Nikhil Rathi.[40]
List of chief executives
edit| # | Name | Tenure | Tenure start | Tenure end | Tenure length |
|---|---|---|---|---|---|
| 1 | Martin Wheatley | 2013–2015 | 1 April 2013 | 11 September 2015 | 2 years and 164 days |
| – | Tracey McDermott (interim) | 2015–2016 | 12 September 2015 | 30 June 2016 | 293 days |
| 2 | Andrew Bailey | 2016–2020 | 1 July 2016 | 15 March 2020 | 3 years and 259 days |
| – | Christopher Woolard (interim) | 2020 | 16 March 2020 | 30 September 2020 | 199 days |
| 3 | Nikhil Rathi | 2020– | 1 October 2020 | Incumbent | 4 years and 89 days |
Chair
editIn June 2012, it was confirmed that John Griffith-Jones would become the non executive chair of the FCA once the FSA ceases operations in 2013.[35][41][42] Griffith-Jones joined the FSA board in September 2012, as a non executive director and deputy chair.[41][42]
Charles Randell became chair of the FCA and PSR in April 2018. In October 2021, he resigned from this position and is scheduled to leave the post in Spring 2022.[43]
On February 7, 2022, Richard Lloyd was named to begin serving as interim FCA chair from June 2022.[44]
List of chairs
edit| # | Name | Tenure |
|---|---|---|
| 1 | John Griffith-Jones | 2013–2018 |
| 2 | Charles Randell | 2018–2022 |
| – | Richard Lloyd (interim) | 2022–2023 |
| 3 | Ashley Alder | 2023– |
Criticism
editIn June 2013, the Financial Conduct Authority was criticised by the Parliamentary Commission on Banking Standards in their report "Changing Banking for Good", which stated:
The interest rate swap scandal has cost small businesses dear. Many had no concept of the instrument they were being pressured to buy. This applies to embedded swaps as much as standalone products. The response by the FSA and FCA has been inadequate. If, as they claim, the regulators do not have the power to deal with these abuses, then it is for the Government and Parliament to ensure that the regulators have the powers they need to enable restitution to be made for this egregious mis-selling.—"Changing Banking for Good: Report of the Parliamentary Commission on Banking Standards", House of Lords, House of Commons[45]
The FCA was rebuked by the Treasury Select Committee for lack of concern over the increase in mortgage interest rates of the Bank of Ireland's subsidiary of the United Kingdom.[46][47]
There had been calls for the resignation of chairman John Griffith-Jones because of his responsibility for auditing HBOS as chairman of KPMG at the time of the financial crisis of 2007–08.[48] There has also been criticism of Chief Executive Martin Wheatley because of his responsibility for the minibond fiasco in Hong Kong.
On 10 December 2014, the FCA released a report from Simon Davis from Clifford Chance LLP inquiring into the events of 27/28 March 2014 relating to the press briefing of information in the FCA's 2014/15 Business Plan.[49]: 10–12
The report recommended:
- That there be substantial improvement in the procedures relating to the identification, control and release of price-sensitive information,
- That the final version of the FCA's Business Plan should only be made available publicly to all market participants at the same time,
- That the relevant review team address the issue of price-sensitive information in any assessment of a potential thematic review, and
- That the FCA urgently put in place price and volume monitoring procedures, combined with an action plan for the effective management of the FCA's reaction to any issues involving the uncontrolled release of price-sensitive information originating from or involving the FCA.
On 16 December 2014, the Treasury select committee commenced taking evidence on the press briefing. Shortly thereafter, committee chair Andrew Tyrie said it looked as if the FCA had been guilty of an "extraordinary blunder" and had created a "disorderly market" through its actions.[50]
See also
edit
References
edit- ^ "Annual Accounts and Reports 2019/2020". FCA. 25 June 2019. Retrieved 29 December 2020.
- ^ "First Chair of the new Financial Conduct Authority appointed". Retrieved 2 November 2012.
- ^ a b Vina, Gonzalo. "U.K. Scraps FSA in Biggest Bank Regulation Overhaul Since 1997". Businessweek. Bloomberg. Retrieved 16 June 2010.[dead link]
- ^ "Reform and regulation". HM Treasury. 17 June 2010. Retrieved 17 June 2010. Archived here. Archived 21 January 2018 at the Wayback Machine
- ^ Goldsworth, J., Lexicon of Trust & Foundation Practice (Wendens Ambo: Mulberry House Press, 2016), p. 140.
- ^ a b "Financial Services Bill receives Royal Assent". HM Treasury. 19 December 2012. Retrieved 4 January 2013.
- ^ Burrows, A., ed., English Private Law, (Oxford: Oxford University Press, ³2013), p. 802.
- ^ "Strong Customer Authentication". FCA. 2 September 2019. Retrieved 23 June 2020.
- ^ "FCA overhauls listing rules to boost growth and innovation on UK stock markets". 11 July 2024. Archived from the original on 11 July 2024. Retrieved 11 July 2024.
- ^ "Financial Services (Banking Reform) Act 2013". Legislation.gov.uk. Retrieved 20 May 2022.
- ^ "Market review into the supply of indirect access to payment systems" (PDF). Payment Systems Regulator. Retrieved 20 May 2022.
- ^ "Background to the PSR". Payment Systems Regulator. Retrieved 20 May 2022.
