Financial Conduct Authority: What do they do and why?

 The Financial Conduct Authority (FCA) is a body that has been created to regulate and standardise over 50 000 firms in the UK. The FCA is not a government funded institution but rather is funded by the businesses that they regulate. The aim of the FCA is to:

  • The financial industry maintains a certain level of integrity.
  • The financial industry provides products and services appropriate to consumers needs.
  • Firms in the financial sector operate in the best interests of consumers.

(source FCA)

The FCA makes sure the financial markets and institutions operate smoothly and treat the consumer with respect and fairness.
The history of the Financial Conduct Authority 

The Financial Conduct Authority was originally formed in 1997 as an offshoot of the Securities and Investments Board. It came after the Chancellor of the Exchequer began a reformation in the financial services industry. The FSA was born. The FSA (Financial Services Authority) took on the responsibility of regulating:

  • The Bank of England’s supervision of banking.
  • The London Stock Exchange and their listing of authority.
  • Regulation of investment services.
  • General insurance business regulation as well as mortgage regulation.
  • The authority to prevent and settle any dispute with regards to market abuse.

The aims of the Financial Conduct Authority

  • The Financial Conduct Authority also works within a regulated structure. The FCA considers it of paramount importance to adhere the principles that they expect from others. There are 8 principles of good regulation that the FCA imposes upon their own work:
  • Efficiency and economy: because the FCA is answerable to the Treasury it is even more important for the authority that resources are efficiently allocated.
  • Proportionality: to ensure that the restriction imposed on any one business is in proportion to what that business is capable of achieving.
  • Sustainable growth: the importance of economic growth is stressed, in the medium to long term for the UK.
  • Consumer Responsibility: It is the consumers responsibility to make decisions.
  • Senior management responsibility: the compliance of a business to the regulatory requirements falls to the senior management. That protects the firm from unrealistic regulatory intervention. Senior staff is then expected to control and monitor the business.
  • Recognising the differences in the businesses carried on by different regulated persons: That ensures that each firm is regulated to suit the firm. Recognising that businesses are unique and so are the people that run them.
  • Openness and Disclosure: Regular and relevant information should be published by the FCA, which also secures discipline and consumers knowledge of financial matters.
  • Transparency: The FCA must function in as much transparency as possible. The Authority should make all their regulatory decisions open to the general public as well as the firms that it represents. 

We read about these different Authorities and Regulatory bodies, especially as the payday market makes a major shift. It is good to know what these bodies work. It’s somewhat comforting to know that there is someone out there that has your back.