In April, the FCA published its annual Business Plan. In addition to its core, day-to-day activities, the FCA identified seven areas of priority for 2016/17 which it says will be used to drive decisions regarding thematic projects and market studies. We focus on the areas that are likely to be of most interest to those involved in enforcement.
- In wholesale markets, the FCA will introduce the awaited enhanced regulatory references rules as part of the Senior Managers and Certification regimes, and it will continue its work with the Treasury on the proposed extension of the regimes to all authorised firms. It will also finish implementing and start applying the new EU Market Abuse Regulation (MAR), and undertake further consultation on the implementation of MiFID II.
- It is no surprise that culture and governance remain central to the FCA's agenda. This year will see the embedding of the Senior Managers and Certification regimes. In line with the messaging of those regimes, the FCA points to Boards as having a critical role in setting the "tone from the top" and says that it will continue to hold senior management to account where cultural issues lead to internal controls that fail to promote the right outcomes for consumers. Remuneration policies will also remain a focus.
- The FCA will also continue its work around Financial Crime and Anti-Money Laundering. Proposed work in this area includes the roll out of its Financial Crime Annual Data Return. Where it finds firms with material weaknesses in their money laundering controls, it says it will use its enforcement powers to send a deterrent message. It also plans to encourage good whistleblowing intelligence from the industry.
Pensions, advice to consumers, treatment of existing customers and innovations and technology also feature as key priorities.
The FCA identifies conflicts of interest as a key risk factor across markets. In particular, it points to the issue of "vertical integration" where firms provides a range of different client services, playing multiple roles with multiple clients, a situation that could lead them to act in their own interests rather than those of individual clients. It also identifies the possibility for conflict where there is an over-reliance on a small number of clients or on clients who have a dominant market share which can make firms reluctant to report suspected misconduct. The FCA will continue its work to ensure that firms build robust strategies to manage such conflicts.
In some ways the enforcement messaging around this year's Business Plan has softened from the Wheatley era. Tracy McDermott talks about regulating in a collaborative way, and John Griffith-Jones describes the FCA's approach for the coming year as one of "constructive deterrence". However, the more familiar, aggressive messaging around credible deterrence is present elsewhere in the plan. Whilst these comments may demonstrate an aspiration on behalf of the regulator to move toward more collaborative relationship with firms and individuals, it remains to be seen what, if any, change we will see.
You can read the FCA's Business Plan here.