What are the FCA Principles of Business? - DeltaNet ...

The 11 Principles for Business · Integrity: A firm must conduct its business with integrity. · Skill, care and diligence: A firm must conduct its business with ... Weusecookiestoimproveyouronlineexperience.Forinformationonthecookiesweuseandfordetailsonhowweprocessyourpersonalinformation,pleaseseeourcookiepolicyandprivacypolicy.Bycontinuingtouseourwebsiteyouconsenttoususingcookies.AcceptCookies [email protected] +44(0)1509611019 Search Solutions ComplianceTraining HealthandSafetyTraining PerformanceTraining AstuteeLearningPlatform BespokeProjects AdaptAuthoringTool Pricing Support CustomerSupport&Services VideoTutorials KnowledgeBaseFAQs Blog Resources ResourceCentre Insights Guides Webinars Checklists BitesizeQ&Avideos Testimonials AboutUs Testimonials WhyChooseDeltaNet? OurContent OurValues WhereWeBegan Careers Roadmaps Menu Solutions ComplianceTraining HealthandSafetyTraining PerformanceTraining AstuteeLearningPlatform BespokeProjects AdaptAuthoringTool Pricing Support CustomerSupport&Services VideoTutorials KnowledgeBaseFAQs Blog Resources ResourceCentre Insights Guides Webinars Checklists BitesizeQ&Avideos Testimonials AboutUs Testimonials WhyChooseDeltaNet? OurContent OurValues WhereWeBegan Careers Roadmaps GetinTouch Home>FAQs>WhataretheFCAPrinciplesforBusiness? WhataretheFCAPrinciplesforBusiness? WhataretheFCA’s11PrinciplesofBusiness,andhowaretheyusedtoregulatethemarket,maintainintegrity&protectconsumers?Findouthere TheUKfinancialservicesfirmscontributehugelytooureconomy,sowemustbeabletotrustthem.TheprimaryobjectiveoftheFinancialConductAuthority(FCA)istoregulateandmanagetheconductofthesefirmstoprotectconsumersandtheeconomy.Thisinvolvesabroadrangeofrolesandresponsibilities,whichareoutlinedintheFinancialServicesandMarketsAct2000(FSMA).Theseobligationscontributetotheiroverallobjectivestorestoreandmaintainmarketintegrity,protectconsumersandpromotehealthycompetition. WhatistheFCA? TheFinancialConductAuthority(FCA)istheUKregulatorforfinancialservicesfirmsandfinancialmarkets.UndertheFinancialServicesandMarketsAct2000(FSMA),theyhavevariousenforcementpowersdesignedtoregulatetheconductoffinancialservicesandenforceintegrityandfaircompetitionwithinthesector. TheprimaryobjectiveoftheFCAistoensurethatcustomerprotectionisahigherprioritythanprofit,andtheirkeyoperationalactivitiesaredesignedtoupholdthisresponsibility.Theirthreekeyoperationalactivitiesinclude: Authorisation:TheFCAmonitorsfirmsandindividualstochecktheymeettherequiredstandards.FinancialservicesprovidersmustbeauthorisedorregisteredbytheFCAbeforetheyoffer‘regulatedactivities’.Banks,creditunionsandinsurancecompaniesareregulatedbytheFCAandthePrudentialRegulationAuthority(PRA).Thisauthorisationinvolvestwosteps: ApplicantsarevettedbytheFCAbasedontheirbusinessplans,risksandcontrols,qualifications,andexperience. Authorisedfirmsmustmeetminimumstandardsandcomplywiththerulesandprinciples.TheFCAHandbookoutlinesrequirementsandcontainsmodulesrelatingtodifferentareasofcompliance. Supervision:ThisoperationalactivityinvolvestheFCAsupervisingfirmsandindividualstoensuretheymeettherequiredstandards.Thissupervisionisrisk-based,andfocusesonfairtreatmentofconsumersandupholdingmarketintegrity.Currently,theFCAsupervisesaround59,000firmsservingretailandwholesaleconsumersaswellasusersofmanyoftheworld’slargestandmostsignificantglobalmarkets.Theirapproachtosupervisionisproportionateddependingonifafirmisclassifiedasafixedportfoliofirmoraflexibleportfoliofirm. Supervisiontakesathree-pillarapproach: Pillar1:Proactivesupervisionofthebiggestfirms Pillar2:Reactivesupervision,inresponsetoactualeventsoremergingrisks