The FCA published its Annual Business Plan on 18 April 2017. As in previous years, we summarise those areas likely to be of particular relevance to those interested in FCA enforcement activity. In addition, this year, following an extensive consultation, the FCA has also published a "Mission" document (see elsewhere in this issue "The FCA sets out its Mission". Both the Business Plan and the Mission provide an insight into the FCA's enforcement priorities and approach.
The purpose of enforcement
In relation to enforcement, the FCA's message remains one of using its powers to bring about a deterrent effect. Whilst only a broad indicator of enforcement activity in the year to come, the FCA's anticipated cost of enforcement cases in 2017/18 is slightly higher than in 2016/17, at £8.6m.
In his statement, FCA Chairman John Griffths-Jones puts tackling misconduct, and changing poor culture from which the FCA believes that misconduct flows, at the centre of its agenda. The FCA notes that, due to budget constraints, they are compelled to prioritise certain areas perceived at any one time to pose the greatest threat to market integrity and consumers' interests. These are divided into priorities that apply across all sectors and those that are sector-specific. We set out below those likely to be of greatest interest to readers of this publication.
The cross-sector priorities of particular interest from an enforcement context are: culture and governance, financial crime and anti-money laundering (AML), and treatment of existing customers.
In relation to financial crime and AML, the FCA's proposed activities are of particular interest. The FCA says it will continue to use its civil and criminal powers where firms have poor AML controls. In terms of identifying relevant risks, the FCA says that it will continue to make use of whistle-blowers and co-operation with other enforcement agencies. It will also seek to identify firms and individuals at a higher inherent risk of money laundering when they apply for authorisation or approval and adopt an approach of "proactive supervision". The Treasury has also proposed that the FCA become a "supervisor of supervisors" with overall responsibility for the quality of AML supervision by professionals such as lawyers and accountants.
As for sector-specific priorities, those of particular interest are:
- Wholesale markets:
- Prevention of market abuse. The FCA notes that from January 2018 under the Markets in Financial Instruments Regulation (MiFIR), firms will be required to report a wider range of information about trading that will assist the FCA to detect and investigate potential market abuse.
- Continuing supervision of the administration of benchmarks and the submissions to them.
- Improving culture, accountability and governance to reduce conduct risk.
- Investment management:
- In Q2 of 2017, the FCA will publish its final report on ensuring value for money in the investment management sector, including a proposed duty on asset managers to act in the best interests of investors and increased transparency on costs and charges.
- Retail investments:
- The FCA will complete an on-going project to assess where firms may be providing good or poor advice. This work will form the basis for potential interventions and help set benchmarks for what suitable advice is.
- The FCA proposes a specific focus on CFD providers. A policy statement on the sale of CFDs to retail clients is planned for 2017 and the FCA intends conduct follow-up work in relation to CFD providers' assessment of appropriateness.
- Retail banking:
- The FCA will focus on banks that have failed to implement the Senior Management and Certification Regime (SMCR) and whether firms that have implemented it have been able to properly embed it into its systems and controls and governance.
- The Second Payment Services Directive requires to be implemented by January 2018. This aims to bring about (amongst other matters) increased consumer protection and regulatory scrutiny in the payments market.