The Financial Conduct Authority (FCA), UK’s securities regulator, has published its business plan for the coming year. The FCA is in a period of transition as interim CEO Tracey McDermott, will be transitioning out as her replacement Andrew Bailey takes the helm of the agency in the coming months. This is the fourth year of the reconstituted regulatory entity having replaced its predecessor the FSA in 2013 following the fallout of the global financial crisis. Today the FCA regulates approximately 56,000 firms and 126,000 individuals.
The plan remains fairly consistent with the one prior. The goal is “ensure an effective and proportionate regulatory approach which tackles the problems of the past without inhibiting the developments of the future.” The FCA maintains a three-point mission:
- Protect Consumers
- Protect Financial Markets
- Promote Competition
Risk is a never-ending concern and the balance between over or under-reacting remains a key challenge. With the growing number of Fintech firms entering the financial sector, the FCA is continuously being challenged to better understand and monitor innovative new financial firms.
“We [the FCA] also remain alive to the risk – and potential rewards – of technological innovation. Technology can drive down the cost of accessing products and services, and can push up the quality of service. But it can present challenges to markets and regulators alike, including resilience, cyber-crime and financial exclusion,” stated FCA Chair John Griffith-Jones.
Of course the global challenges and question regarding EU membership add to the list of hurdles in the coming year.
The top seven itemized priorities include:
- Financial Crime and Anti-Money Laundering (AML)
- Wholesale Financial Markets
- Innovation and Technology (and their support of RegTech)
- Firms Culture and Governance
- Treatment of Existing Customers
The UK, and specifically the FCA, has been recognized for its enlightened regulatory approach when it comes to overseeing financial innovation. The FCA understands that “rigid regulation may stifle innovation in financial services”. Meanwhile some sectors call for additional rules. To assist in the management of disruptive financial firms, the FCA is creating a regulatory Sandbox, along with “Project Innovate”. In response to the wave of newly created financial firms, Project Innovate is designed to help “firms of all sizes develop innovative ideas that meet consumer needs.” The regulatory Sandbox will create a safe place for approved firms to test new ideas while accelerating development of new services. The FCA expects more firms to come to market as the result of this approach – one that is being replicated in other countries now.
The FCA recognizes that crowdfunding and peer to peer lending can “improve access to financial services”.
“While the proportion of the market accounted for by crowdfunding platforms is relatively small, it may grow and become a more significant issue, highlighting the fact that innovation can drive competition and innovation, but may also come with new risks.”
These risks include consumers who do not fully understand the risk of investing in these products and the potential for default or loss.
The FCA 2016/2017 Business plan is embedded below.