Académique Documents
Professionnel Documents
Culture Documents
2018/19
Business Plan
Contents
Chair’s foreword 5
Chief Executive’s introduction 6
Our priority work for the year ahead 8
1 Our role 10
2 EU Withdrawal 16
3 Our priorities for 2018/19 19
4 Cross-sector priorities 20
Firms’ culture and governance 20
Financial crime (fraud & scams) and anti-money laundering (AML) 22
Data security, resilience and outsourcing 24
Innovation, big data, technology and competition 26
Treatment of existing customers 28
Long-term savings and pensions and intergenerational differences 30
High-cost credit 32
5 Sector priorities 34
Wholesale financial markets 34
Investment management 38
Retail lending 41
Pensions and retirement income 44
Retail investments 46
Retail banking 48
General insurance and protection 50
6 How we operate 53
Chair’s foreword
Charles Randell
5
Financial Conduct Authority
Chief Executive’s introduction Business Plan 2018/19
The FCA regulates the UK’s financial location, we move our London
services sector to ensure that office to the International Quarter in
markets work well for individuals, Stratford. This will finally allow us to
businesses and the UK economy as a bring all our London staff together
whole. This Business Plan explains our in one building. The improved
priorities over the next year. technological infrastructure will
allow us to work more effectively and
We publish this Business Plan collaboratively, meeting our public
alongside our Sector Views. Sector interest objectives.
Views provide an assessment of the
developments, performance and Our Mission also stresses the need for
risks of each financial services sector us to be able to measure the impact of
in the previous year. They give us a our work more meaningfully, and we
detailed picture of financial sectors, will continue developing better ways
consumers and relevant macro- to do this over the next 12 months.
economic and demographic factors,
which directly informs our activity. Planning our priorities for the
next year has again underlined
The priorities in this year’s Business how technology is supporting
Plan reflect the high level of resource competition, transforming markets
we need to dedicate to EU Withdrawal, and changing the way consumers
given its impact both on our regulation engage with them. The take-up of
and on the firms we regulate. This technology and innovation across
inevitably affects the amount of work and between firms is accelerating,
we can undertake in other areas. As a creating a conveyer belt of risks and
result, agreeing our 2018/19 priorities opportunities. These are often finely
has involved particularly rigorous nuanced, so this year we have agreed
scrutiny and challenge. two clearly defined priority themes
to address different aspects of
As we explained in Our Mission, our technological regulation, application
aim is to use our tools efficiently and resilience. This Business Plan
and cost-effectively to deliver explains why tackling risks including
the greatest public value. So we cyber and financial crime, as well as
have prioritised areas where we staying ahead of developments in Big
consider both that the risks of harm Data and Open Banking, remains a
to consumers, market integrity or priority.
competition are greatest and where
we assess our intervention will have FCA Innovate and our regulatory
the most impact. sandbox are increasingly being
adopted as templates by many
The aim of adding public value cuts overseas regulators, shaping
across all our activities. This year, international standards in innovation.
as the lease expires on our current Against this backdrop, the UK’s
6
Financial Conduct Authority
Business Plan 2018/19 Chief Executive’s introduction
withdrawal from the EU makes it even Culture and governance is particularly to build a national picture to assess
more important that UK markets relevant when firms design new potential and actual harm and identify
remain visibly clean, fair and reliable. products and services. They also the most effective ways to reduce it.
It is also important that we both heavily influence whether firms’ Over 2018/19 we will deliver a wider
maintain and extend our levels of business models deliver the right package of remedies as part of our
international co-operation. outcomes for consumers. The Retirement Outcomes Review.
shift to consumers having to
The requirements of the Markets in take more responsibility for their These are just some of our priorities
Financial Instruments Directive financial choices has coincided with over the next 12 months. Delivering
(MiFID II) illustrate the major changes to increasingly complex needs. our core work of authorisation,
improve market integrity in wholesale supervision, enforcement and
markets in recent years. From tackling Perhaps nowhere is this more clearly developing and implementing policy
conflicts of interest to strengthening illustrated than in the retirement and rules will always demand most of
the transaction reporting and Initial income savings and pension market. our resources.
Public Offering (IPO) regimes, we This presents a significant public
will closely monitor how well firms challenge, both in terms of the need for In this particularly challenging year,
are complying with these new new and affordable savings products I am delighted to welcome Charles
requirements. To clarify how we take and in the information firms give Randell as the FCA’s new Chair. I
decisions about intervening in markets, consumers to help them take decisions. would also like to thank our outgoing
this year we will also publish a document Chair, John Griffith-Jones and
which explains our approach to market In the past year, we have been pass on my and the FCA’s warmest
integrity. This joins documents already extremely concerned about some wishes for his future. Finally, I would
published as part of Our Mission, which firms exploiting consumers’ lack like to thank all of our staff. I am
explain our approach to consumers, of knowledge of pension products consistently impressed with their
competition, authorisation, supervision when advising them to transfer out sheer hard work and commitment
and enforcement. of defined benefit schemes. We to delivering the greatest possible
have recently published new rules public value to firms, consumers and
Firms’ culture and governance is on pension transfer advice. These the UK economy.
pivotal to building public trust and rules aim to improve the quality
confidence in the UK’s financial of pension transfer advice to help
services industry, both domestically consumers make informed decisions
and internationally. We continue for their individual circumstances.
to implement the reforms that We also published a Consultation
followed the financial crisis. The Paper (CP) proposing further changes Andrew Bailey
extension of the Senior Managers which include requiring pension Chief Executive
and Certification Regime (SM&CR) transfer specialists to have the Financial Conduct Authority
to insurers this year will ensure that same qualifications as investment
key staff are accountable for their advisers. This CP also seeks views
conduct and decisions. We will publish on whether we should intervene
our policy and final rules that set out in charging structures for pension
how the SM&CR will be extended to all transfer advice. In 2018 we will be
other FSMA firms in summer 2018. collecting details of practices across
the entire pensions transfer market
7
Our priority work for the year ahead
EU Withdrawal: Cross-sector priorities:
Current priorities Firms’ culture and Financial crime (fraud Data security, resilience
governance & scams) & anti-money and outsourcing
laundering (AML)
Working with the Finalising rules to extend Tackling money laundering Supervisory assessment of
Government the Senior Managers and firms’ operational resilience
Publishing our findings on
Certification Regime to all
money laundering in the Assessing the risks of
Ensuring an appropriate FSMA firms
e-money sector outsourcing and third-party
transition for EEA firms
Establishing a public register providers
Embedding the new Office
Working with regulated firms Focusing on firms’ for Professional Body Monitoring the roll out of
and monitoring the risks to remuneration arrangements Anti-Money Laundering technology and resilience
our objectives Supervision (OPBAS) data as part of Open Banking
and the second Payment
Taking account of the
Working towards our Services Directive
recommendations of
operational readiness
the Financial Action Task
Force’s evaluation
Cooperating with our
international partners Raising awareness of fraud
and scams
Improving intelligence
sharing with law
enforcement partners and
agencies to fight money
laundering and financial
crime
Cross-sector priorities:
8
Sector priorities:
Clarifying our approach to Finalising rule changes Assessing creditworthiness Developing a joint pensions
market integrity following the Asset in consumer credit strategy with The Pensions
Management Market Study Regulator
Reviewing money laundering Launching our Market
in capital markets Working with European Study on Credit Information Potentially extending
Supervisory Authorities the remit of Independent
Monitoring firms’ compliance Publishing our interim
in the implementation and Governance Committees
with new conflicts of interest report on our Mortgage
review of the Packaged for workplace pension
requirements Market Study
Retail and Insurance-Based schemes
Addressing operational Investments Products Reviewing the commission
Helping consumers
resilience Regulation (PRIIPS) between credit brokers and
avoid scams
other firms
Monitoring firms’ compliance Consulting on new rules
with our rules on IPOs and guidance on liquidity Ensuring the debt
management management sector works
Publishing final rules and our
well for consumers
approach to industry codes Considering the extension
of conduct for unregulated of governance remedies to Reviewing the motor
markets with-profits and unit-linked finance market
funds
Reviewing retained
Assisting the Treasury Consumer Credit Act
in the development of a provisions
new prudential regime
for investment firms
authorised under MiFID II
Publishing research that
explores the rise of passive
investment
Sector priorities:
9
Chapter 1 Financial Conduct Authority
Our role Business Plan 2018/19
Our role
Our objectives, set by Parliament, ensure that we We are the conduct regulator for
over 58,000 financial services firms
act in the public interest. Our aim is to add public in the UK and 145,000 approved
value by improving how financial markets operate, to persons.
benefit individuals, businesses and the UK economy.
