Regulatory Framework | Introduction and Handbook | Financial Services and Objectives | Mortgage Conduct of Business MCOB | Template for FCA Applications and Authorised Firms

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Regulatory Framework

2.1 Introduction to the FCA

The Financial Conduct Authority (FCA) are an independent financial regulatory body who regulate financial firms providing services, products and consumer credit to customers within the United Kingdom.

The overall aim of the FCA is to ensure that consumers get a fair and relevant product or service and that the regulatory rules are complied with by any such provider. The FCA has numerous tiers to their regulatory system, most of which are encompassed in their objectives.

The FCA aim to make financial firms transparent and accountable so that consumer trust is maintained in buying financial products and services, with those firms not putting the customer first or adhering to the strict rules and guidelines being held accountable and penalised accordingly.

2.2 Financial Services Regulatory Framework

The Financial Services Act 2012 came into force on 1 April 2013 and contains the UK government’s legislation and reforms for the UK financial services regulatory structure. This Act and reform led to the creation of the new regulatory framework for the supervision and management of the UK’s banking, consumer credit and financial services industry.

The Act saw the formation of three new regulatory and oversight bodies and gave the Bank of England macro-prudential responsibility for overseeing the financial system and day-to-day prudential supervision of financial services firms. Due to the extensive reform outlined in The Financial Services Act 2012; the Financial Services and Markets Act 2000 (FSMA) also underwent many changes, revisions, and additions to ensure that the new structural regulatory regime laid the groundwork and foundations for its long-term objectives.

The 3 new bodies that formed are: –

• Financial Conduct Authority (FCA)
• The Financial Policy Committee (FPC)
• The Prudential Regulatory Authority (PRA)

2.2.1 FCA’s Objectives

The FCA has 3 main statutory operational objectives and covered within each objective are their aims.

Protecting Consumers

• Ensure customers are treated in a way that is appropriate for their level of financial knowledge and understanding
• Be more outward looking, by engaging more with consumers and understanding more about their concerns and behaviour
• Set clear expectations for firms and be clear about what firms can expect from us
• Intervene early to tackle potential risks to consumers before they take shape
• Be tougher and bolder, following a strategy of credible deterrence, using new powers of intervention and enforcement

Within the objective of protecting consumers also comes one of the FCA’s core objectives – Treating Customer Fairly (TCF).

Market Integrity

• The soundness, stability and resilience of the financial markets
• The transparency of the price information process in those markets
• Combating market abuse
• The orderly operation of the financial markets
• Reducing financial crime in the UK financial system

Promoting Effective Competition

• To promote effective competition in the interests of consumers in the markets we regulate
• To promote effective competition when addressing our consumer protection or market integrity objectives

2.2.2 FCA Handbook Overview

The FCA Handbook sets out their legislative provisions which have been created under the powers given to them by the Financial Services and Markets Act 2000 (FSMA). The handbook is vast and can be quite complex, with additional sourcebooks for industry specifics.

Whilst the Handbook applies to all regulated firms, some sections contain rules and requirements that must be followed; with others focusing on providing guidelines for best practice and complying with the regulatory regime.