Your guide to this week in regulation (2024)

Welcome to our weekly round-up for UK financial services regulation. Paul Staples summarises the key announcements and developments. Be sure to subscribe to receive our updates in your inbox every week. 

This week we lead with the Financial Conduct Authority’s (FCA) recently published annual report and supplemental reports. Consistent with a notable increase in staff numbers and operating costs, the headlines include a record number of criminal charges against individuals and a doubling of cancelled firms’ authorisations. And so, the expectation of high standards rings through loud and clear. In less straightforward messaging, the FCA aims to strike a delicate balance between enforcing its rules and regulations, while encouraging innovation and growth.

Elsewhere, firms are reminded of regulatory expectations and their obligations around the oversight of appointed representatives. Having raised the bar with enhanced rules in late 2022, this feedback on observed practices is timely and essential reading for all applicable firms.

We round off this week with the FCA’s latest report aiming to address potential harms in relation to bank account access, which includes predictable and frequent reference to the Consumer Duty.

The FCA published its annual report and accounts for 2023/24, presenting financial statements and corporate governance matters for the year ended 31 March 2024. The report updates on the FCA's progress in meeting its operational objectives, highlighting key achievements in relation to its 13 cross-cutting commitments in its three-year strategy.

Some key highlights include:

Read more on the FCA's Annual Report and Accounts 2023/24

The FCA published its 2023/24 enforcement data. The data outlines actions taken by the FCA to protect consumers and prevent wider misconduct. It highlighted the consequences of non-compliance with its rules including financial penalties, prosecution, public censure, and prohibiting individuals from carrying out regulated activities. The FCA outlined how it collaborates with international groups, such as International Organisation of Securities Commission’s (IOSCO), to tackle cross-border misconduct.

Key highlights from the data include:

Read more on FCA Enforcement data 2023/24

The FCA’s Prescribed Persons Annual Report 2023/24 details whistleblowing reports (protected disclosures) received under the Prescribed Persons Regulations 2017 for the period from 1 April 2023 to 31 March 2024. The FCA oversees nearly 45,000 UK businesses and in its role as a prescribed person it received 1,124 new whistleblowing reports, a slight increase from previous years.

Of these reports, 52% led to direct action, such as supervision, enforcement or compliance measures. Key allegations included compliance issues, fraud, and consumer detriment. Most reports came through the online webform. The updated webform, introduced this year, aims to enhance report quality and effectiveness. Whistleblowers can report anonymously or with their identity, and the FCA ensures all reports are handled confidentially.

This report underscores the value of whistleblowers in supporting regulatory oversight and improving sector standards. This will be of interest to all regulated firms to understand how internal whistleblowing frameworks can respond to reports effectively, such that the risk that workers escalate concerns to the FCA is mitigated.

Read more on Prescribed Persons Annual Report 2023/24

The FCA recently conducted a review of principal firms' adherence to its enhanced Appointed Representative (AR) rules introduced in December 2022. The review involved a telephone survey with 251 principals and assessments of documentation from 23 firms.

The review findings highlighted good practices, such as clear documentation and diverse monitoring methods, but also revealed shortcomings. Some firms were found to employ a tick-box approach, neglecting essential self-assessments and failing to regularly review AR agreements. Additionally, a third of principals didn't use data or management information to monitor ARs, and most firms hadn't updated their AR onboarding or termination procedures since the rules were implemented. The FCA has directly engaged with firms from the review and has put in place plans to take prompt action against those not meeting its standards.

Read more on the FCA's view of AR's

Read more on the new rules for effective appointed representative oversight including good practice and areas for improvement

In a recent report, the FCA emphasised the importance of improving access to bank accounts for individuals who are currently underserved. The FCA urged banking institutions and payment firms to enhance their support for individuals seeking to open a bank account, including increasing awareness of basic bank accounts and simplifying the application process. The approach to denials and closures should also be reviewed to ensure that customers, particularly those with vulnerable characteristics, don't face unnecessary obstacles.

The FCA highlighted the significance of clear and helpful communication with customers, aligning with the obligations under the Consumer Duty. The report sheds light on the experiences of financially excluded customers and seeks to help industry and consumer groups understand the appropriate support needed to effectively serve consumers. Overall, the FCA aims to foster more consistent outcomes and greater access to suitable financial products for all individuals.

Read more on the steps the FCA is taking to improve access to bank accounts