We are also the prudential supervisor
We have a single strategic objective under the Financial for approximately 46,000 firms.
Services and Markets Act 2000 (FSMA) – to ensure the For 18,000 of these firms, we have
markets we regulate function well. We also have three detailed standards that need to be
met. Even those firms that have
operational objectives under FSMA to advance this. no minimum financial resource
requirements must still ensure
they have adequate resources, as
outlined in the threshold conditions.
Operational objectives
Protect consumers:
to secure an appropriate
degree of protection for
consumers
Promote competition:
to promote effective
competition in the interest
of consumers.
10
Financial Conduct Authority Chapter 1
Business Plan 2018/19 Our role
1 www.fca.org.uk/publication/corporate/our-mission-2017.pdf
2 www.fca.org.uk/publications/corporate-documents/our-approach
11
Chapter 1 Financial Conduct Authority
Our role Business Plan 2018/19
12
Financial Conduct Authority Chapter 1
Business Plan 2018/19 Our role
To advance our competition as well as market participants in We set out what we expect from
objective we do three things: secondary markets. Misconduct and those we regulate and consult
poor investor protection in capital widely before we finalise our rules
1. We look at the structure and markets can damage confidence in and guidance. We use evidence and
dynamics of markets through their integrity and effectiveness. This analysis to assess the costs and
our market studies and, where harms investors who suffer losses in benefits of our proposals to ensure
necessary, adjust our rules unfair markets and harms the broader that they are an effective and efficient
to improve the outcomes for UK economy by preventing the response to an identified harm.
consumers and to support stimulus that robust and fair capital
consumer choice markets provide. International: We ensure markets
work well, working collaboratively
2. We take action against The role we play in overseeing and with international partners to shape
anti-competitive behaviour, implementing change in the UK’s the global regulatory agenda. We
investigating breaches of the markets allows the full spectrum shape and lead changes in the
Competition Act 1998 and its of issuers to access deep and liquid international environment, for
EU equivalent pools of capital for growth. It aims example delivering the optimal
to guarantee that the process of regulatory response to EU
3. We ensure regulation promotes, price formation is robust and that all Withdrawal, focusing on minimising
rather than hinders, healthy participants can rely on it. It provides harm and proactively making the
competition. An important aspect investors with the appropriate most of opportunities.
of this is to support new and levels of protection they need to
innovative initiatives with firms sustain their confidence in market Regulatory perimeter: Our central
whose business models may test activity. In the secondary market, our focus is on the conduct of regulated
the boundaries of our current programme ranges from education activities. 3 As well as regulated
regulations through to enforcement, and aims activities, authorised firms also
to ensure there are strong conduct carry out activities that are outside
Enforcement: We take action standards and integrity in trading the regulatory perimeter but which
against firms and individuals where activity on UK markets. This helps have an impact on our objectives.
their behaviour fails to meet our ensure these markets function in For example, while the process
standards, is dishonest or illegal. Our the interests of investors and issuers for setting LIBOR was outside our
aim is to prevent consumer harm and alike, benefitting the broader UK perimeter, LIBOR malpractice had
damage to market integrity before it economy. a major impact on market integrity.
happens, or reduce further harm if it As Our Mission explains, we have
has already happened. Enforcement Policy: We use our policy-making powers to act outside the perimeter
has a particularly visible role in our powers to implement and maintain in certain circumstances. We will
regulation. Investigating misconduct a framework of rules and guidance be more likely to do this when the
fairly and promptly and holding those that reduces harm and make unregulated activity could potentially
responsible to account helps us to markets work better. Our policy work undermine confidence in the UK
maintain public confidence in the is guided by the following principles: financial system or have an impact
integrity and fairness of UK markets. on a regulated activity. Where we
• Prioritising where we can add the decide we cannot or will not act,
We also tackle the consequences most public value. we will publicly explain why and, for
of misconduct including, where example, raise the matter with other
possible, seeking redress or remedy • Only making or supporting new bodies or regulators who are better
for those harmed. We explain where rules if they will be an effective and placed to deal with it or with the
and why we have taken action. This proportionate solution to an issue. Government.
ensures our actions are transparent
and fair and that those we regulate • Reviewing rules where they no
can use this information to evaluate longer achieve the right outcomes.
and improve their own conduct. We seek to influence and guide, and
align our work with, international
Market Oversight: We deliver public initiatives.
value to the wider economy through
our oversight of UK capital markets.
This includes overseeing the conduct
of issuance, issuer and sponsors,
3 Activities set out in FSMA 2000 and the Regulated Activities Order.
14
Investigating misconduct fairly
and promptly and holding those
responsible to account helps us
to maintain public confidence
in the integrity and fairness of
UK markets
Chapter 2 Financial Conduct Authority
EU Withdrawal Business Plan 2018/19
EU Withdrawal
The UK’s decision to leave the European Union (EU) We expect our work on the
has, and will continue to have, a substantial impact implications of EU Withdrawal
will continue beyond March 2019,
on the way we work. A significant proportion of our throughout any implementation
resources are already focused on the forthcoming exit, period. We will keep our EU
including arrangements to implement the change. Withdrawal priorities and
resources under review as we
To fulfil our regulatory objectives and provide technical gain greater certainty on the
support to the Government in the run up to withdrawal, outcome of negotiations and the
we have increased the level of resource dedicated to implementation timeframe.
16
Financial Conduct Authority Chapter 2
Business Plan 2018/19 EU Withdrawal
17
18
Financial Conduct Authority Chapter 3
Business Plan 2018/19 Our priorities for 2018/19
Our Business Plan sets out our main areas of focus across seven themes
that span the seven specific sectors we regulate. Preparing for and
implementing changes resulting from EU Withdrawal is inevitably the
priority for our discretionary activity. For 2018/19 we outline our approach
to delivering necessary changes across the sectors we regulate.
19
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
Firms’ culture and governance
Firms’ culture and governance Our key activities
should drive behaviours and produce
outcomes that are likely to benefit XXX
Accountability and governance
consumers and markets. We will Lack of accountability of senior
XXX
continue to support and engage with management can drive poor
conduct, from selling unsuitable
firms, sharing our expectations and products to excessive risk taking or
working to promote effective cultures mis-selling, that harms those who
and governance across the industry. use financial services.
This will ensure that firms have the right We are working on finalising the
people in the right roles, working in the rules for the extension of the Senior
interest of consumers. It will also make Managers and Certification Regime
(SM&CR) to all FSMA firms, including
sure that markets and our stakeholders dual-regulated insurers (FCA and
understand our approach. PRA regulated). Our proposals
will reflect our intention to tailor
We expect firms to be able to demonstrate that their
the extended regime to reflect
purpose, leadership, governance arrangements and
the different risks, impact and
approach to rewarding and managing staff do not lead
complexity of firms in a clear, simple
to avoidable or unnecessary harm to their customers.
and proportionate way. In total, the
This should be a collaborative effort driven forward by
SM&CR will cover approximately
staff at all levels. We support individuals who contact
47,000 firms. We intend to publish
us as whistleblowers and we ensure that they are
our Policy Statement and new rules
provided with the anonymity they need.
in summer 2018.
