The FCA has published its 2021/22 business plan, which sets out the new Chief Executive, Nikhil Rathi’s desire for the regulator to be seen as “tough, assertive, confident, decisive, agile.” Here, we take a brief look at what this means for firms in the coming 12 months.
The FCA recognises that it needs to adapt to keep up. As a result of the explosion in technology and consumer choice in the market, the regulator will be investing in its tech capabilities by moving to a cloud environment to be able to share intelligence more easily and scale its work. In addition, the FCA has announced an £11m digital marketing campaign on crypto currency and other high-risk products to remind young people in particular that investors in high-risk products should expect to and be robust enough to lose all their money.
Another change we expect to see is a trial to disrupt the ‘halo effect’, where firms are regulated for one activity and use this to make its unregulated activities seem more trustworthy. The trial will see firms who don’t undertake the activity for which they are regulated lose their permission. As noted, the FCA is taking a robust approach to the perimeter of its powers. It has said it will no longer turn a blind eye to consumer harms, even in places where their powers do not extend.
The FCA continues to focus on consumer outcomes and has identified its priorities as:
The FCA’s priorities in this area are to reinforce the effectiveness of the wholesale markets. This includes revising the listing and prospectus rules for issuance of securities in primary markets and the MiFID rules around trading of financial instruments in secondary markets. It will also be ensuring the UK markets make an orderly transition away from LIBOR.
We should expect to see increased supervision of non-bank finance, with a focus on the environmental, social and government (ESG) attributes of asset managers’ investment products being fair, clear and not misleading. It is also looking at the consequences of continued low interest rates, which have the effect of making premium return investments more attractive. However, this can lead to consumer harm and distorted market functions so it will seek to monitor these closely. It also expects to tighten supervision of ARs to prevent any weakening of conduct standards (see our AR article for further detail).
The fourth area of focus are trends that cross all markets. In particular, the FCA will be focusing on fraud, financial resilience, operational resilience, diversity and inclusion, ESG, international priorities, market access, equivalence and trade negotiations. For example:
If you have any question about what this means for your business, please don’t hesitate to get in touch. You can also find the full FCA’s 2021/2022 business plan here.