Welcome to Legal Long, a briefing on a relevant issue in the financial services industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

The FCA Mission 2017

The FCA has published its 2017 mission statement entitled ‘Our Mission 2017; How we regulate Financial Services’ (the “Mission”). The purpose of the Mission is to give firms and consumers greater clarity as to how the FCA prioritises its interventions in financial markets and sets out a framework for the way in which the FCA takes strategic decisions, the reasoning behind such decisions and the tools which the FCA employs to take the decisions.

Background

The Mission builds on the consultation launched by the FCA in October 2016 on its future mission and the feedback received to the consultation. In the consultation, the FCA sought views on:

1. whether there is a need for a more specific Handbook review to clarify the rules;
2. its plans to review the use of private warnings on the basis of its desire to be more transparent; and
3. its use of data science to see how it can more effectively sift through the large amounts of data that it receives to identify firms with a greater risk of regulatory breach which can then be used for targeted monitoring of firms. The FCA’s next focus in this area is financial crime and on detecting insider trading and market manipulation.

The consultation closed on 26 January 2017 and the Mission builds on the FCA’s analysis of this consultation.

The Mission

According to Andrew Bailey, Chief Executive of the FCA, much of what the Mission describes is current practice within the FCA, although other aspects will be given greater emphasis and focus in the future.  In its Feedback Statement accompanying the Mission, the FCA notes that it has received, among other things:

1. feedback that it can be difficult to navigate and interpret the FCA Handbook and that this creates uncertainty. The FCA is committed to reviewing the Handbook to make its requirements clearer. This review will take place once the Handbook has been adjusted to reflect the UK’s exit from the EU; and
2. mixed views about the use of private warnings. Some respondents were in support of their continued use; others expressed caution or proposed improvements, including clearer communication and the publication of anonymised examples. The FCA has considered this feedback carefully in light of its commitment to exercise its functions as transparently as possible. It intends to consult on this subject, as part of a review of the Enforcement Guide and the Decisions Procedure and Penalties manual.

The FCA also held a press conference last week relating to the publication of the Mission, which included a question and answer session.  Topics raised in the Q&A session included the following:

1. Duty of care – the FCA will address this issue in the context of its Handbook review, as it believes there is an issue around the distinction between a duty of care and a fiduciary duty, and how those two duties map. The FCA will also come back to the question that it raised in the 2016 mission consultation, namely whether there is actually a separate thing called a duty of care or whether this is already covered in the FCA’s principles and rules.
2. Senior Managers and Certification Regime (SM&CR) – an initial consultation on the SM&CR will be launched later in 2017, although no details regarding the proposed consultation were given, and it was confirmed that implementation would still take place in 2018.
3. Whistleblowing – whistleblowing is a very important issue for the FCA and the FCA’s answer highlighted the scope of who is a whistleblower, noting that there is an important focus on staff who work in institutions, although it can also cover customers who feel that they want the protection of whistleblowing status, which is also important.

The FCA’s Business Plan 2017/18 and Sector Views

The FCA has also published its annual Business Plan, which gives details of the specific areas of work which the FCA has prioritised for the period ahead in all the sectors it regulates. The Business Plan sets out the FCA’s view and strategy for each, as well as highlighting the cross-sector issues which the FCA has identified.

It has also published its Sector Views, which describe the Sectors the FCA regulates, its priorities and the major issues and developments it sees within those sectors. This is the first time that the previously private Sector Views have been published. In relation to equity and debt markets, the FCA notes again that improvements need to be made in certain areas, including the IPO share allocation process and availability of information during the IPO process.

Next Steps

The FCA states that it will follow the Mission with more detailed explanations as to how it carries out its main activities – authorising and supervising firms, taking enforcement action, encouraging competition and influencing market design – and how the Mission affects those activities.

This document is for general guidance only. It does not contain definitive advice.