We believe it is important that all firms, regardless
The Treasury has confirmed the
of size, are well governed and that individuals are
Regime will start for insurers on
accountable for their actions. Firms should be able
10 December 2018. It will confirm
to show the effectiveness of their governance
the date for when these rules
arrangements in identifying, managing and mitigating
commence for solo-regulated firms
the risk of harm.
(firms regulated only by the FCA,
rather than by both the FCA and the
PRA) in due course. We will work with
firms to ensure that the regime is
implemented effectively.
20
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
Remuneration
We have published a Policy
Statement that explains how
consumer credit firms can
improve how they manage the
risks that their staff incentives,
remuneration and performance
management policies may pose
to consumers. We will review
how firms respond to this Policy
Statement.
Monitoring change
We do not attempt to measure or
assess culture directly; instead
we seek to form judgements as to
whether the drivers of behaviour
we are interested in as a regulator
are driving appropriate behaviours
which are unlikely to cause harm.
This includes looking at firms’
remuneration practices and the
number of whistleblowing cases
we receive to determine the
effectiveness of firms’ internal
processes and whether they meet
our expectations.
21
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
Financial crime (fraud & scams)
and anti-money laundering (AML) Our key activities
The safeguards we put in place to Along with the work set out below,
our proactive work to tackle market
prevent financial crime are designed abuse (covered under the Wholesale
to make the UK and the financial section) is an important way in which
services sector a hostile place for we seek to combat financial crime.
criminals, a safe place for consumers,
Tackling money laundering
and ensure we meet latest
international standards. Our permanent programme of work
includes regular inspections of the
Financial crime, including money laundering, harms largest firms, as well as other firms
society and the wider economy by causing financial loss that we believe present high money
to victims and enabling criminal activity. The UK’s financial laundering risk. This work, alongside
markets are very large, complex and operate globally. This our supervision and authorisation
makes them attractive to money launderers and other frameworks, enables us to identify
criminals who operate across borders. and reduce the potential for firms
to be used for money laundering
We want to ensure that the safeguards in place are and other financial crime. We use
proportionate, operate efficiently and minimise the full range of supervision and
any unintended consequences of regulation. We regulatory enforcement tools
also want to reduce and prevent the harm caused in our financial crime work. This
by scams and increase consumer awareness of the includes authorisation interviews,
dangers of fraud. proactive and reactive supervisory
work, consumer alerts, FCA-led or
jointly-run education programmes,
as well as enforcement tools such as
business restrictions and regulatory
and criminal investigations.
The UK’s financial markets are large, We use intelligence, including liaising
with other agencies in the UK and
complex and operate globally. This internationally, to support the work
makes them attractive to money we do to supervise and enforce our
principles and rules. We also conduct
launderers and other criminals random sampling of small, lower-
risk firms to ensure they maintain
high standards and check that our
assessment of risks in different
sectors remains current.
22
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
issue to enable us to decide the Taking account of FATF Mutual We collaborate with law
best approach, covering a range Evaluation recommendations enforcement partners and other
of different firms. Better systems agencies at home and abroad
We are a major participant in the UK
and controls in capital markets will on AML, scams and other types
delegation to the Financial Action Task
protect society as a whole, as well of financial crime, to help the
Force (FATF). We have been closely
as the integrity of the UK’s financial relevant organisations take action.
involved in the preparation for the
system and of the global financial This year, we will convene an
FATF’s Mutual Evaluation of the UK
framework. We are also undertaking international TechSprint. This will
which will conclude in October 2018.
diagnostic work on money laundering bring together a range of experts
We will continue to review and refine
and terrorist financing risks in the to explore whether new technology
our AML supervisory approach and
e-money sector. This is important can be used more effectively to
take account of any recommendations
because if e-money firms have fight financial crime. Working in
from FATF’s evaluation.
ineffective systems and controls this collaboration with others improves
could undermine confidence and intelligence-sharing arrangements
participation in e-money services Raising awareness of fraud to help fight money laundering and
and the integrity of the financial and scams financial crime. This leads to more
system. We will share our findings in The aim of our ScamSmart effective and consistent standards
Q2 2018/19. communication campaign is to help and ultimately delivers better
protect consumers from falling outcomes.
The new Office for Professional Body
victim to investment fraud. Scams
Anti-Money Laundering Supervision
are becoming more sophisticated,
(OPBAS) was established in
while consumers’ increased use of
February 2018. OPBAS oversees 22
data sharing and social media can
professional body supervisors for
also make them more susceptible
anti-money laundering. OPBAS aims
to fraud. Scams continually evolve
to ensure a robust and consistent
and there is now a significant overlap
standard of AML supervision
between pension and investment
across the legal and accountancy
fraud. In 2018 we will work with
sectors, and improve and enable
The Pensions Regulator to deliver Monitoring change
collaboration and information
a single, co-ordinated awareness
and intelligence sharing between We assess the quality of firms’
campaign to tackle pension and
professional body AML supervisors, AML controls and consumers’
investment scams.
statutory supervisors and law use of our online resources, such
enforcement agencies. as ScamSmart, as one indicator
Collaborating with our partners and of whether the potential harm to
In December 2017, the Home other agencies consumers and market integrity
Secretary announced a package of Not all fraud and scams fall within in this area is likely to have
measures to tackle economic crime. our remit but we have a range of reduced.
We are working closely with the enforcement action to tackle those
Government and industry on reform that do. These include civil court OPBAS will monitor the
of the suspicious activity reporting action to stop activity and freeze quality and consistency of the
regime and to establish a new National assets, insolvency proceedings, professional bodies’ own efforts
Economic Crime Centre. We will prohibiting individuals from financial to supervise their members’
continue to use intelligence, including services roles and, for the most money laundering controls and
from whistleblowers, to make it more serious cases, criminal prosecution. how effectively information
difficult for money launderers to use is being shared between their
the financial system. members and law enforcement.
We believe that effective
information-sharing is essential
to tackling the harm that arises
from financial crime.
23
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
Data security, resilience
and outsourcing Our key activities
Technology plays a pivotal role in Addressing industry’s operational
delivering financial products and resilience
services. It enables firms’ innovation Our aim is to help firms to become
(see the Innovation, big data, more resilient to cyber-attacks, to
enhance market integrity and to
technology and competition cross- protect consumers.
sector theme) and supports their
business strategies. New technologies Over the next year, we will strengthen
our supervisory assessments of
can lead to harm if they are not safely the highest impact firms to better
adopted and managed. For example, understand their current and planned
new technologies such as distributed use of technology, resilience to
cyber-attacks and staff expertise.
ledger (blockchain) and artificial We will also review how governance,
intelligence rely on access to sensitive strategy, systems architecture, risk
and high quality data. But new management and culture contribute
to firms’ data security. This will ensure
technologies present opportunities we can better assess potential harm
for helping firms to meet Know Your and explain to firms what we expect
Customer or anti-money laundering from them. Where necessary, we
will ensure they address any specific
requirements more efficiently. issues we have found.
Cyber-attacks in the financial services sector are
becoming more frequent and widespread. This is We will also conduct focused
potentially made worse by the use of complex and thematic work with ‘lower impact’
ageing IT systems, outsourcing of operations and the firms, based on harms we have
growing transfer of data between firms. identified in each sector. This
could include firms that are new
Our work focuses on ensuring that firms are more to financial services as well as
resilient to cyber-attacks and technology outages, so established firms. We will continue
reducing the risk and frequency of disruption and also the communications approach we
ensuring new and replacement technologies began in 2017/18 and give smaller
are resilient. firms additional information on
how to improve their resilience.
