On 5 April 2023, the FCA published its Business Plan for 2023/2024, setting out how it will continue to deliver its Strategy. The Strategy, published last year, identified three themes where the regulator would strengthen its focus:
- Reducing and preventing serious harm
- Setting and testing higher standards
- Promoting competition and positive change
From an investigations and enforcement perspective, this Business Plan builds on the previous year. There is a renewed emphasis on the use of data, across all commitments. This Business Plan reiterates the regulator's intention to become more assertive and proactive. The FCA intends to act faster, and at a larger scale, against individuals and firms causing harm to consumers or the UK financial system more widely. The FCA has decided to invest in its most critical commitments over the coming year, notably with the introduction of specialist teams to tackle market abuse and effectively supervise and enforce the new Consumer Duty.
Market abuse
Market abuse remains a key focus for the FCA. The Business Plan affirms the FCA's aim to have a robust detection and investigation capability, following on from last year's work in influencing the development of international data standards and improving market monitoring.
The FCA will create a dedicated non-equity manipulation team, alongside increased enforcement resources, as it intends to significantly improve its capability to detect and prosecute fixed income and commodities market manipulation. Its capability will also be improved through increased data capture and improved analytics.
In primary markets, the FCA will build on its earlier work on market disclosures, with an increased focus on prevention and compliance alongside further work in the detection of potentially misleading disclosures. The FCA will also develop a strategy for tackling unlawful disclosure of inside information.
The FCA will continue its commitment to deliver deterrents, across primary and secondary markets, through the use of criminal, civil and supervisory actions.
Protecting consumers
The FCA has rightfully identified the cost-of-living crisis as a challenge for the year ahead, in the context of continuously rising mortgage rates and high inflation, both of which have a detrimental impact on household incomes. In this context, the new Consumer Duty forms an integral part of the FCA's regulatory approach and mindset. The new Consumer Duty will come into effect on 31 July 2023.
As part of implementing the Duty, the FCA has identified supervision and enforcement priorities and processes. The FCA will create an additional, specialist Interventions Team within Enforcement, "ready from day one of the duty coming into force". Further investigative resources will also be allocated in an attempt to ensure swifter investigations of any potential misconduct.
The FCA will continue to use its powers to enforce consumer protection legislation to address harm, such as the Consumer Rights Act 2015. It will also increase its technological capability to identify illegal financial promotions faster and at scale, building on its work in previous years to intervene quickly and assertively against those who issue non-compliant financial promotions.
Financial crime
As seen across other commitments, the FCA will start to increase its use of data in order to identify firms which are more susceptible to receiving the proceeds of fraud. It also intends to develop data-led analytical tools to use in its anti-money laundering supervision work.
As the FCA attempts to become a more assertive and proactive regulator, it will build on its proactive supervision of firms' sanctions systems and controls, as it takes a more proactive approach in its assessment of firms' anti-money laundering systems and controls. The recent appointment of Steve Smart, as joint Executive Director of Enforcement and Market Oversight, brings his criminal enforcement and investigatory experience from the National Crime Agency into the FCA.
Financial resilience
The FCA considers that there is a heightened risk of firm failure. It is notable that the Business Plan was published within weeks of both the collapse of Silicon Valley Bank and the sale of Credit Suisse.
Although the FCA does not seek a zero-failure regime, it expects firms to be financially resilient. To this end, it has introduced a new regulatory return for solo-regulated financial services firms to provide information about their financial resilience. The FCA, as part of its journey to becoming a data-led regulator, will continue to use data to identify emerging issues early and actively monitor higher-risk business models in the first year after authorisation and during periods of high growth. We can also expect the FCA to continue to use its powers more assertively to start relevant insolvency processes to minimise harm to consumers and market participants.
Conclusion
The overarching theme of the 2023/2024 Business Plan is the FCA's clear intention to act as a more assertive and proactive regulator, whether by increased use of data, more proactive supervision or through increased enforcement resources. It remains to be seen whether this increased investment and strategic approach leads to more, and faster, action and intervention from the FCA.