- ^ "Consumer protection standards for APP scams". The Lending Standards Board (LSB). Retrieved 24 April 2023.
- ^ "Registered Firms". Lending Standards Board (LSB). Retrieved 24 April 2023. List of banking institutions signed up with the LSB, updated as required.
- ^ "UK launches new anti-money laundering watchdog". GOV.UK. HM Treasury. 23 January 2018. Retrieved 10 August 2022.
- ^ "The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017" (PDF). legislation.gov.uk. 26 June 2017. Retrieved 10 August 2022.
- ^ "OPBAS, the UK's new anti-money laundering supervisor, becomes operational". Allen Overy. 16 January 2018. Retrieved 10 August 2022.
- ^ a b "The Financial Conduct Authority: What it Does and Who is Charge". Financial Times. London. 8 November 2011. Archived from the original on 12 January 2022. Retrieved 20 August 2012.
- ^ "News and investigations". fca.org.uk. Retrieved 6 June 2015.
- ^ Bond, R., "e-Commerce in United Kingdom", Lexology, 15 August 2019.
- ^ "News and investigations". fca.org.uk. Retrieved 27 February 2019.
- ^ Chitimira, H., Market Abuse Regulation in South Africa, the United States of America and the United Kingdom (Wilmington, DE: Vernon Press, 2018), p. 143.
- ^ "OFT's work and responsibilities after 31 March 2014". Office of Fair Trading. 2014. Retrieved 27 March 2014. Archived here.
- ^ "UK Watchdog to Crack Down on 'Finfluencers' With Tighter Social Media Rules". Bloomberg.com. 17 July 2023. Retrieved 17 July 2023.
- ^ "Banks, building societies and credit unions". FCA. 27 April 2016. Retrieved 20 October 2019.
- ^ McLaughlin, S., Unlocking Company Law (Abingdon-on-Thames: Routledge, 2015), p. 64.
- ^ "Mutual societies". FCA. 28 April 2016. Retrieved 20 October 2019.
- ^ "Financial advisers". FCA. 28 April 2016. Retrieved 20 October 2019.
- ^ Staff, "RDR Overview", moneymarketing.co.uk, 2019. Retrieved 11 June 2021.
- ^ Hoyles, C., Noss, R., Kent, P., & Bakker, A., Improving Mathematics at Work: The Need for Techno-Mathematical Literacies (Abingdon-on-Thames: Routledge, 2010), p. 109.
- ^ https://www.ft.com/content/9839d83b-bbc4-4fcd-9a01-d22a29c659b5
- ^ https://www.fca.org.uk/news/press-releases/fca-charges-john-dance-offences-related-wealthtek
- ^ "Regulatory Reform". FSA web site. FSA. Retrieved 20 August 2012.
- ^ "Wheatley to head new UK consumer regulator". The Financial Times. 2 February 2011. Retrieved 2 February 2010.
- ^ a b "First Chair of the new Financial Conduct Authority appointed". Newsroom & Speeches. HM Treasury. 11 June 2012. Retrieved 20 August 2012.
- ^ "House of Commons - The Treasury Committee's scrutiny of appointments - Treasury Committee". publications.parliament.uk. Retrieved 22 June 2020.
- ^ Phillip Inman (17 July 2015). "City watchdog chief quits after George Osborne vote of no confidence". The Guardian. Retrieved 31 December 2015.
- ^ "Statement on the Financial Advice Market Review". 3 August 2015. Retrieved 16 December 2019.
- ^ Anon. (26 January 2016). "Andrew Bailey appointed CEO of the Financial Conduct Authority". Bank of England.
- ^ Makortoff, Kalyeena (22 June 2020). "FCA appoints London Stock Exchange executive Nikhil Rathi as CEO". The Guardian. ISSN 0261-3077. Retrieved 22 June 2020.
- ^ a b "KPMG UK chairman John Griffith-Jones to head Financial Conduct Authority". The Telegraph. London. 11 June 2012. Archived from the original on 12 January 2022. Retrieved 20 August 2012.
- ^ a b Masters, Brooke (11 June 2012). "KPMG's UK boss to chair new watchdog". Financial Times. Retrieved 20 August 2012.
- ^ Hickey, Sally (15 October 2021). "Charles Randell resigns as FCA chairman". FT Adviser. Retrieved 20 May 2022.
- ^ Rach, Sonia (7 February 2022). "FCA names interim chairman as search gets underway". FT Adviser. Retrieved 20 May 2022.
- ^ "Changing Banking for Good: Report of the Parliamentary Commission on Banking Standards". parliament.uk. Retrieved 6 June 2015.
- ^ Powley, Tanya (29 March 2013). "'No action' against B of I". Financial Times. Retrieved 20 May 2022.
- ^ Flanagan, Martin (29 March 2013). "Rebuke for new FCA boss ahead of launch day". scotsman.com. Retrieved 20 May 2022.
- ^ Bowers, Simon (10 April 2013). "HBOS heat turns on head of new City regulator John Griffith-Jones". The Guardian. London.
- ^ House of Commons Treasury Committee, HC 881—Press Briefing of the FCA's Business Plan for 2014/15 (London: TSO, 2015), pp. 10–12
- ^ Inman, P., "Financial Conduct Authority director quit over insurance review fallout", The Guardian, 16 December 2014.