Regulatory consultations come and go. Only occasionally are they met with widespread consternation. This appears to be the case with the Financial Conduct Authority’s (FCA) proposal for a shift in enforcement approach to disclose investigations when they're deemed to be in the public interest (our leading item this week). Concerns from all quarters were seemingly predictable, and the proposal jars uncomfortably with the regulators’ new competitiveness and growth objectives.
The interface between Big Tech and financial services firms is explored in our second item. This is only one part of a much broader set of in-train initiatives in relation to Big Tech firms and digital markets, not least around critical third parties and artificial intelligence.
Elsewhere, we include updates on new anti-greenwashing guidance, latest complaints data, and top tips for firms with appointed representatives.
The FCA consultation on publishing enforcement investigations closed on 30 April 2024 and already the regulator has responded to the House of Lords Financial Services Regulation Committee’s letter of 18 April which shared concerns about its plans to name some firms under investigation. Criticism centres around firms which are cleared of wrongdoing and the length of investigations which result in no further action.
The FCA signaled the importance of publication being in the public interest and gives examples that it considers would meet this burden. Its intent is that this will amplify the deterrent impact of enforcement and also provide greater confidence to whistleblowers that the FCA is responding to the concerns they raise. The FCA reiterates that this will improve transparency and that the impact is limited to a small number of cases.
This is one to watch as the response rate appears to be high and the term 'public interest' is commonly debated.
Read more on the House of Lords letter to the FCA
Read our in depth article on The FCA's proposed approach and market implications
The FCA recently published a feedback statement summarising its analysis of the responses received to its call for input (CFI) on potential competition impacts from the data asymmetry between Big Tech and firms in financial services. On the same day, Nikhil Rathi, the FCA’s Chief Executive, delivered a speech at the Digital Regulation Cooperation Forum on the subject of ‘Navigating the UK’s Digital Regulation Landscape’.
The CFI formed part of the FCA’s commitment in its three-year strategy to analyse the competition impact of the increasing prevalence of Big Tech in financial services. 31 responses to the call for feedback have been received, and are summarised further through the statement.
The FCA has proposed four next steps:
Mr Rathi, in his speech, said that if the FCA’s analysis finds that Big Tech data is valuable in financial services, it will look to incentivise data sharing between Big Tech and regulated firms through Open Banking and Open Finance.
Read more on Navigating the UK's Digital Regulation Landscape: Where are we headed?
The FCA has released finalised non-handbook guidance on its anti-greenwashing rule, which will be effective from 31 May 2024, and will apply to all regulated firms in the UK. The rule aims to combat misleading sustainability-related claims about products and services. The FCA has tailored its guidance, post consultation, to address industry requests for greater clarity on the rule's scope and examples of good and bad practice across different sectors.
However, there's uncertainty regarding the extent to which statements made by a firm about itself are covered by the rule. With proactive enforcement expected, firms must be prepared for the implementation of the new rule and the potential for private law claims if customers suffer financial loss due to greenwashing. This guidance serves as a valuable resource for businesses seeking to navigate the anti-greenwashing rule, offering comprehensive insights into its scope and interaction with existing requirements.
Read more on FG24/3: Finalised non handbook guidance on the Anti‑Greenwashing Rule
Every six months the FCA publishes data on the number of complaints received by firms where they've received a minimum of 500 complaints over six months or 1,000 complaints over a year. The most recent release shows that complaint volumes remained static in the second half of 2023 at around 1.8 to 2 million. Complaints relating to banking, credit card, homes finance and investments all went up during the period, but overall the number of upheld complaints decreased from 61% to 58%.
In addition, the Financial Ombudsman Service (FOS) has published some possible gaps it has identified in the FCA Handbook Chapter DISP. These include some activities that the FOS would like to adjudicate but cannot, such as commercial hiring and leasing, peer-to-peer lending or a credit broker of unregulated loan. Similarly, there are some occasions where an individual doesn’t qualify as a consumer but the business doesn’t have a relationship with the financial firm, or the firm isn’t trading at the point of complaint. The FOS is working together with the FCA to potentially address these gaps.
Read more on complaints data published by the FCA
Read more on the FOS letter describing possible gaps in DISP for small businesses
The FCA has assessed appointed representatives (ARs) and Introducer Appointed Representatives (IARs) who are undertaking credit broking to identify the key harms and the drivers of harm. It provides examples of good practice and areas where firms can improve. These include:
having procedures, systems and controls which ensure appropriate due diligence checks on ARs, both on an initial and ongoing basis
ongoing monitoring which provides the principle with a clear view of the risk and harms involved in the AR
Ensuring that there are robust systems and controls to end AR relationships, including checking that all post-termination activities have been completed
The practice areas will be relevant to all firms who have appointed representatives, although some of the practices are specific to credit brokers.
Read more on good practice and areas for improvements from the FCA
An essential guide to the regulatory landscape for financial services