Pillar3:Thematicanalysis,basedonrisksaffectingmultiplefirmsorentiresectors. Enforcement:Wherethereisnon-compliance,theFCAintervenesbylaunchinganenforcementinvestigation.Morerecently,theFCAhasannouncedtheirplanstouseinvestigationsasatooltodeterminewhetheranywrongdoinghasoccurred,ratherthanasaresponsetoobviousbreaches.Thismeanstheyhaveloweredthethresholdforcasestheythinkmightrequireinvestigationandenforcementaction. TheFCAhascriminal,civilandregulatoryenforcementpowerstoprotectconsumers.Usually,thepenaltiestheyimposearefines,whichareissuedthroughalengthyprocess.Theyassesstheriskofharmcausedbythemisconductandconsideranymitigatingfactors,includingadjustmentsforearlysettlements.Inrecentyears,theFCAhaspromisedtoupdatetheirapproachinordertomakeuseofalloftheirenforcementpowers.Forexample,there’sarenewedfocusonusingtheFCA’spowertovaryafirm’spermissionsinordertopreventharm. The11PrinciplesforBusiness TheFCAsupervisesover59,000firms,usingtheir11PrinciplesforBusinessascriteriatomeasureandregulateeachcompany’sconduct.Thesearestandardsofconductthatallfirmsmustfollowtomeetregulatoryobligations.TheFCAusestwokeymeasures:Treatingcustomersfairly(TCF)andtrainingcompetence(T&C). The11PrinciplesforBusinessare: Integrity:Afirmmustconductitsbusinesswithintegrity. Skill,careanddiligence:Afirmmustconductitsbusinesswithdueskill,careanddiligence. Managementandcontrol:Afirmmusttakereasonablecaretoorganiseandcontrolitsaffairsresponsiblyandeffectively,withadequateriskmanagementsystems. Financialprudence:Afirmmustmaintainadequatefinancialresources Marketconduct:Afirmmustobserveproperstandardsofmarketconduct Customers’interests:Afirmmustpaydueregardtotheinterestsofitscustomersandtreatthemfairly. Communicationswithclients:Afirmmustpaydueregardtotheinformationneedsofitsclientsandcommunicateinformationtotheminawaywhichisclear,fairandnotmisleading. Conflictsofinterest:Afirmmustmanageconflictsofinterestfairly,bothbetweenitselfanditscustomersandbetweenacustomerandanotherclient. Customers:relationshipsoftrust:Afirmmusttakereasonablecaretoensurethesuitabilityofitsadviceanddiscretionarydecisionsforanycustomerwhoisentitledtorelyuponitsjudgement. Clients’assets:Afirmmustarrangeadequateprotectionforclients’assetswhenitisresponsibleforthem. Relationswithregulators:AfirmmustdealwithitsregulatorsopenlyandcooperativelyandmustdisclosetotheFCAappropriatelyanythingrelatingtothefirmofwhichtheFCAwouldreasonablyexpectnotice. TrainingCompetenceRequirements Inordertoadhereto‘Principle3:ManagementandControl’,businessesneedtoensurethatemployeesarecompetenttocarryoutregulatedactivities.Thisrequirestraining,supervision,recordkeepingandmanagementinformation(MI).EmployeesalsoneedtosatisfytheFCA’strainingandcompetencyrequirementsinrelationtothejobtheyperform.Theseinclude: FCArequirements:FCArequirementsforcompetencemustbeunderstoodforanyjobrolewhereacontrolledfunctionisperformed. Recruitment:Recruitmentneedstobealignedwiththecompetenceandexperiencerequirementsfortherole. Trainingandsupport:Thetrainingorsupporttoachievecompetencemustbeprovidedtoemployees. Measurement:KeyPerformanceIndicators(KPIs)mustbemonitored.Supervisorsorassessorsmusthavethenecessarycoachingandassessmentskills. Qualityassurance:Qualityassuranceisrequiredtoensurethatstandardscontinuetobemet. Evidence:Recordsofemployeesneedtobekeptfor3to5yearsorindefinitely,dependingonjobrole. Whyaretheseprinciplesimportant? BeforetheFCAtookresponsibilityforregulatingthefinancialservicesindustry,misconductresultedinbillionsofpoundsinfines,compensationandotherpenaltiesforbusinesses.Byadheringtotheprinciplesforbusiness,companiesnotonlyreducetheriskofbeingprosecuted,buttheyalsogainmorecustomersbyaligningthemselveswithadmirablevalues.Financialserviceproviderswhoputcustomersfirstandendorseacultureoffairtreatmenthistoricallywinmorebusiness.Thisstimulateshealthycompetitionandgrowthwithinthesector. FCAConsumerOutcomes TheFCAsupervisesover59,000firms,usingtheir‘6ConsumerOutcomes’ascriteriatomeasureandregulateeachcompany’sconduct.Theseoutcomesrepresentthestandardsofconductthatallfirmsmustfollowtomeetregulatoryobligations.Businessesmustprovideevidencethatall6consumeroutcomesarebeingmet,toavoidsupervisionorpenaltiesenforcedbytheFCA. ConsumerOutcome1 Thefairtreatmentofcustomersmustbecentraltoyourbusiness’corporateculture.Thesevaluesmustbeembeddedthroughouteverydepartmentandactivityexecutedbyyourcompany,whichmeansseniormanagementteamsmustactivelyendorseacustomer-centriccodeofconduct. ConsumerOutcome2 