Financial Conduct Authority

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Financial Conduct Authority
Financial Conduct Authority.png
Agency overview
Formed 1 April 2013
Preceding Agency Financial Services Authority
Jurisdiction United Kingdom
Headquarters 25 North Colonnade
London, United Kingdom
Annual budget £452m (2014/2015)[1]
Agency executives John Griffith-Jones, Chairman
Martin Wheatley, Chief Executive
Website fca.org.uk

The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but 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 UK’s financial markets.[3] 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.

History[edit]

On 19 December 2012 the Financial Services Act 2012 received royal assent, and it came into force on 1 April 2013.[5] The Act created a new regulatory framework for financial services and abolished the Financial Services Authority.[5] Specifically, the Act gave the Bank of England responsibility for financial stability, bringing together macro and micro prudential regulation, created a new regulatory structure consisting of the Bank of England's Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority.[5]

Powers[edit]

The 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.[6] It has the power to investigate organisations and individuals.[7][8]

In addition, the FCA is able to ban financial products for up to a year while considering an indefinite ban; it will have the power to instruct firms to immediately retract or modify promotions which it finds to be misleading, and to publish such decisions.[6]

The authority is responsible for regulating the consumer credit industry from 1 April 2014, taking over the role from the Office of Fair Trading.[9]

Sectors and firms[edit]

Banks[edit]

The Financial Services Act of 2012 set out a new system for regulating financial services in order to protect and improve the UK’s economy.[10]

The FCA will supervise banks to:

  • Ensure they treat customers fairly
  • Encourage innovation and healthy competition
  • Help the FCA to identify potential risks early so they can take action to reduce the risks

Mutual societies[edit]

There are more than 10,000 mutual societies in the UK. The FCA are responsible for:[11]

  • Registering new mutual societies
  • Keeping public records
  • Receiving annual returns

Financial advisers[edit]

Rules came into force in 2012 for Independent Financial Advisers (IFAs) following the Retail Distribution Review (RDR) rules.[12] To be classed as an IFA, businesses need to:

  • Offer a broad range of retail investment products
  • Give consumers unbiased and unrestricted advice based on comprehensive and fair market analysis

Leaders[edit]

In early 2011, it was confirmed that the new head of the FCA will be Martin Wheatley, formerly chairman of Hong Kong's Securities and Futures Commission.[6][13][14][15] In 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.[15][16][17] Griffith-Jones joined the FSA board in September 2012 as a non-executive director and deputy chair.[16][17] Griffith-Jones retired from KPMG, where he was chairman of the UK division, in August 2012.[16][17]

In December 2013, it was announced that head of asset management supervision Ed Harley had left the regulator to take up a role at Goldman Sachs Asset Management.[18]

Criticism[edit]

In June 2013, the Financial Conduct Authority was criticised by the Parliamentary Commission for 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.

—Parliamentary Commission for Banking Standards, Report - Changing Banking for Good [19]

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 UK subsidiary.[20][21]

There have been calls for the resignation of the 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.[22] There has also been criticism of the chief executive Martin Wheatley because of his responsibility for the minibond fiasco in Hong Kong. There were not the customary pre-appointment hearings for either John Griffith-Jones or Martin Wheatley, so that people could not disapprove of these appointments by submitting evidence to these hearings.

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.

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.

Name[edit]

The "Consumer Protection Agency" (CPA) promised in 2009 by the Conservative Party [23] became "Consumer Protection and Markets Authority" (CPMA), which was changed to Financial Conduct Authority (FCA) after the Treasury Select Committee pointed out that this name could mislead consumers.[24]

See also[edit]

References[edit]

  1. ^ "Business Plan 2014-2015" (PDF). FCA. Retrieved 6 June 2015. 
  2. ^ "First Chair of the new Financial Conduct Authority appointed". Retrieved 2 November 2012. 
  3. ^ Vina, Gonzalo. "U.K. Scraps FSA in Biggest Bank Regulation Overhaul Since 1997". Businessweek (Bloomberg). Retrieved 16 June 2010. 
  4. ^ "Reform and regulation". HM Treasury. 17 June 2010. Retrieved 17 June 2010.  Archived here.
  5. ^ a b c "Financial Services Bill receives Royal Assent". HM Treasury. 19 December 2012. Retrieved 4 January 2013. 
  6. ^ a b c "The Financial Conduct Authority: What it Does and Who is Charge". Financial Times (London). 8 November 2011. Retrieved 20 August 2012. 
  7. ^ Lewis Silkin. "Lewis Silkin - FCA Investigations". lewissilkin.com. Retrieved 6 June 2015. 
  8. ^ "News and investigations". fca.org.uk. Retrieved 6 June 2015. 
  9. ^ "OFT’s work and responsibilities after 31 March 2014". Office of Fair Trading. 2014. Retrieved 27 March 2014.  Archived here.
  10. ^ "FCA - Banks". 
  11. ^ "FCA - Mutual Societies". 
  12. ^ "FCA - Independent Financial Advisers". 
  13. ^ "Regulatory Reform". FSA web site. FSA. Retrieved 20 August 2012. 
  14. ^ "Wheatley to head new UK consumer regulator". The Financial Times. 2011-02-02. Retrieved 2010-02-02. 
  15. ^ a b "First Chair of the new Financial Conduct Authority appointed". Newsroom & Speechs. HM Treasury. 11 June 2012. Retrieved 20 August 2012. 
  16. ^ a b c "KPMG UK chairman John Griffith-Jones to head Financial Conduct Authority". The Telegraph (London). 11 June 2012. Retrieved 20 August 2012. 
  17. ^ a b c Masters, Brooke (11 June 2012). "KPMG’s UK boss to chair new watchdog". Financial Times. Retrieved 20 August 2012. 
  18. ^ Alex Steger. "FCA asset management head to join Goldman Sachs AM". New Model Adviser. Retrieved 6 June 2015. 
  19. ^ "Changing banking for good - Parliamentary Commission on Banking Standards". parliament.uk. Retrieved 6 June 2015. 
  20. ^ "Correspondence published with FSA on Bank of Ireland". UK Parliament. Retrieved 6 June 2015. 
  21. ^ "Rebuke for new FCA boss ahead of launch day". scotsman.com. Retrieved 6 June 2015. 
  22. ^ Bowers, Simon (10 April 2013). "HBOS heat turns on head of new City regulator John Griffith-Jones". The Guardian (London). 
  23. ^ "Plans for sound banking" (PDF). Conservative Party. Retrieved 6 June 2015. 
  24. ^ Trotman, Andrew (17 March 2011). "What next for the FSA?". The Daily Telegraph (London). 

External links[edit]