Enforcement cases to rise under FCA

In a newly published document outlining the FCA’s approach to financial regulation, the FSA says that the FCA’s more interventionist stance and lower tolerance for consumer detriment is likely to require an enhancement of activity in the enforcement area. (To read the FCA approach document in full click here.)

It says: “Based on FSA experience of thematic work, a greater use of cross-firm supervision is likely to result in more enforcement cases, and thus a need for greater enforcement resource.”

The FSA has issued fines in excess of £150m as well as banning more than 200 individuals from the industry since 2007.

There were further indications of the future regulator's attitude in a conference speech by Margaret Cole, Managing Director of the FSA's Conduct Risk Unit, which is to form the core of the FCA:

"There is a chasm between the fair treatment consumers should be entitled to expect from our financial services industry and what a series of bitter experiences have shown that many of them actually get. The standards of conduct we have seen would not be tolerated in other industries. If a supermarket sold rotten food to its customers how long would it stay in business?"

To read the speech in full click here. Other points of interest included:

• The EU agenda will have a growing consumer protection focus and the FCA’s priorities are likely to have much in common with the EU’s consumer protection goals.
• "The fair treatment of customers will be a central part of the FCA’s role in regulating the industry . . . If necessary the FCA will mandate fair treatment through the use of its powers and credible deterrence."
• Firms will be required to publish more information on their activities to improve market discipline
• FCA will take the initiative in the regulation of competition in the financial services market
• The ARROW framework is to be replaced with a revised risk assessment process
• In supervision, the emphasis will shift from firm-specific supervision to a cross-sector issue approach, building on the FSA’s small firms’ supervisory strategy and apply it across a wider range of firms.  "This will rely on the use of regulatory returns, thematic work and sector profiles with a more targeted use of firm-specific work."
• "The FCA aims to have some form of regulatory contact with all of the firms it supervises over a four year period. Whether this contact – or ‘touch-point’ will take the form of a compliance visit will depend to a large extent on the FCA’s resources."
• The FCA will look at intervention "further up the value chain", targeted at product governance
• Perhaps most importantly: "Understanding what regulation requires is not just a job for compliance officers"!