Who are the FCA
From bank accounts to mortgages, credit cards, loans, savings insurance and pensions, virtually every adult in the UK is a consumer of financial services. When looking at financial products, including car finance in all its forms, you’ll likely see or hear the phrase “Regulated by the FCA”. But who exactly are the FCA? What do they do to regulate finance providers and how does the FCA benefit consumers? In this article, we’ll tell you everything you need to know about the FCA and how they work.
What does the FCA stand for?
The FCA stands for The Financial Conduct Authority. Their ‘About’ page on their website explains that The Financial Conduct Authority is the conduct regulator for 56,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms. Established on 1st April 2013 the FCA has been safeguarding consumers for years. Not only do they ensure fair trading between provider and consumer, their work helps to maintain confidence in the UK economy.
Who does the FCA protect?
The common misconception is that the Financial Conduct Authority only protect consumers. This isn’t true. As an overseeing regulator of the entire financial industry, its objectives are to
- Protect consumers – they look to secure an appropriate degree of protection for consumers.
- Protect financial markets – they look to protect and enhance the integrity of the UK financial system.
- Promote competition – the look to promote effective competition in the interests of consumers.
That being said, a statement on the FCA website says that “We act to ensure that a firm has its customers at the heart of how it does business, giving them appropriate products and services, and putting their protection above profits or remuneration”. You can’t offer any service regulated by the FCA unless you are approved by them
Why is the FCA so important?
The UK financial services industry employs over 2.2 million people. These people all need the stability that the FCA provides. Not only that, the financial services industry contributes £65.6bn in tax to the UK economy. This makes the FCA responsible for the stability of this National income. They are an independent public body who are entirely funded by the firms they regulate. This means that financial providers and advisors must pay a fee to the FCA in order to be regulated by them. The FCA is accountable to UK Parliament and The Treasury. Imagine having those big guys as your boss! Wow.
How does the FCA regulate?
It’s no mean feat keeping an eye on all of these finance providers and to do so the FCA must supervise on several levels. Firstly they make a risk-assessment based upon the firm’s business model. This is to ensure that customers receive fair treatment. They also assess whether the firm upholds market integrity and whether it is financially sound. This identifies risks before they cause any harm.
Moving on from initial risk assessment the FCA conduct regular supervision of the 56,000 businesses they regulate. There are 3 main pillars for how they regulate.
- Bigger firms receive proactive supervision. I’d imagine this is because they have the potential to cause the most harm because they have larger volumes of clients.
- Reactive supervision as a result of emerging risks or business changes which pose threat.
- Risks to the sector as a whole or multiple firms are also supervised.
The FCA are also responsible for the prudential regulation of over 18,000 firms, including asset managers, financial advisers, and mortgage and insurance brokers. For this, they assess how well a firm understands the risks it is running, how well placed it is to manage those risks, and how well it can avoid large, unexpected costs.
What can the FCA do if they find a company is not compliant?
Being that they are answerable to UK Government, they can sentence some strong punishment to any company not compliant with their regulations.Depending on the severity of the breach of regulation the FCA can use a wide range of enforcement powers. These include criminal, civil and regulatory in order to protect consumers and to take action against firms and individuals that do not meet their standards.
Some examples of the action that can be taken are:
- Withdraw a firm’s authorisation
- Prohibit individuals from carrying on regulated activities
- Suspend firms and individuals from undertaking regulated activities
- Issue fines against firms and individuals who breach the rules or commit market abuse
- Issue fines against firms breaching competition laws
- Making a public announcement at the start of the disciplinary action and publish details of warning, decision and final notices.
- Applying to the courts for injunctions, restitution orders, winding-up and other insolvency orders.
- Bring criminal prosecutions to tackle financial crime, such as insider dealing, unauthorised business and false claims.
- Issue warnings and alerts about unauthorised firms and individuals and requesting that web hosts deactivate associated websites.
How do I claim compensation through the FCA?
If you feel you have been treated unfairly by a finance provider or prudential business then you can complain. Equally, if you have suffered loss as a result of their misconduct you are able to claim compensation. There is a set process to claiming compensation via the Financial Conduct Authority. And while we hope you never have to do this, it’s worthwhile noting for future reference.
Firstly, you must go through the firm’s complaints procedure and put a case forward why you believe they should compensate you. If they come back and say no and you still believe you have a case then you’ll need to seek assistance from the Financial Ombudsman Service. They may be able to help you communicate with the firm and help you to secure your refund.
Failing that you will need to check if the firm is still trading. Searching Companies House will allow you to discover this information. The Financial Services Compensations Scheme, otherwise known as the FSCS, will not pay compensation if the company has enough assets or means to pay. If it considers the firm to be in default and unlikely or unable to pay for the claims made against it, then the FSCS will endeavour to contact customers affected with a compensation application form. If you do not receive a form you can contact them directly to request one. Making a claim through the FSCS is free and simple to do yourself
What am I eligible to claim for?
There are limits to the amount of compensation you can claim for with the FSCS and this depends on the financial product you are claiming for. Note that compensation is only paid to cover financial loss. So, for investment claims the compensation paid will try to return you to the financial position you would have been in if you did not invest.
|Product||Compensation limit||How it works|
|Deposits||£85,000 per depositor. Depositors with some types of temporary high balances will have FSCS protection up to £1m for up to 6 months.||This includes deposits in a bank, building society or credit union.|
|Investments||£50,000||This applies to investments placed in firms declared in default from 1 January 2010.|
|Home finance||£50,000||This includes advising on and arranging mortgages, and applies to home finance firms declared in default from 1 January 2010.|
|Insurance||90% of the claim with no upper limit.||This limit is for insurance business, and general insurance advice and arranging. Compulsory insurance is protected in full.|
The FCA is, in simple terms, a governing body to regulate the financial industry. They approve certain organisations and financial products as ‘safe’ for consumers and focus on improving the financial industry overall for consumers, staff and businesses.
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