Financial Conduct Authority

 What is the Financial Conduct Authority (FCA)?

The FCA or Financial Conduct Authority was first implemented in 2013, by the UK Parliament. The Financial Conduct Authority regulates the conduct of over 58,000 companies within the UK financial markets. The role of the Financial Conduct Authority also includes; being the prudential supervisor for nearly 50,000 financial companies, as well as being responsible for setting key standards for approximately 19,000 firms within the Financial Services industry.

Regulation, in and of itself is not free of charge. So, the Financial Conduct Authority is primarily funded through regulatory costs (both directly and indirectly), that are typically passed onto: companies, firms and individuals working within the financial sector. The aim of the Financial Conduct Authority is to regulate; in such a way, that provides optimum benefit to all who use financial services, allowing it to be more cost efficient. The FCA seeks to serve the interest of the public by finding ways; in which, they can better the operations of the financial markets within the United Kingdom. Also, the Financial Conduct Authority seeks to improve just how financial firms carry out their business operations. Some of these activities consist of providing financial advice as well as the organising of capital investment.

The objectives of the Financial Conduct Authority are to:

– Protect customers, ensuring that the appropriate measures are taken, to ensure complete security.
– Keep and uphold integrity of the financial system, within the United Kingdom.
– Promote competition effectively, that suits the best needs of the consumer.

The following excerpt below is taken from the Financial Conduct Authority’s publication of statistical data, particularly focused on the consumers within the UK, providing a sector overview.

What do they do?

When it comes to protecting customers, the FCA take an active approach in ensuring that companies, who offer financial products to the consumer, have their best interests in mind.
This means, that the Financial Conduct Authority monitors companies within the financial sector; ensuring, that they are providing the customer with the correct financial products and services and placing the customer’s protection ahead of company profits. So, it is imperative that each customer receives accurate information, presented in the correct way, so that they are well informed to make the best decision possible for themselves.

The FCA will also authorise which individuals and companies, are able to operate within the financial sector, by monitoring their practices, ensuring that they meet the standards of the Financial Conduct Authority. In fact, the FCA also hold the power to supervise how each company operates, impose penalties and prevent those from trading, if they fail to meet the required standards.

Protection and enhancement of the financial system’s integrity within the United Kingdom, is enforced by the Financial Conduct Authority. The benefits of doing so, extends to society in general, as well as each company and individual operating within the financial industry. It is the role of the Financial Conduct Authority to ensure that financial markets are indeed reliable and are effective in working efficiently, to serve the best interests of the public. The financial markets require the support of a solid infrastructure. However; it is important to note here, that this is usually achieved through a level of transparency, in order to best serve the consumer that utilises said particular financial market.

According to the Financial Conduct Authority’s website, there is a list of values that the FCA seeks to ensure, in order to achieve their objective of keeping and upholding integrity within the UK financial system. The values within this list (previously mentioned) are directly quoted below: 

  • “senior management are accountable for their capital markets activities, including principal and agency responsibilities
  • there is a positive culture of proactively identifying and managing conflicts of interest
  • there is orderly resolution and return of client assets
  • firms’ business models, activities, controls and behaviour maintain trust in the integrity of markets and do not create or allow market abuse, systemic risk or financial crime
  • market efficiency, cleanliness and resilience is delivered through transparency, surveillance and the supervision of infrastructures, as well as their principal users
  • firms, acting as agents on behalf of their clients, put clients’ best interests at the heart of their businesses
  • we intervene early in wholesale markets to mitigate the risk of harm being transmitted to retail consumers”

The Financial Conduct Authority, have a duty of care in promoting healthy competition, as this proves to be most effective in keeping consumers up to date, so that they can make well-informed decisions. What tends to happen is that if a customer is unhappy, they have the right to take their business elsewhere. So, it is also in the best interests of the financial company to improve their practices in order to gain new clients. This could be done through a number of ways, such as: Excellent Customer Service, High Quality of product and Competitive Pricing, etc.

This, of course, results in a significant increase in customer satisfaction and retention. As, the financial markets welcome innovative companies, who strive to improve, in order to meet the needs of the customer. Financial companies, who are innovative, tend to be more successful over the long term. Therefore, by the FCA promoting healthy competition, it reassures the customer, that they can place their trust in the financial companies/individuals that they purchase their products/services from. It also reassures the customer, by increasing their confidence, in knowing, that they are also protected, in the event of something going wrong. Thus, it will encourage firms to compete effectively in order to win custom.

The Financial Conduct Authority takes active steps to investigate a wide variety of financial markets, highlighting any areas of concern. This will then lead to the FCA, being proactive in addressing these areas of concern, such as, potential breaches of Competition law; which, could inhibit healthy and effective competition. For example, a possible breach of Competition law could result from a firm, who are in a leading position within a particular market or industry, being found, to have reduced their prices grossly low, creating a deficit to the company’s own profit margin, in order to drive out competitors, before returning their prices to normal again.

References & Topic Research (Bibliography)
https://www.fca.org.uk/about/the-fca
https://www.gov.uk/government/organisations/financial-conduct-authority
https://www.pfca.org.uk/financial-claims/organisations/financial-conduct-authority.html
https://complyadvantage.com/knowledgebase/fca-financial-conduct-authority/
https://www.fca.org.uk/publication/corporate/our-mission-2017.pdf#page=8
https://www.fca.org.uk/publication/research/statistics-and-sources-sector-overviews.pdf

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