We work closely with global bodies such as Our approach to cyber resilience
the International Organisation of Securities is aligned to the UK’s National
Commissions (IOSCO), Group of Seven (G7), Financial Cyber Security Strategy and we will
Stability Board (FSB) and others who prioritise data continue to work closely with the
security, resilience and outsourcing. National Cyber Security Centre
(NCSC) to share good practice
with industry.
24
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
25
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
Innovation, big data, technology
and competition Our key activities
Financial Technology (FinTech4) is Assisting firms through the FCA
already driving change in markets and Innovate programme
encouraging further innovation. It is Our FCA Innovate programme provides
increasing competition and reducing assistance to firms which are using
innovation to improve consumer
costs, offering consumers better value outcomes. We help them better
products and services and easier ways understand our rules, processes and
for firms and consumers to engage guidance. In turn, this helps us keep
ahead of developing trends and potential
with each other. For many consumers harms in the market, including in new
it has already improved access to areas such as initial coin offerings and
products and services. Increasing distributed ledger technology.
amounts of data from a wider range
Allowing firms to test viability in the
of sources, alongside sophisticated regulatory sandbox
analytical tools, can improve pricing,
Our regulatory sandbox gives
access and service for consumers, businesses of every size the
including those who may previously not opportunity to test the commercial
have been able to access services. and regulatory viability of their
innovative concepts before they invest
The increased use of big data also has the potential more heavily in them, while providing
to cause harm. There is a risk that if technology and safeguards for consumers. The
innovation move too quickly, the more vulnerable in sandbox also gives us an understanding
society could be at a disadvantage. As both old and of the opportunities and risks of harm
new firms grapple with the challenges and benefits of that innovation can create.
innovation we also expect them to develop plans to
deal with those who are more vulnerable. Problems Over the coming year we will undertake
can also occur because of data loss and weak cyber work that uses lessons we have learned
resilience. This theme is strongly linked to our since the sandbox was created in 2016.
cross-sector theme of ‘Data security, resilience and We aim to further reduce unnecessary
outsourcing’. barriers to entry for innovative firms.
26
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
jurisdictions – especially for start-ups data pools, algo trading and wider business models without putting
who are keen to expand internationally. artificial intelligence. This work will consumers at unacceptable risk.
help us better assess both potential
Over the next few months we will opportunities and harm and where we We will finalise the proposed
work with interested regulators on a may need to intervene. new rules and publish them for
blueprint of the global sandbox. consultation in 2018.
We will further develop our relationship
with the Information Commissioner’s
Testing and applying RegTech and Cryptocurrencies
Office as the General Data Protection
advanced analytics
Regulation (GDPR) comes into Cryptocurrencies has been an area
RegTech describes new technologies force in May 2018. We will then of increasing interest for markets
developed to help overcome regulatory publish an updated Memorandum of and regulators globally. In the
challenges faced by financial services Understanding setting out how we will UK, the Treasury Committee has
firms. In 2018/19 we will take forward work together in future. announced that it will be launching
work to deliver cost savings, both for an enquiry, to which we intend
firms submitting regulatory returns to to respond.
Reviewing retail banking
us and in how we use this information.
business models
At the start of 2018 we published a Call Cryptocurrencies themselves
for Input which summarised our work to This review looks at the core (i.e. those designed primarily as
date on machine executable regulatory differences between emerging and a means of payment/exchange)
reporting and the ‘proof of concept’ traditional retail banking business are not currently within our
developed during our November 2017 models. It assesses how these regulatory perimeter. However,
TechSprint. In summer 2018 we will differences are being driven by some models of use or packaging
publish a feedback statement that technological change and innovation cryptocurrencies bring them
brings together the results of the and how they affect competition and within our perimeter, making the
feedback from this Call for Input and firms’ conduct. We particularly want to landscape complex.
further industry discussions. understand what impact the growing
use of digital channels and declining Last year, we issued consumer
Some of the experiments we are use of branches is having on business warnings on cryptocurrency
conducting with advanced analytics models and the implications of this for Contracts for Difference and
over this year include: consumers. the risks of Initial Coin Offerings
(ICOs). We will work with the Bank of
• automated detection of We are analysing the information we England and the Treasury as part of
unauthorised business activity on have collected from retail banks. We a taskforce to develop thinking and
the internet through a variety of new will publish an update in the first half publish a Discussion Paper later this
technologies of 2018, explaining the results of this year outlining our policy thinking on
preliminary analysis and our proposed cryptocurrencies.
• testing advanced Natural next steps.
Language Processing (NLP)
technologies and semantic
Crowdfunding post-implementation
language models in an effort to
review
automate what would otherwise
be manual supervisory tasks Crowdfunding markets are Monitoring change
continuing to develop rapidly.
• automated evaluation and detection Since the publication of our To see whether FinTech is helping
of misleading advertising interim feedback in 2016, we have to improve competition in the
been working on additional rules interest of consumers, we will look
The automated processes will allow to address areas of concern, at metrics such as the number of
us to review the total population of in particular for loan-based new entrants to the market and
high-risk markets, rather than only crowdfunding. This has been an the emergence of new innovative
sampling a proportion. extensive process due to the products to meet consumer
continually evolving market but we needs. We continue to measure
Reviewing firms’ use of data need to ensure that there remains an feedback and the number of
appropriate framework for regulating firms we help through our FCA
We will review the use of data by the crowdfunding industry. We want Innovate work.
financial services firms, including a sector that can innovate, compete
machine learning analysis of big and challenge established firms and
27
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
Treatment of existing customers
Our aim is to ensure that existing Our key activities
customers enjoy the benefits
of increased competition and Understanding firms’ pricing
practices in retail general insurance
innovation. Firms should not give
In 2018/19 we will continue work on
longstanding customers less attention pricing practices in retail general
than new customers or treat them in a insurance. We will conclude the first
way which results in poorer outcomes. phase of our diagnostic work to give
us a better understanding of retail
All customers should be well informed general insurers’ and intermediaries’
about the financial products they pricing practices and how these affect
buy or are invested in, including household insurance customers. This
work has also looked at the types of
performance and charges. systems and data that firms use to
If competition is working well in a market, it should decide the final price to consumers
not overly disadvantage existing customers over new and the governance and oversight
customers. While many firms have made progress in arrangements within firms.
putting customers more firmly at the centre of their
business models, they need to further improve both Drawing on the emerging themes
competition and their standards of treatment for from that work, our earlier Call for Input
existing customers. on Big Data in retail general insurance
and recent public debate, we are
currently scoping work to formalise
that debate and to assess whether we
need to act to ensure future insurance
pricing practices support a market
While claims management companies that works well for its customers. We
will publish details of the scope of this
can provide access to justice, some work in due course.
firms may not always operate in
consumers’ best interests Regulation of claims
management companies
We expect to take over the
responsibility of regulating claims
management companies (CMCs)
from the Ministry of Justice, subject
to legislation, in spring 2019. While
CMCs can provide access to justice
for consumers who may be unwilling
or unable to bring a claim themselves,
some firms may not always operate
in consumers’ best interests. We are
developing a package of information
to ensure CMCs are clear about the
rules and principles they will have
to meet when we take over their
regulation. We will also continue to
build our knowledge of the sector and
consult on draft rules to deliver robust
regulation to protect consumers later
this year.
