The Financial Conduct Authority's (FCA) 2023/24 Business Plan (Business Plan) sets out the FCA's aim to be viewed as a proactive, assertive and robust regulator, especially in its protection of retail consumers.
Released on 5 April 2023, the Business Plan establishes the FCA's priorities for the coming year and how it is going to deliver on the second year of its 2022-2025 Strategy. This strategy established the FCA's intention to act more assertively and test the limits of its powers. The details of this year's Business Plan elaborate on how it will do so.
Some of the key elements of the Business Plan are summarized below.
The Consumer Duty
The new Consumer Duty is a key priority for the FCA this year. The duty comes into force on 31 July 2023 and requires firms to act to deliver good outcomes for retail customers. The FCA has significant funding earmarked for the Consumer Duty, which it plans to use for sector-specific supervisory work.
The Business Plan states that through this supervisory work, the FCA will "identify, assertively supervise and effectively enforce against activities which undermine effective competition and good consumer outcomes". This indicates that firms should expect the FCA to open investigations and commence enforcement action where it deems that regulated firms have taken insufficient action to comply with the Consumer Duty.
Financial and Operational Resilience
The Business Plan states that regulated firms should be investing in their operational resilience, in light of a growing level of cyber threats, operational risks and a complex geopolitical backdrop. While the FCA has always been focused on the financial resilience of firms—ensuring that firms meet financial resource requirements so they can conduct business and, if necessary, wind down without causing harm—operational resilience is a relatively new priority that became highly relevant during the 2020 global pandemic. The FCA will be starting to assess firms' operational resilience ahead of the 2025 deadline in order for firms to demonstrate that they can remain within specified operational impact tolerances.
Financial Crime
One of the FCA's primary areas of focus is the reduction and prevention of financial crime. This focus combines the FCA's aim to reduce scams and frauds for retail consumers, as well as its aim to reduce the incidence of money laundering through firms.
The FCA plans, among other things, to increase its proactive assessment of firms' anti-money laundering (AML) systems and to control and develop the data-led analytical tools used in its AML supervisory work. The Business Plan also re-emphasised the FCA's ongoing work to supervise AML within cryptoasset firms, a sector of increasing importance for the FCA. The multiple references to AML within the Business Plan show that it continues to be a priority for the FCA.
Enforcement Against Market Abuse
The FCA plans to deliver assertive action on market abuse. There are two important strands of this plan: first, to ensure that firms are resilient to market abuse, for example by having robust systems and controls and a strong reporting and anti-market abuse culture; and second, to deter wrongdoers by imposing sanctions. Specifically, the FCA plans to invest in the investigation and prosecution of fixed income and commodities market manipulation, with a focus on very high-risk firms.
Market abuse has always been an important area for the FCA, but this year's Business Plan indicates that it has new, tangible plans to address this issue. If effective, these should result in new market abuse investigations being opened, which may ultimately result in more civil criminal insider dealing investigations, regulatory outcomes and prosecutions
Headcount and Changes to Leadership
The FCA notes that it has significantly increased its headcount since the start of 2022, particularly within its Authorisation and Enforcement divisions.
News of additions to the Authorisation division should be welcomed by firms and senior individuals who have been caught in a regulatory vacuum while authorisation and change of control applications have been significantly delayed.
Equally, additions to the Enforcement division should allow the FCA to more effectively manage its significant workload. Firms and individuals subject to enforcement action can therefore hope to see a reduction in the ever-lengthening duration of FCA investigations. As well as increased headcount, the FCA's Enforcement division is also undergoing a significant change of leadership: Therese Chambers (an FCA veteran) and Steve Smart (former head of intelligence of the National Crime Agency) are replacing Mark Steward as co-executive directors of the Enforcement division. Mr. Smart's criminal intelligence experience supports the FCA's investment in and expansion of its intelligence-gathering capabilities.
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