Productsandservicesmarketedandsoldintheretailmarketmustbedesignedtomeettheneedsofidentifiedconsumergroupsandmustbetargetedaccordingly.Thismeans: Ensuringproductsandservicesaretargetedattherightmarketsandconsumerstoavoidmisselling Periodicallyreviewingcomplaintsandclaimsmanagementinformation Collectingandanalysinginformationtoassesstheperformanceofthedistributionchannels ConsumerOutcome3 Consumersmustbeprovidedwithclearinformationandkeptappropriatelyinformedbefore,during,andafterthepointofsale.Thereareseveralwaystoensurethis;forexample: Beforethesale:Avoidsmallprintorjargon.Productfeaturesorlimitationsmustbecommunicatedtocustomersthroughyourdistributionchannels Pointofsale:Pointofsaleinformationmustbeclearandhelpcustomerstodecideiftheproductmeetstheirrequirements Postsale:Post-saleinformationmustmakeconsumersawareofproductperformance,opportunitiestoact,andanychangesinthetermsandconditions. ConsumerOutcome4 Whereconsumersreceiveadvice,theadvicemustbesuitable.Thismeansanyguidanceofferedmustconsidertheiruniquecircumstances. ConsumerOutcome5 Consumersmustbeprovidedwithproductsthatperformastheyhavebeenledtoexpect,andtheservicetheyreceiveisofanacceptablestandard.Organisationsmustregularlyreviewproductsandfeedbackfromconsumers.Highnumbersofclaimsandcomplaintsmayindicatethatcustomersarenotbeingtreatedfairly.Buyersmustbemadeawareofpotentialmarketrisksforproducts.Consumerscanstillbetreatedfairlyiftheproducttheypurchaseperformspoorly.However,itisn’tfairifconsumersaremisledaboutthepossibleperformanceofaproduct. ConsumerOutcome6 Firmsmustnotimposeunreasonablepost-salebarriersonconsumerswhochangeproduct,switchprovider,submitaclaimormakeacomplaint.Customersshouldbeabletochangeproductsorswitchproviderswithoutexcessivepenalties.Itmustnotbedifficultforconsumerstomakeclaimsorcomplaints.Complaintsareavaluablesourceoffeedbackandanearlywarningoffailuresinservicedelivery.Thewayyouhandlecomplaintscanenhanceordamageyourreputation. Whathappenswhenthereisnon-compliance? AllregulatedfirmsmustcomplywiththeprinciplesandrulessetoutintheFCAHandbook.TheHandbookconsistsofmodulesrelatingtodifferentareasofcomplianceandisavailableonlineorinprint.Whenthereisnon-compliance,theFCAintervenestolimitthedamageandseekredress. TheFCAwilllaunchanenforcementinvestigationwherevertherearecircumstancessuggestingmisconduct,orforauthorisedfirmswherethereis‘goodreason’fordoingso.Thisisalowthreshold,andmorerecently,theFCAhasannouncedtheirplanstouseinvestigationsasatooltodeterminewhetheranywrongdoinghasoccurred,ratherthanasaresponsetoobviousbreaches. FCA’scurrentapproachtoimposingfinancialpenaltiesisbasedonafive-stepprocess.Theyassesstheriskofharmcausedbythemisconductandconsideranymitigatingfactors,includingadjustmentsforearlysettlements.Inrecentyears,theFCAhaspromisedtoupdatetheirapproachtomakeuseofalloftheirenforcementpowers.Forexample,there’sarenewedfocusonusingtheFCA’spowertovaryafirm’spermissionstopreventharm. WhatenforcementpowersdoestheFCAhave? Wherestandardsofconductarenotmet,theFCAhascriminal,civilandregulatoryenforcementpowerstoprotectconsumers.Forexample,theFCAcanwithdrawafirm’sauthorisation,issuefinesandimposecriminalprosecutions.Theyalsopublishenforcementnoticestoinformthepublicandmaximisethedeterrenteffectofenforcementaction.Thismeansthatifyourfirmfailstocomplywiththeregulations,youriskcompromisingthebusiness’reputation,aswellasanyimportantprofessionalrelationships.TheFCAalsohasanenforcementdivisionthatworkswithotherbodiestoensureearlyenforcementactionistaken. Thereisadiscountschemeforfinancialpenalties,suspensions,restrictionsconditionsanddisciplinaryprohibitionsifthecaseisresolvedquickly.Forexample,ifafirmfullyagreeswiththefactsproposedbytheFCA,theycouldreceiveadiscountofupto30%ontheirfinancialpenalty. RosieAnderson DeltaNetInternational GetNewandExclusiveInsightsDirecttoYourInbox! FollowusonLinkedIn RelatedArticles WhatisSocialEngineering? Wed,06Apr2022 WhatisSocialEngineering? Wed,06Apr2022 WhatisPhishing? 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