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Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
29
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
Long-term savings and pensions
and intergenerational differences Our key activities
Our work on long-term savings and Retirement Outcomes Review
pensions and intergenerational Since we published the interim
differences covers a broad group report from our Retirement
Outcomes Review, with potential
of issues around the changing UK remedies, we have received
population and their financial needs. feedback and undertaken further
In some sectors, including pensions analysis on the types and level of
consumer harm that drawdown
and retirement income, retail banking, charges and investment choices may
general insurance and protection and cause. We will publish our final report
retail lending, some older consumers’ in 2018, together with a Consultation
Paper on our proposed remedies.
financial services needs are not being
fully met, resulting in exclusion, poor
Unsuitable pension transfer advice
customer outcomes and potential harm.
Some firms have responded to
An ageing population, increased life expectancy the pension reforms by changing
and individuals taking on more responsibility for their business models in ways
financing their longevity shows that our society that potentially cause harm to
is undergoing dramatic social and demographic consumers. We will not hesitate
change. The pronounced fall in real interest rates has to intervene, where necessary, if
reduced savings growth and created concerns that we see evidence of firms providing
consumers may be unable to meet their expectations unsuitable pension transfer advice.
of sufficient retirement savings. We will be collecting data from all
firms that have pension transfer
Additionally, the reduced cost of servicing household permission to assess practices
debt has created an incentive to borrow, while the across the entire market. Our work
cost of building up assets to support retirement will identify the extent of consumer
income has gone up. harm and where and how we can
intervene most effectively to stop it.
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Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
Monitoring change
We will use a variety of metrics,
particularly through our
diagnostic work, to assess how
consumers are saving and how
this varies across generations.
The measures in this cross-sector
theme are likely to link to our
outcome indicators in Pensions
and retirement income and
Retail investments.
31
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19
Cross-sector priorities
High-cost credit
We have already made a significant Our key activities
impact in the high-cost credit
Alternatives to high-cost credit
market. We have taken action
For low-income, high-risk
to protect potentially vulnerable consumers, even in a well-regulated
consumers by putting in place new sector, borrowing remains expensive
rules for high-cost short-term credit and the consequences can create
harm for consumers. Drawing on
firms. We have taken supervisory and our research and our extensive
enforcement action against non- stakeholder discussions, we have
compliance across all credit markets. identified key issues that can
create barriers to the expansion
Our work on high-cost credit complements our work of alternatives to high-cost credit.
on Retail lending which covers the wider borrowing These include access to sustainable
needs of consumers across mortgages and capital, lack of access to alternative
consumer credit. lending options and uncertainty
about regulatory requirements from
The harms caused by high-cost credit products tend
organisations such as Registered
to disproportionately affect vulnerable consumers
Social Landlords referring
who may turn to them in financial difficulty. We have
consumers to lenders.
a responsibility to ensure there is a framework of
rules that allows consumers access to products and As part of our ongoing review of
services that are suitable, affordable and right for high-cost credit, we will look at
their circumstances. solutions designed to increase
the choice and availability of
We want to send a clear message to firms and
alternatives to high-cost credit.
consumers that more work is needed in some parts
We will also consider the options to
of the market to improve consumer protection.
improve transparency of regulatory
requirements and, if needed, will
consult on further guidance and
rule changes.
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Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities
33
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19
Sector priorities
Wholesale financial markets
The UK is a leading international financial centre and Our work is concentrated on four
broad principal drivers of harm in
plays a key role in global wholesale financial markets. wholesale markets.
Healthy wholesale financial markets enable firms and
governments to access short-term finance and First, market participants that
undermine clean markets through
long-term capital to provide investment opportunities financial crime and market abuse.
for retail and institutional investors, undertake The integrity of the UK financial
domestic and international trade, and fund growth. system suffers if those undertaking
unlawful activities benefit at the
Their effectiveness relies on them being visibly fair, expense of others.
transparent and efficient. So clean markets where
competition works well are vital to the UK’s prosperity, Second, market participants
failing to deal with each other
and we have a role in facilitating this. appropriately. This could be either
through conflicts of interests, poor
governance or weak oversight.
These conflicts can affect the
incentive for dealers to act in their
client’s best interest, resulting
in clients buying unsuitable or
overpriced products.
34
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
Our key activities Promoting clean financial markets In 2018/19 we will carry out a
thematic review to increase our
Insider dealing illegally exploits
Clarifying our approach to understanding and assessment
privileged information for profit,
market integrity of the harms caused by money
disadvantaging those who abide by
laundering in capital markets (see
Wholesale financial markets are the rules. Market manipulation and
Financial crime (fraud and scams)
complex. They have undergone other forms of market abuse distort
and anti-money laundering).
large-scale and complex regulatory the effective allocation of capital,
change, including the Markets in damage competition and reduce
Financial Instruments Directive confidence in market fairness
(MiFID II) and the Market Abuse and integrity.
Regulation (MAR). Technology
and innovation are affecting their MiFID II has updated the transaction
business models and their users have reporting regime. The regime’s scope
different levels of sophistication. All has been significantly expanded
of this creates particular challenges across new instruments and asset
for firms and individuals who need to classes, providing more information
be clear about the conduct that we on transactions. Over the next
expect of them. To provide necessary year, we will monitor, detect and
clarity and certainty, in 2018/19 we investigate potential abuse in these
will publish a document outlining markets and enforce against unlawful
our ‘Approach to Market Integrity’. behaviour where appropriate. We will
It will help firms and individuals to focus our supervision monitoring on
take responsibility for their part in the fixed income, commodity and
maintaining clean, fair, effective and non-standard derivative markets.
competitive markets and be clear These have previously received
about our approach to regulating less focus than equities, but make
these markets. up a large and important part of the
wholesale financial markets.
35
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19
5 Previous analysis, has shown that regulation has improved the accuracy of the Intercontinental Exchange (ICE) Swap rate benchmark, as well as the liquidity of the underlying
market: see Occasional Paper No.27: Benchmark Regulation and Market Quality.
6 www.fca.org.uk/news/press-releases/bank-fca-launch-next-phase-sterling-libor-transition-work
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Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
innovations across the wholesale up work will depend on the outcome encourage the industry to develop
financial markets. We will use existing of EU Withdrawal negotiations and and adopt new codes for firms to
diagnostic work on HFTs, circuit clarity on future arrangements. But we achieve strong conduct standards.
breakers and mini-flash crashes to expect to complete a more specific These standards can be a useful
inform this work. This will enable us aspect of further work aimed at issuers way for the industry to police itself in
to anticipate and deal with potential controlled by sovereign countries. support of our regulatory work, and
harms this kind of technological can help firms to communicate what
advancement may create. We have already begun preparations they expect from their senior staff
for the Europe-wide adoption of when linked to the Senior Managers
electronic filing of annual reports in and Certification Regime.
Effectiveness of primary and
formats supporting structured data,
secondary markets
due to come into force in 2020 and
Poorly functioning primary markets we will be progressing this further Outcome indicators
lead to badly allocated economic in 2018/19.
resources and capital. The UK IPO We will use indicators such as market
process plays a vital role in helping MiFID II introduced important cleanliness data and the number of
companies raise finance and changes to the wholesale market suspicious transaction and order
provides investment opportunities structure by establishing new reports to assess the potential harm
for a wide range of investors. For trading venues and, in some from market abuse which damages
example, between 2011 and 2015, instances, limiting the amount of confidence and participation in
a total of 460 companies floated on trading that takes place outside the market.
the London Stock Exchange, raising organised venues. These changes
an estimated £53 billion7 (including may have a significant impact on
capital raised on the Alternative wholesale financial markets, for
Investment Market (AIM)). example in 2016 a total £5,375
billion of UK equities were traded via
Recently, our work has focused on over-the-counter trading.9 There
two key drivers of harm in primary may be important unintended
markets. The first is the disparity in consequences to these regulatory
the information provided to investors changes, such as less liquidity in
during the IPO processes and the some markets. We will undertake
second is the difficulties market monitoring and diagnostic work to
participants had in interpreting our ensure that we can anticipate any
Listings Rules. such changes and act if we consider
that they may lead to potential harm.
