The FCA: A Year in Review
Posted on 26 Jan 2022
Enhancing Consumer Protection
Last January, the Supreme Court handed down a series of judgements pertaining to business interruption insurance cover, enabling small businesses to recover a total amount equating £1.2bn.
Throughout 2021, the FCA launched several initiatives targeted towards protection of consumer investors. The £11m InvestSmart campaign marked the regulator’s debut on social media where it sought to alert and help younger audiences make more informed investment decisions. As part of the FCA’s crackdown on fraudulent investment schemes and misleading financial marketing, the regulator issued 1,300 public warnings. It also terminated the approval to undertake financial services for 176 firms which had not carried out any regulated activities during the last 12 months.
Over the past year, the FCA reported having prevented an overall sum of £4m from being lost of scammer and further secured a disgorgement which could potentially equate up to £33.5m, subject to final adjudication.
As a result of those initiatives, platforms such as Google now require financial products advertisements to be approved by FCA authorised firms. The regulator also urged the Government to include paid-for advertising in the Online Safety Bill and called for tighter regulatory scrutiny for crypto-asset firms. Consequently, it has declined or withdrawn nearly 90 percent of crypto-asset firms which sought to register with the FCA for money-laundering purposes.
In addition to the guidance published last February concerning the protection of consumers in vulnerable circumstances, the FCA expects to introduce a new consumer duty in July 2022. Last year, the regulator reduced the financial burden for 4.5m mortgage and credit customers who were impacted by the COVID pandemic. The FCA has worked with the industry to provide payment holidays and proposed to ban debt packagers from receiving referral fees to ease access to debt management services.
Safeguarding the Integrity of the UK’s Financial System
Last year, the FCA reported having secured a total disgorgement of £568m from financial organisations such as Credit Suisse and HSBC. In mid-December, NatWest was fined £264.7m by the Southwark Crown Court in the first ever criminal proceeding initiated by the FCA under anti-money laundering legislation. Other actions taken by the FCA consisted of insider dealing offences, non-financial misconducts, and carrying out regulated activities without aurhotirsation. The regulator further reported over a hundred variations of permission throughout 2021.
In an attempt to tackle consumer harm in a faster and more efficient manner, the FCA amended its decision-making process. The reform enables senior managers of the FCA to take actions with respect to firm authorization, civil and criminal proceedings, variation of permission, and imposing requirements on particular firms. Prior to the reform, these decisions could only be issued by the Regulatory Decision Committee (RDC). The FCA further purports to strengthen its authorisation process and plans on launching a new support programme for newly authorised firms later this year.
Working with Bank of England and foreign regulators, the FCA began to phase out LIBOR, advising firms to transition to risk-free alternatives by the end of 2021. As for ESG, the regulator published guidelines on the classification of investment products based on economic and social governance indicators as well as guidance for climate disclosures targeted towards listed companies and asset managers.
Finally, the FCA intends to design new data use techniques to identify risks and regulatory issues more efficiently. The cross analysis of social media and data collected by the FCA showed, for instance, that small businesses were struggling to make claims on business interruption insurance policies, necessitating further FCA intervention.
Effective 1 January 2022, the FCA will begin tackling loyalty penalties in home and motor insurance. The FCA had previously found the practice of increased renewal prices for existing customers to be distorting the market and hindering competition. The FCA expects the new measures to save consumers £4.2bn over the coming decade.
In December, the FCA amended its listing rules to help new companies enter the investment market and allow them to access the stock market at earlier stages in their development. The regulator is now accepting regulatory sandbox applications on a rolling basis in an attempt to promote innovation.