How will the new FCA affect regulation?

Jess Cooper of Grovelands gives her account on how the formation of the FCA may effect regulation in the UK.

Following on from last week’s post about Mark Davies’ training session on the new regulator, this week we look in more detail at the FCA.

The FSA will be splitting into two factions: the PRA (Prudential Regulatory Authority) and the FCA (Financial Conduct Authority). The PRA will regulate deposit takers, insurers and designated investment firms, aiming to reduce the threat the firms can pose to the stability of the financial system. The FCA, on which Mark particularly concentrated his attention, will focus on the interest of the consumer, delivering intensive supervision and making proactive product-based interventions.

In his speech at the Launch of the Journey to the FCA event, Martin Wheatley stated that ‘We see it as the role of the regulator to not only make the relevant markets work well but also to help firms get back to putting their customers at the heart of how they do business.’

He outlines the FCA’s expected outcomes as such:

  • Consumers get financial services and products that meet their needs from firms they can trust.
  • Firms compete effectively with the interests of their customers and the integrity of the market at the heart of how they run their business.
  • Markets and financial systems are sound, stable and resilient with transparent pricing information.

In short, the FCA will have the consumer at its heart and the focus of their decision making. They will enforce this new approach to regulation through increased intervention, particularly focusing on the largest financial firms, in order to establish a high standard of conduct. They will have it in their power to punish wrong-doing and will have an increased reliance on Skilled Person Reports (s.166) as a supervisory and enforcement tool.

Both firms will work closely together and there will be a legal cutover with regards to their regulatory powers. It is hoped that these changes will come into play on 1st April 2013,depending on the Financial Services Bill being approved by parliament.

Join us next week as we look at what impact this Twin Peaks regulation will have on the financial services industry.

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