During 2018/19 we will monitor
firms’ compliance with the final rules
Industry codes of conduct
on IPOs we made last year. We will
assess if the rules are working as Many of the recent conduct issues
intended and if firms are making the that have caused harm in wholesale
right information available at the financial markets involved authorised
right time during the UK IPO process. firms carrying out activities that
are outside our remit (known as
Following our review of the the ‘regulatory perimeter’). While
effectiveness of primary markets8 voluntary industry codes can help
three topics require further focus: raise standards of market conduct,
the future structure of the UK listing historically their status has been
regime (premium listing and standard unclear and they have lacked teeth.
listing), the provision of patient capital
to companies that require long-term So last year we proposed to recognise
investment and retail access to some industry codes of conduct for
debt markets. As elements of these unregulated markets and in 2018
topics are based on powers from EU we will publish a Policy Statement
legislation and involve EU market outlining our final rules and approach
structures, progress on the follow- to these codes. Our aim is to
37
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19
Sector priorities
Investment management
The investment management sector is an important Key issues in this sector include:
poor quality and value for money of
contributor to the UK economy, with just over £8 products, inadequate disclosure and
trillion in total assets under management at the end lack of transparency, susceptibility
of 2016. It has grown steadily in recent years and this to financial crime, and cyber and
technological resilience risks. These
growth is expected to continue. It is important that we issues may cause harms such as
have a competitive sector which is both attractive and investors paying too much for
works well for those who rely on it for their financial products, inappropriate purchases and
products that do not deliver or behave
wellbeing. as expected. Investment management
firms also have responsibilities to
uphold market integrity.
38
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
Our work will aim to deliver strong brings with it important potential
regulatory cooperation that harms, such as service disruption, loss
supports open markets. of data and exposure to cyber crime. Given that even small
We will engage with firms to ensure differences in charges
they allocate sufficient expertise
Our key activities and resources to these important can have a significant
developments to prevent consumer impact on people’s
Our work in the investment
management sector will aim to
harm and avoid disruption of critical savings over time, the
services. This work will also help to
ensure that firms act as good inform our future strategy with new harm is significant
agents to their investors and as technology. In 2017, we launched the
effective participants in wholesale Asset Management Authorisations
markets. This is especially important Hub to streamline the authorisation
in a continued low interest-rate process for new asset managers
environment that drives a ‘hunt looking to set up in the UK. This is
for yield’ and where technology part of our commitment to efficient
advances rapidly. regulation and enhanced competition.
We will continue to welcome
It is crucial that firms’ decision-making applications throughout 2018.
gives due prominence to customers’
interests. Our ‘five conduct questions’
form the framework we use to assess Asset Management Market Study
the effectiveness of a firm’s culture We estimate that over three-quarters We are implementing a
and governance. Firms also need to of the UK population are exposed to comprehensive remedies package
ensure they have effective systems the asset management sector, either on asset management to tackle the
and controls to avoid being used as directly or through their pensions. It harm we have found by promoting
conduits for financial crime, including is important that competition works increased competition in the
market abuse. well in this market as, for example, interests of investors and to better
even small differences in the charges protect them from the results of
This sector is using new and they pay can have a significant impact weak competition where necessary.
innovative technologies, for example, on people’s savings over time.
distributed ledger technology and In September 2017 we referred
artificial intelligence. Technology investment consulting and fiduciary
has the potential to create real management to the Competition
benefits for both consumers and
firms by increasing competitiveness,
innovation and efficiency. But it also
39
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19
and Markets Authority (CMA) for a Liquidity strategy proposal for a new prudential
full market investigation. The CMA regime for investment firms
We have reviewed the feedback
will publish their provisional findings authorised under MiFID. The
from our 2017 discussion paper on
on how competition is working in this proposal is a prudential regime
liquidity management in open-ended
part of the market in summer 2018 for these firms that mitigates the
funds. UK open-ended funds have
and will finalise the investigation potential harm they may cause if
approximately £35 billion invested in
including recommendations for they have insufficient resources
commercial real estate.10 Our paper
remedies by March 2019. to stay financially viable. The aim
looked at the tension from funds
of the review is to formulate more
that offer daily redemption terms,
In 2018/19 we will issue a further proportionate rules for these
while managing assets that are not
Policy Statement on the final rules firms, rather than subject them to a
revalued on a daily basis. It noted the
and guidance outlined in our recently regime primarily intended for banks.
potential harms to investors who
published Consultation Paper. We Over the next year we will provide
are unable to withdraw their money
will also issue a second Consultation technical assistance to the Treasury
or do not receive a fair sale price for
Paper on remedies focused on during the negotiations of the
their assets. We will consult on a
measures to ensure investors proposed text.
package of new rules and guidance
receive clear, comprehensive and
that takes on board the responses
consistent information. We believe that together these
we received, as well as the wider
new and proposed measures will
international agenda, particularly
strengthen the governance of
PRIIPs Regulation the International Organization of
investment managers, helping them
The sector continues to be affected Securities Commission’s updated
to better act in the interests of their
by important regulatory changes ‘Collective Investment Schemes
underlying investors.
that should mitigate actual and (CIS) Liquidity Risk Management
potential harm to investors. Recommendations’ published in
January 2018. Impact of passive investment
The Packaged Retail and Insurance- Given the rapid growth in the
based Investment Products (PRIIPs) Our aim is to ensure that our
proportion of investor wealth
Regulation has applied since January regulatory framework does
managed passively, it is important
2018. It introduced a requirement for not prevent investors having
for us to understand the economic
firms to produce, publish and provide access to diversified investment
implications of this development
a standardised key information opportunities. It should also support
on both individual investors and
document (KID) for PRIIPs. This was the fair treatment of all investors
UK financial markets generally.
so that investors can make better and in these funds and not amplify
By the end of 2018/19, we plan to
fully informed decisions by being able disruptions to the financial system in
publish research that will look at
to compare key features, risks and stressed market conditions.
the rise of passive management in
rewards of PRIIPS, through access to a the UK and will explore the impact
short and consumer-friendly KID. Strengthening governance on core aspects of financial market
performance such as corporate
Alongside the governance remedies
Some firms have told us they governance, market efficiency and
we proposed following the Asset
have concerns about this directly financial stability.
Management Market Study, we are
applicable EU regulation. In
considering whether we should
response, in January we published
extend similar remedies to
a statement clarifying some of our Outcome indicators
with-profits and unit-linked funds.
views on the KID. We will continue
to engage with firms and their trade Following our Asset Management
The SM&CR is being extended to Market Study, we will monitor the
associations to consider how their
cover most of the firms we regulate, market to assess how outcomes
concerns may be resolved so that
including investment managers. We are changing in this sector. Relevant
investors get the full benefits of
give more information on this work information will include measures of
the Regulation.
in the Firms’ culture and governance price clustering and whether firms
chapter. are passing on gains from economies
We will also continue to work with the
European Supervisory Authorities, of scale to their customers. We also
and contribute to the European Investment Firms Review cover governance, technology and
Commission’s post-implementation cyber issues for this sector in our
In December 2017 the EU cross-sector themes.
review of the PRIIPs Regulation.
Commission published a legislative
40
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
Sector priorities
Retail lending
42
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
Ensuring the debt management Motor finance transfer of regulation, and to report
sector works well to the Treasury by 1 April 2019. We will
The motor finance market grew 8.2%
consider whether the repeal of CCA
Poor practices by debt management in the twelve months to April 201713
provisions would negatively affect
firms pose a high risk of harm to with new point-of-sale lending for
appropriate consumer protection
consumers, particularly those in car purchases totalling £32.6 billion
and whether the provisions could be
vulnerable circumstances. So it is in the twelve months to the end of
replaced by FCA rules or guidance.
important that we have the best Q1 2017.14 Our recently published
We will also take into account whether
possible understanding of how the update explains that we want to
some provisions remain appropriate
market as a whole is working for identify whether consumers have
in today’s market and whether they
consumers. Financial Lives data sufficient, timely and transparent
should be amended or updated. We will
suggest that 3% of UK adults used information when taking out motor
publish an interim report setting out
debt advice or debt management finance. We are testing this in a
our initial views and invite responses.
services in the last twelve months and, number of ways, including through a
of these, 19% used a paid-for service.12 mystery shopping exercise.
