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FCA Hiring 80 Staff To Boost `Rogue Firm’ Shutdown Powers

7 April 2022 alastair walker Insurance Regulation 0

The FCA has launched a new strategy to improve outcomes for consumers and in markets throughout the UK.

As the FCA’s remit is broad and growing, the three-year strategy prioritises resources to prevent serious harm, set higher standards and promote competition. The regulator will also, for the first time, hold itself accountable against published outcomes and performance metrics.

A key focus of the strategy is shutting down problem firms, which do not meet basic regulatory standards. The FCA is recruiting 80 employees to work on the initiative, which will protect consumers from potential fraud, poor treatment and create a better market.

IE Comment: The move to shutdown ghost brokers is good news for the insurance industry, and consumers alike. We need rapid action against those offering worthless policies online, often using Whatsapp, FB or other social media channels.

In the development of the strategy, the FCA has calculated that for every pound spent on its operations, consumers and small businesses benefit by at least £11. The regulator has also considered the rising cost of living, which could drive greater demand for credit products and lead consumers to look for new ways to manage and make more of their money.

The strategy builds on activities launched last July, when Nikhil Rathi, Chief Executive of the Financial Conduct Authority, committed the regulator to become more innovative, assertive and adaptive and transform the FCA into a data-led platform that can face the threats and opportunities of the future.

This approach led to the FCA reforming the general insurance market, saving consumers an expected £4.2bn over 10 years; leading the transition from LIBOR; helping small businesses claim £1.3bn against business interruption insurance cover; bringing its first ever criminal prosecution under anti-money laundering regulations, with NatWest fined £264m; and protecting consumers from scams by preventing unauthorised firms from advertising financial products on Google.

Nikhil Rathi said: ‘Our new strategy enables the FCA to respond more quickly to the rapidly changing financial services sector. It will give us a foundation to continuously improve for the benefit of our stakeholders, and respond swiftly to economic and geopolitical developments.’

INDUSTRY COMMENT;

Michael Sicsic, managing director of Sicsic Advisory, a specialist financial services risk and regulation consultancy, added this comment;

“Nikhil Rathi was brought in to fix the performance of the FCA. The strategy, business plan and outcome metrics published today support the drive towards the performance culture he wants to build and a way of measuring its success. There are no sector-specific updates. Rather, the FCA will continue to announce policy interventions throughout the course of the year instead of set pieces wrapped up into its business plans.”“Nonetheless there are a number of key headlines for all financial services firms. Firstly, the FCA will raise the bar for authorisation of new firms and individuals. It is ultimately easier to thoroughly check for bad apples before they enter the cart than to sift through thousands. It will also move faster to remove authorisation from any bad actors it identifies. For established and reputable firms, the new Consumer Duty principle is confirmed as its flagship policy. This raises the standards it expects firms to adhere to above ‘treating customers fairly’ and with a rigorous amount of reporting and internal measurement to support its implementation.

“Third, the use of data runs deep. Firms will need to build up their capabilities to measure consumer outcomes and adequately deal with complaints, before they reach the FCA, which will be used to identify outlier firms. The FCA’s full data strategy is to follow, however, and is as such an unfinished story.“We also note plans to publish a discussion paper on AI later this year and the exploration of concepts of ethics and bias in algorithms in AI. The Citizens Advice recent report about a potential ethnicity penalty in the motor insurance market and the initial round of responses are clearly not the end of the story here. The business plan and strategy are also noteworthy for what they don’t say. There is scant mention of ‘supervision’ for example, with language shifting towards detecting harm and fixing it. This could trail the disbandment of its dedicated supervision team in its yet to be published new target operating model.”

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