On 7 April 2020, the FCA published its Business Plan 2020-2021. The purpose of the Business Plan is to set out the FCA's priority areas over the next 1 to 3 years. The below struck us as being of particular interest to enforcement watchers.
Given COVID-19's profound impact on consumers and markets, investigations are likely to occur where the FCA sees misconduct related to it. The FCA states that it has the ability and power to tackle significant harm to markets and consumers caused by, for example, regulated firms aiming to take advantage of COVID-19. Market abuse, capitalising on investors' concerns or reneging on commitments to consumers are specifically mentioned. Tackling this situation is likely to mean using all regulatory tools available.
Operational resilience was a priority in the FCA's 2019-2020 Business Plan and will continue to be a priority in the coming years. It is likely that the FCA will point to the probable severe operational disruptions caused by COVID-19 as illustrating the importance of firms being operationally resilient. The FCA expects all firms to have contingency plans to deal with major events and that the plans have been tested. Alongside the Bank of England, the FCA is actively evaluating the contingency plans of a wide range of firms. Given the FCA's continuing prioritisation of operational resilience, those found falling short due to a lack of sufficient contingency planning or testing are likely to be the focus of attention. See elsewhere in this edition for further information. The FCA and the Bank of England have stated that they will be publishing final rules in this area after September this year.
Financial crime was a priority in the FCA's 2019-2020 Business Plan and will continue to be a priority in the coming years. Further to its commitments in the UK's 2019 National Economic Crime Plan, the FCA will continue to use data to identify firms or areas that are potentially vulnerable and continue to take enforcement action where it uncovers serious misconduct, particularly where there is a high risk of money laundering.
Pensions and retail investments
Pensions and retail investments were a priority in the FCA's 2019-2020 Business Plan and will continue to be a priority in the coming years. The FCA recognises that when these sectors work poorly, consumer losses from unsuitable investment decisions, or fraud, can be catastrophic. The FCA recognises significant risk of harm in these markets, in part driven by the way consumers have been given additional responsibility for complex investment decisions, through the shift to defined contribution pensions and the Government’s 2015 pension freedoms. This view is from the FCA's Dear CEO letter, dated 21 January 2020, which stated "we are seeing an increasing number of cases where the action of firms are resulting in significant harm to consumers' financial well-being".
Culture in financial services
Culture in financial services was a priority in the FCA's 2019-2020 Business Plan and continues to be a priority in the coming years. The FCA expects all solo-regulated firms to comply with the requirements of the Senior Managers and Certification Regime and aims to see firms across financial services foster healthy cultures where conduct and fair customer outcomes are at the forefront of their business. The FCA's assessment of a firm's culture may be an indicator of how it treats the firm going forward.
In the Authorisations space, the Business Plan states that in 2019, the percentage of firms which the FCA refused or which withdrew their application following scrutiny was 7.6% compared to 5.8% in 2018. The FCA seems keen to show that it is being robust, and we might expect to see more of this in years to come.