Close engagement with the debt We are undertaking further work on Outcome indicators
management sector through our responsible lending, particularly the We will use various sources of
authorisation and supervision work approach taken by motor finance information to see how drivers of
has led to a debt management lenders to assessing creditworthiness harm that lead to unaffordable or
sector with fewer, and more (including affordability). Our work unsuitable product purchase are
regulatory compliant, firms. A will primarily focus on higher changing.
large number of issues still remain credit-risk consumers, but we will
however, particularly around the test how lenders assess affordability We have only regulated consumer
quality of debt advice and the and whether current procedures credit since 2014. Therefore,
long-term sustainability of the are working in the interests of all we will continue to increase our
business model. Our supervision consumers. understanding of issues and improve
function continues to engage closely the evidence on which we base our
with the largest authorised firms We are also doing further work on interventions in this area.
to ensure that they act in the best commission arrangements. Some
interests of consumers. commission structures create a
strong link between the dealer
Last year, we started a thematic commission and the interest rate
review to look at fee-charging charged to consumers. We are
and free-to-customer debt therefore assessing whether lender
management providers to help controls and current regulatory
us build up a full picture of the requirements minimise the potential
sector. This year, we will look at how for harm to consumers.
these providers are meeting their
customers’ needs. We will review We expect to complete our review of
customer files and visit providers the motor finance market by the end
to interview staff and assess their 2018. At that stage, we will publish
processes and how they deal with our findings, setting out any areas of
customers. We will look at both concern we have identified and how
the initial debt advice process we intend to tackle them.
and the continuing service. We
want to understand where there Review of retained CCA provisions
is good practice that helps
consumers manage their debts, Our rules aim to ensure consumers are
as well as identifying areas where adequately protected while not placing
improvement could be made. We disproportionate burdens on firms. We
expect to complete this review and are required to review the Consumer
report on findings in Q1 2019. Credit Act 1974 (CCA) retained
provisions which were not replaced
with FCA rules or repealed during the
43
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19
Sector priorities
Pensions and retirement income
We want to ensure that consumers are equipped to The decisions consumers make
during their working life about saving
make good decisions to fund their retirement, such for retirement will influence their
as through appropriate advice or guidance, and can financial wellbeing in later life. The
access good quality, value-for-money retirement subsequent decisions they make on
how to take their retirement savings
products. We also want to ensure consumers know are also hugely significant. Yet many
how to avoid pension scams and poor deals. The consumers feel unequipped to make
number of consumers contributing to workplace these decisions confidently. 15
pensions continues to grow, driven in large part by The market has been adapting to
auto-enrolment. In the first quarter of 2016, 68% of all changes from the Government’s
employees were enrolled in a pension, equating to 78% pension freedom reforms in 2015.
Our regulation of the market has
of all eligible employees.15 focused on making adjustments to
our rules to support the reforms. We
have continued to see a shift away
from consumers using annuities
to purchase a guaranteed income
towards drawdown products that
offer greater flexibility.16 Drawdown
products attracted inflows of
approximately £16.2 billion in 2016
versus £4.6 billion for annuities.17
Pensions strategy
This year our focus is on producing a
clear strategy that makes it easier for
all our stakeholders to understand
our role in the pensions sector. We
are working closely with The Pensions
Regulator to produce a joint Pensions
Strategy which will set out how we
15 ONS, Annual Survey of Hours and Earnings 2016. ONS, Workplace Pension Participation and Savings Trends of Eligible Savers Official Statistics: 2006 to 2016.
16 FCA, Product Sales Data 2016.
17 FCA, retirement income data 2016.
44
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
will work together to tackle the key Helping consumers avoid scams Outcome indicators
regulatory risks facing the pensions
Where appropriate, we take robust We use a variety of data to assess
sector in the next 5-10 years. This
action against scammers both harm in this sector. These include
will be informed both by our own
to stop them and deter others. how many consumers shop around
research and views from other key
Alongside our ScamSmart work for drawdown products, how much
stakeholders, including the outcome
(covered in Financial crime and AML), they understand about their options
of the House of Commons Work and
we continue to monitor, quantify and and the number of products that
Pensions Select Committee’s inquiry
tackle cases of systemic pension are fully cashed-in. Working with the
into the pension freedoms. We will
mis-selling and fraud. This involves DWP, we can use charges to assess
jointly host a series of stakeholder
firms we regulate and unregulated the cost of workplace pensions and
events and a webinar with The
firms that introduce business to how that may harm consumers. Our
Pensions Regulator to ensure that all
them. We also work with firms to workstream on assessing suitability
relevant issues are covered.
ensure they take the necessary enables us to measure whether
steps to protect consumers and customers are making unsuitable
Potential extension of the remit collaborate with other agencies purchases or choices due to
of Independent Governance to tackle scams. We will continue unsuitable advice.
Committees for workplace pension to work with the Treasury and
schemes Department for Work and Pensions
on legislative measures to combat
We are currently undertaking
pension scams, including a ban on
wider policy work on Independent
pension cold calling.
Governance Committees (IGCs) We take robust action
for workplace pension schemes to
look at the possibility of extending
against scammers
their remit. This wider work includes both to stop them and
possible changes to the rules for IGCs deter others
to improve governance and value
for money for consumers, following
recommendations on social investing
from the Law Commission.
45
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19
Sector priorities
Retail investments
46
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
In 2018/19 we will carry out a consumer (D2C) platforms and share Review, the number of consumers
programme of work to tackle dealing services currently administer who report mis-selling, consumer
incidences of consumers entering £170 billion of assets. The assets perceptions of quality, price and
into high-risk investments which under administration in both the value, and reports of problems in
are unsuitable for their needs. This D2C and adviser platform market accessing appropriate advice.
work will enable us to identify where grew rapidly in 2016, by 15% and 18%
there are problems with high-risk respectively.18 Our market study is
investments. We will also strengthen looking at how platforms compete
our authorisations gateway and and their impact on the overall
supervision for firms that provide charges investors pay for their retail
advice on high-risk and complex investment products. We will publish
investments. This will ensure they our interim report in summer 2018,
improve their disclosure and reduce setting out any problems we see in
the risks of harm to retail investors. the market and any action we intend
to take to tackle them.
Contracts for Difference
The report will cover the tools that
As part of our programme of work platforms use to help consumers
we continue to mitigate harm make informed investment decisions
from firms selling Contracts for and evaluate the value for money of
Difference (CFDs) and spread bets investing through a platform. It will
to retail consumers who often do consider the ‘model’ portfolios and
not understand the risks of these diagnose whether consumers can
complex, leveraged instruments. understand what these portfolios
We are also focused on binary offer. The report will look at how
options, which entered our regime platforms promote the products
from January 2018. Our work they offer and how this affects
involves a coordinated programme consumer choice. We will also assess
of policy and supervisory activity. what impact these relationships are
In 2018, we will evaluate how well having on competition.
our interventions have worked and
act where firms fail to meet our
Raising awareness of fraud
expectations.
and scams
We support the European Securities We have a duty to protect
and Markets Authority’s (ESMA) consumers from becoming victims
agreed EU-wide temporary product of scams and fraud. We note an Younger consumers are
intervention measures announced increase in fraudulent investment at increased risk of online
27 March 2018. These include firms that are advertising online
the prohibition of the marketing, and on social media – for example, investment fraud, which
distribution or sale of binary offering trades in binary options. has now overtaken the
options to retail clients and a range Younger consumers are at increased telephone as the most
of restrictions on the marketing, risk of online investment fraud, which
distribution or sale of CFDs to retail has now overtaken the telephone as common contact method
clients, including rolling spot forex. the most common contact method for investment fraudsters
We expect to consult on whether for investment fraudsters. We cover
to apply the ESMA measures on a our work in this area in the earlier
permanent basis to firms offering section on Financial Crime (fraud and
CFDs and binary options to retail scams) and anti-money laundering.
clients.
