Regulator Watch

Ben Mason, CEO, My Compliance Centre

28 March 2022

We like to keep an eye on our primary regulators and what they are up to and of course My Compliance Centre’s automated data feed and Regulatory Change management module make this easy to do. 

And, in summary, it is rare to say this, but they have not been as busy as usual in Q1 2022. 

There have been 215 regulatory updates within scope for our service (and we do filter out some of the less relevant stuff).  That is nearly a 40% decrease on this time last year – if measured purely on volume of output.

The main trend I noticed from the FCA over recent months is its increasingly defensive position in regard to its consumer protection objective and how hard it is working to protect consumers in numerous ways:  at the gateway (i.e. when a new firm tries to get FCA authorisation), acting against misleading marketing and other supervisory work. 

When Nikhil Rathi was appointed FCA CEO, I remember reading that there could be a swing towards market supervision from consumer protection, reflecting Mr. Rathi’s background.  This could not have been more wrong.  Whether it is Mr. Rathi’s appointment, or more simply the FCA being on the receiving end of investigations into its handling of incidents such as Woodford Investment Management and London and Capital Finance, it feels like there has been a serious strengthening of the FCA’s approach towards consumer protection, which I suspect many firms already thought might not be possible.

When we look at the FCA’s activity overall, then a sleepy 4 consultations of relatively minor consequence and one Policy Statement – on fees – means this really has been a quiet quarter.  I won’t be provocative and speculate on the reasons for that. 

In terms of materiality, overall, it also feels like the last quarter has been less high profile than normal.  There has also not been very much in the way of ‘super fines’, although two at the end of last year, that were too late for our December newsletter, certainly register on the dial: HSBC’s £64m (after 30% discount) for AML failings and Blue Crest’s £40m for conflicts failings. 

When I look at the different output of the PRA’s enforcement team compared to the FCA’s, I do sometimes wonder if the FCA enforcement team work late into the night while the PRA’s go home early!  Or are banks, insurers, credit unions and building societies simply much better behaved on the back of the ongoing intensive supervision they receive? 

As a fully paid-up member of the entrepreneur’s club, and with full empathy for financial services entrepreneurs and the challenges they have getting licensed, the one fine that does deeply trouble me is the FCA’s fine of Barclays over its handling of Premier FX (see FCA Final Notices on 28th Feb).  The unintended consequences of regulation are something I have been talking about for some time and this has inspired me to write this article about the potential wider damage that could be done by this fine if Barclays decides to tighten its risk appetite. 

The EBA’s opinion on ‘de-risking’ on the 5th of January is really interesting, starkly highlighting how this issue is having a wide-ranging and long-term impact.  (And the subsequent response of the EBA’s Banking Stakeholder Group is similarly helpful.)

The other trend that simply won’t go away is “crypto” – digital assets.  While smaller jurisdictions and financial centres typically saw a commercial opportunity and hopped on the bandwagon early, creating regulatory frameworks embracing digital assets, larger jurisdictions and the primary financial centres still feel like rabbits in the headlights, playing catch-up with a highly innovative and agile sector. 

It is nearly 4 years since the parliamentary select committee (which was also highly critical of all parties for not responding to the crypto challenge quickly enough) recommended amending the Regulated Activities Order to incorporate digital assets.  It simply has not happened, and the FCA is using AML regulations as a pseudo crypto-management regulatory tool.  I believe it would be preferable to have a proper regulatory framework for digital assets or at least incorporate it within the existing framework.  Baffling…

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