The Financial Conduct Authority (FCA) has faced its fair share of challenges since its creation in 2013. The latest - and arguably most damaging - scandal comes just days after the City watchdog
announced the need for a "sharper focus" and clearer distinctions between its approach to the regulation of large and smaller firms.
Following a review of its strategy, the Authority confirmed several structural changes that will come into effect from 5 January next year. Martin Wheatley, Chief Executive of the FCA, said: "The financial industry continually evolves and to regulate it effectively we must evolve too."
Five ways the FCA will sharpen its focus
1. Bring together the current Authorisations and Supervision divisions
2. Create a new Strategy and Competition Division to enable better prioritisation and focus across the organisation
3. Create a new Risk Division to provide a strategic approach to the management of internal and external risk
4. Create a new Markets Policy and International Division that will strengthen the FCA's focus and influence on the European stage
5. Create a Market Oversight Division incorporating UK Listing Authority and Market Monitoring functions
But some are already questioning whether the restructuring will do enough to cut out poor practice - and more may do so in light of the independent
Davis Inquiry Report that was released on Wednesday this week.
Rooting out poor practice
Under this new regulatory framework, the FCA will be far more efficient in identifying small firms engaging in poor practice, writes Carmen Reichman for
Investment Week.
She quotes Neil Walkling, the wealth management consultant who suggested the structural changes, and who claims that although it might seem as though smaller firms will receive less attention from the FCA due to the lack of specific routine visits, the watchdog will, in practice, sharpen its focus on thematic reviews and consider standards more thoroughly. "It should mean the FCA is more efficient in identifying poor practice," he suggests.
Investment Week piece Looks could be deceiving
But others are dubious about the changes. Treasury Committee Chairman Andrew Tyrie believes it is "crucial" that the City watchdog learns from past mistakes.
"Serious concerns have been raised - not least in Parliament - about the way that the FCA has approached its responsibilities since it was formed in April 2013," Tyrie told
Professional Advisor this week. While he admits the structural changes "look substantial", he believes they must undergo detailed examination before we can tell whether or not they address these "serious concerns".
What is certain, Tyrie emphasises, is that the FCA must "exercise judgment to secure much better outcomes for consumers, not least by engaging more with the regulated community, by increasing competition and, where necessary, enforcing higher standards".
Professional Advisor article Much to prove
The changes come at a critical time for the FCA. Just days after they were announced, the FCA was reprimanded in the damning Davis Enquiry Report for being "high risk, poorly supervised and inadequately controlled", after causing the value of Britain's insurers to fall by a staggering £3bn in one day.
"Clifford Chance lawyer Simon Davis said the Financial Conduct Authority created a false market on March 28 by briefing
The Daily Telegraph about plans to probe 30 million pension and investment policies dating back to the Seventies," reports Jamie Dunkley for
The Independent.
Dunkley highlights some of the report author's comments: "It appears that a significant number of investors in life insurance sector shares based their investment decisions on the widespread misapprehension of the nature and scope of the Life Insurance Review," said Davis. "When it went wrong, the FCA's reaction fell short of the standards expected of those it regulates."
It seems the financial services watchdog has a lot to prove.
The Independent story
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