What does FCA stand for?

The FCA is the UK Financial Conduct Authority, the organization that regulates firms offering services in the UK’s financial market. The regulatory authority was constituted in 2013 following the implementation of the Financial Services Act of 2012, while it’s mandate is set forth in the Financial Services and Markets Act (FSMA): the Financial Conduct Authority is responsible for promoting transparency and competition in the UK’s financial markets while protecting consumers and other stakeholders of financial service providers as well as the health and integrity of the financial market in general. 

What does the FCA do and regulate?

The FCA sets out to achieve its mandate also through interventions along three main directives: regulation, supervision and standard setting. 

Regulation

Through its mandate, the FCA is tasked with regulating the conduct of over 59,000 businesses in the UK financial market, introducing and enforcing regulation against anti-competitive behaviour and other instances of market abuse, keeping the framework of the financial services industry solid and stable.

Supervision

The FCA maintains continuous oversight of financial service providers, investment firms and consumer credit firms, and the individuals that control them, performing FCA regulated activities, in order to reduce the risk of potential harm to consumers and the overall health of the financial markets. Through the exercise of its supervisory powers, the FCA ensures that authorised operators are acting in accordance with its framework of principles and regulations and continuously meet the minimum criteria necessary for lawfully operating in the UK’s financial markets.

Standard setting

The FCA works to develop and implement the operating standards for what is FCA regulated in the UK’s financial markets, in order to promote consistency in UK regulation, while collaborating with international regulators to facilitate the exchange of information.

What does FCA authorised mean?

One of the main activities performed by the FCA, according to its mandate, as set forth by the FSMA, is the authorisation of firms operating in the UK financial markets. Financial services providers, investment firms and consumer credit firms all request authorisation and registration by the FCA, demonstrating their organisation, readiness and willingness to comply with FCA regulation, as well as pay annual authorisation fees and provide reports demonstrating that they continually meet the FCA’s minimum authorisation standards in order to operate legally in their respective markets. In addition to initial authorisation fees and the annual fee companies must pay to maintain their authorisation, authorised companies are also charged when they want to offer new services or take on new responsibilities.

Financial service providers seeking authorisation must meet a range of requirements before they are allowed to legally enter the market. Before accepting requests for authorisation, the FCA performs stringent reviews of corporate documentation, like business plans and the company’s approach to risk management, budgeting, controls and access to key resources, including staff with the necessary qualifications and experience to perform their roles according to the minimum standards provided for by the Financial Conduct Authority. 

The FCA monitors ongoing compliance with its minimum authorisation standards by requiring that authorised companies submit periodic reports demonstrating compliance with FCA rules and regulations.

While this authorisation may seem lengthy, it was purposefully designed that way. This extensive authorisation process is designed to act as a deterrent against fraudulent companies from entering the market, thereby protecting and enhancing the integrity of the market and the consumers.

What is the FCA register?

Open to the public, the FCA register lists all the FCA regulated firms and individuals that conduct regulated activities, detailing what they are authorised to do and what protections the consumer is entitled to when doing business with them.

How does the FCA protect consumers?

One of the main remits of the regulator, the FCA works to protect the interests of consumers from inappropriate or illicit behaviour from companies in the financial markets in different ways. 

First, the FCA prevents fraudulent business practices from entering the market in the first place, limiting potential exposure of the consumer to the risk of illicit business practices or bogus financial products through its authorisation procedures, continual scrutiny and supervision of authorised businesses against its minimum standard requirements. 

The market regulator also works to promote greater transparency and ease of access of information regarding financial products, thereby ensuring that consumers have the reliable, easy-to-understand information that they need in order to understand and avoid some of the most common risks associated with financial markets, make the best decisions and protect themselves on the market.

By promoting competition in the markets, the FCA is also in part protecting consumers – if consumers are aware that they have multiple options on the market to choose from, they have greater confidence when switching to financial product providers. This creates greater incentive for competing companies to improve customer care and provide quality products and services and prioritise customer retention.

Encouraging competition in the interest of consumers

The FCA works to engender competition among financial service providers and discourage anti-competitive behaviour among companies in the financial markets and prevent monopolisation of financial services, in the interest of promoting a healthy, thriving financial market that is open and easy to navigate. 

This goal is achieved by enforcing market regulation against market abuse and anti-competitive behaviours as well as providing for an ease of entry into financial markets for new companies seeking to enter the market, helping them to navigate and succeed in the market. 

When there are more providers operating on the market, consumers are more empowered to choose the best financial products and services for them, since it is easier for them to take their business elsewhere if they are not satisfied. Consequently, companies on the market must work harder to win over and retain customers on the basis of service, quality, price and innovation, which in turn generates better results and greater satisfaction for consumers.

Protecting the integrity of the financial system

At the core of its mandate, the FCA is responsible for protecting and enhancing the integrity of the framework of the UK’s financial system. To guarantee the resilience of the UK’s financial infrastructure, the FCA needs to ensure that it is able to hold senior management of authorised companies accountable for their activities in the capital markets, and that it is able to provide for market efficiency and transparency, as well as the resolution of violations of market regulation and return of client assets.

The FCA works to protect the integrity of the financial system not only by implementing stringent requirements for market entry, barring bogus firms from entering the market, but also by monitoring those firms that it does authorise for operation in the financial markets and ensuring that these firms don’t violate the regulations that it puts in place. 

To that end, the FCA financial regulator was imbued with special powers to enforce these regulations and protect consumers, which span from revoking company authorisation, to suspending firms from offering regulated activities, deactivating company websites, issuing fines to companies and individuals that violate anti-competition and market abuse regulations and taking legal action against companies and individuals that violate FCA regulations.

The FCA regulator also posts statutory notices to make sure that the public is informed of any actions that the regulator takes against providers of financial products and services.