Sector priorities
Retail banking
Retail banking is central to the lives of virtually The last two years have seen major
regulatory changes to retail banking
every consumer, business and organisation in the to improve competition; many of
UK, and the way customers use it is constantly these are continuing. Our focus on
evolving. Technology and innovation now drive implementing these changes is on
tackling the main harms they are
customers’ expectations of how they run their finances designed to resolve. These harms
and how they make and receive payments. These range from poor value and service,
changes will profoundly shape the size and nature of the high charges and theft of customers’
data and money through cyber
market over the next decade. attack and fraud.
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Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
Sector priorities
General insurance and protection
50
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities
51
52
Financial Conduct Authority Section 6
Business Plan 2018/19 How we operate
How we operate
FCA Budget
£m 2017/18 2018/19 Change % Change
53
Chapter 6 Financial Conduct Authority
How we operate Business Plan 2018/19
We have signed an Agreement for In 2018/19, we will continue to work Finally, underpinning all of this we are
Lease for 20 years to move to the collaboratively with the PSR to continuing to embed the concepts
new site. We are incurring costs to carry on developing interventions to of VFM and how we can apply
get the building ready for occupation reduce harm to consumers from them in practice through a training
and the current intention is that these Authorised Push Payment scams. programme and support network
will be funded by external financing, We worked closely with the PSR on its of subject matter experts. We are
the costs of which will be recovered response to the Which? super further developing our approach
against the rent-free period. complaint in December 2016, on its to continuous improvement
report and consultation published in throughout all areas of our work and
Dual running costs for operating both November 2017. we continue to work closely with the
our Canary Wharf estate and our new National Audit Office to maintain an
site in Stratford during the transition effective relationship.
55
Chapter 6 Financial Conduct Authority
How we operate Business Plan 2018/19
Our people the Future and Advanced Manager Our Chief Executive is a member
Programmes, investing in our future of the Financial Policy Committee
Our People Strategy reflects our
leadership and helping balance our (FPC). The FPC identifies, monitors
Mission:
people’s technical expertise with and acts to remove or reduce
the best people and operational systemic risks with the aim of
• our new ‘At our best’ values will
management skills. protecting and enhancing the UK
directly support embedding the our
financial system’s resilience. We
Mission and reinforcing the right
closely monitor risk to financial
behaviours across the organisation Corporate responsibility
stability and work closely with the
We are proud of the fact that 39% Bank of England on areas of interest
• a refreshed Leadership Framework,
of our staff volunteered for a range to the FPC, such as market liquidity.
including clear responsibilities
of initiatives, against a target of
and accountabilities under our
30%. Our current initiatives are We work closely with the Treasury,
application of the SM&CR, ensures
diverse and engage people at all the Competition and Markets
that our leaders know what is
levels and in a variety of teams Authority , The Pensions Regulator,
expected of them and their role in
across the organisation. We the Financial Ombudsman Service,
the organisation
are also a London Living Wage the Money Advice Service , the
employer and incorporate corporate Financial Services Compensation
• a forward-looking strategic
responsibility requirements into our Scheme, the Prudential Regulation
Employee Capability Plan tells us
supplier relationships through the Authority and the Bank of England,
what capabilities we will need in the
procurement process. other government agencies and
future and helps us ensure these are
in place departments, and international
To build on our move to Stratford, regulatory organisations to provide
We are building a diverse and and after extensive research evidence and input to advance
inclusive place to work, both and engagement with the local our objectives.
because we want our people to be community, we have agreed a new
themselves and because diversity community programme which
makes us a more effective regulator. will focus on year seven students FCA statutory panels
To demonstrate our commitment (those in the first year of secondary
education). We are now working with We are required to consult on
to diversity and inclusion, we are the impact of our work with
actively working towards the target schools and community partners to
develop the programme, ready for four statutory panels. These
we set in 2016 for 45% of our senior panels represent the interests of
leadership team to identify as female our move to Newham in 2018.
consumers, practitioners, smaller
by 2020, and 50% by 2025, in addition regulated firms and markets. We also
to our target for 8% of our senior Working with others consult with the Listing Authority
leadership to identify as Black, Asian Advisory Panel.
In addition to our ‘Approach to’
and Minority Ethnic (BAME) by 2020,
documents, we have a central role in
and 13% by 2025. These panels play an important role
developing and delivering key policy
initiatives, often in collaboration with in both advising and challenging us,
As well as building a diverse workforce and bring a depth of experience,
other regulators. We also monitor
with a broad range of skills, we also support and expertise in identifying
and respond to issues around our
need to think strategically across risks to the market and consumers.
regulatory remit.
all of our people-related activities We consider their views when we
to achieve the organisational and develop our policies and decide
We help influence domestic
behavioural changes to deliver and implement other regulatory
and international initiatives and
our Mission. interventions. The Panels are:
legislation. We actively engage with a
wide range of global bodies, to shape
We continue to develop our people • The Consumer Panel
policy debates, ensure effective
to achieve their potential and to
cross-border cooperation, share
keep our best talent. As well as our • The Practitioner Panel
regulatory experience and help
rolling programme of events to keep
identify new and emerging issues.
our staff up to date with economic • The Smaller Business Practitioner
Many countries see our initiatives, for
and market developments, we will Panel
example FCA Innovate, as industry-
expand our successful secondment
leading and we collaborate with
programme to include a wider range • The Markets Practitioner Panel
international regulators to promote
of regulated firms and consumer
innovation in our respective markets.
organisations. We will also strengthen • The Listing Authority Advisory Panel
our management framework through
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Financial Conduct Authority Chapter 6
Business Plan 2018/19 How we operate
57
Annex 1 Financial Conduct Authority
Update on Business Plan 2018/19
market-based activity
Treatment of existing customers Publication type Timings
Pensions and retirement income Publication type Timings
Retirement Outcomes Review Final report and Q2 2018/19
Consultation Paper
Non-workplace pensions Feedback Statement Q3 2018/19
Fair treatment of with-profits customers Q3 2018/19
*Unsuitable pension transfer advice Policy Statement Q3 2018/19
*Savings adequacy Occasional Paper Q4 2018/19
Retail Banking Publication type Timings
Strategic Review of Retail Banking Business Models Consultation Paper Q3 2018/19
Improving competition in current accounts Policy Statement Q3 2018/19
Financial crime Publication type Timings
Financial crime review of e-money Report Q2 2018/19
General Insurance and protection Publication type Timings
Wholesale Insurance Brokers Market Study Interim report Q3 2018/19
Value in the distribution chain (Phase 1) Q2 2018/19
*Assessing claims inflation in General Insurance Q4 2018/19
* New projects
58
Financial Conduct Authority Annex 1
Business Plan 2018/19 Update on
market-based activity
* New projects
59
Annex 2 Financial Conduct Authority
FCA organisational chart Business Plan 2018/19
FCA Board
Corporate Services
Chair
Supervision –
Supervision Enforcement
Strategy & Investment,
– Retail & & Market Operations International
Competition Wholesale &
Authorisations Oversight
Specialists
Executive Committee
60
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