Andrew Bailey, chief executive of the FCA, on 26 October 2016 launched a consultation to gather views on how the FCA operates and how it should interpret its statutory objectives.
Bailey was appointed chief executive four months ago and the Mission consultation has been a work in progress since then. This is his first new key initiative at the helm of the regulator and is likely to be used to set the tone for the rest of his tenure. The document is intended to create a forum to discuss how the FCA regulates and how it decides its priorities against a range of critical areas.
One of the document's clear aims is to make the regulator more transparent. In a report published 25 October 2016 by New City Agenda, a financial services think tank founded by Lord McFall and Lord Sharkey, the FCA was heavily criticised for its lack of transparency, with information about its internal workings released only reluctantly. The New City Agenda also criticised UK regulators generally for 'group think', again a criticism that can be seen to be addressed through this consultation.
The FCA's consultation on its Mission Statement sets out proposed principles underpinning its strategic choices. It highlights that the FCA is working in a changing environment, with technology driving new products and services and an increasing number of firms within its ambit. In order to develop the Mission, the FCA is seeking the input of a variety of stakeholders. Respondents are asked to feedback on:
- what should be the FCA's role in protecting consumers and whether the FCA should prioritise the protection of vulnerable consumers;
- how the FCA approaches disclosure in financial products and should it be more interventionist where conventional disclosure steps prove ineffective;
- the FCA's role in consumer redress schemes;
- the FCA's strategy for intervention where "harm" has been identified (the FCA highlights the need for predictability and notes that there is room for improvement in its interventions);
- the scope of regulation in light of unclear demarcation between regulated and unregulated activities, particularly in some consumer credit businesses;
- the interaction between regulation and public policy; and
- competition, supervision and enforcement.
The consultation notes that consumers’ needs are becoming more diverse and complex, yet they are increasingly required to take more personal responsibility for their financial decisions. The FCA is sensitive to the need to be a proportionate regulator, which does not stymie innovation and progress. The FCA is seeking views on how to balance and address these issues.
In its views on competition, supervision and enforcement, the FCA has questioned whether more formal discussions with firms about lessons learned would improve regulatory outcomes and whether private warnings are the right outcome, given the lack of their transparency. It is also considering whether its approach to firm failure (it will allow firms to fail) is the right one.
The paper may be slightly puzzling to those who are likely to read it: this is not the first time there has been "navel gazing" at the regulator (the enforcement process review, for example) but it is a good way to set the tone for a new incumbent's tenure and ensure that critics have the opportunity to make their voice heard, hopefully with useful suggestions as well.
The consultation closes on 26 January 2017. The policy statement which follows should be a worthwhile read.
