On the 7th April 2022, the FCA released its 2022/23 Business Plan. The Business Plan is part of a three-year strategy document which sets out the visions and outcomes the FCA expects all Firms to deliver across UK markets. Within the FCA’s three-year strategy document, the FCA has grouped their commitments into three areas: Reducing and Preventing Serious Harm, Setting and Testing higher standards, Promoting competition and positive change. A programme of work for the next 12 months is contained in the Business plan, along with an indication of how progress will be measured and examples of the FCA’s work. Below, are some of the highlights of the announced business plan.
Focus 1 – Reducing and Preventing Serious Harm
The FCA wants to quickly identify and cancel ‘problem’ firms which fail to meet the threshold conditions (TC). The FCA wants to intervene and be seen to intervene with these firms, using the maximum reach of its powers against firms causing harm to consumers and/or markets.
To achieve this, it will:
- Review, whether FCA aims for complex Threshold Conditions (TC) test cases are supported by current legislation;
- Remove firms that consistently show they are unable or unwilling to follow the rules;
- Increase automation of processes for authorisation cancellation requests;
- Expand the types of TC breaches it takes action against.
The FCA to reduce the harm caused by Firm failure, with particular emphasis on ensuring firms meet their financial resource requirements, hold client assets and money appropriately and to quickly respond to financial stress.
To achieve this, it will:
- Embedding the new IFPR regulation;
- Be assertive with its powers to start insolvency processes.
The FCA wants to protect consumers from harm caused by firms’ insufficient due diligence, inadequate oversight, and control of Appointed Representatives (ARs).
To achieve this, it will:
- Have earlier engagement with principals and tougher assessments of appointed representative authorisations by prospective principal firms;
- Following consultation paper CP21/34, the FCA intends to set rules and standards to clarify and strengthen principals Firm’s responsibilities and increase information provided to the FCA;
- Assess the need for further policy interventions;
- Consult on improvements to appointed representative information on the FCA register;
- Intensify supervision to reduce the most significant risks from ARs with more assertive supervision of high-risk principals .
The FCA wants to lower the incidence of financial crime and money laundering.
To achieve this, it will:
- Increase the proportion of applications rejected, withdrawn or refused by the FCA under Money Laundering Regulations (MLR) or for other financial crime reasons;
- Set rules and standards to ensure oversight of firms’ financial promotions;
- Assess firms’ anti-fraud systems and controls;
- Continue to supervise cryptoasset firms’ compliance with the Money Laundering Regulations, and intervene rapidly where needed;
- More proactive supervision through the Office for Professional Body Anti-Money Laundering Supervision;
- Use enforcement powers to disrupt, pursue and sanction those committing financial crime and fraud.
Focus 2- Setting and testing higher standards
The FCA wants to implement a strategy for positive change, prioritising environmental, social, and governance (ESG) priorities. In particular, The FCA wants to combat misleading marketing and disclosure around ESG-related products.
To achieve this the FCA will:
- Embed ESG issues in the authorisation process for firms and individuals, as well as in the everyday supervisory process;
- Develop a set of metrics to monitor and measure the quality and quantity of climate-related and sustainability disclosures;
- Help the industry address ESG challenges in line with competition law;
- Developing key ESG information disclosures and monitor firms to protect customers from unfair treatment.
The FCA wants to ensure that important business services provided by firms are resilient to operational disruption.
To achieve this, the FCA will:
- Ensure that the authorisation process takes into consideration how firms that are subject to the Operational Resilience Policy have ensured they meet the expectations;
- Work with the PRA to refresh and clarify incident reporting requirements;
- Assess whether firms are able to remain within their impact tolerances.
Focus 3 – Promoting competition and positive change
The FCA wants to prepare firms, markets and consumers for the future of financial services and wants to ensure they respond effectively to these changes.
To achieve this, it will:
- Continue to work with HMT to design, prepare legislation and deliver a new regulatory framework that will increase the FCA’s responsibilities and also strengthen accountability processes.
The FCA wants to strengthen the UK’s position in global wholesale markets by guaranteeing that the wholesale regulatory framework is considered to be clear, proportionate, trusted and seen to be supporting innovation.
To achieve this, it will:
- Review and develop with the HMT appropriate regimes for overseas firms to access UK markets;
- Support innovation by launching the financial market infrastructure sandbox.
The FCA wants the digitalisation of financial services to enable consumers to take decisions in their best interest and obtain fair value.
To achieve this, it will:
- Work with the Government on new pro-competitive regimes for digital markets but also analyse the risk and benefits of Big Tech entries into financial services;
- Publish a joint discussion paper with the BoE on artificial intelligence;
- Investigate digital consumer journeys to ensure consumers are empowered to take decisions in their best interest.
