What is the Financial Conduct Authority?

30 July 2020

The Financial Conduct Authority logo on a mobile phone

If you’re interested in starting a career in finance or have recently taken on a job in financial services, you are probably familiar with the Financial Conduct Authority (FCA). As a newcomer to the sector, it’s only natural that you may be unaware of what exactly the FCA is and the role it plays in finance. However, it’s important to understand this crucial part of financial services.

In this blog, we explain the importance of the FCA, how much influence it has over modern UK finance and how it’s controlled by the UK government.

What does the FCA do?

The role of the Financial Conduct Authority is to regulate financial services in the UK and every individual, firm or company that it relates to. In essence, they focus on three key objectives: ensuring the continued standard of the UK financial system, checking that consumers are sufficiently protected and fairly treated, and encouraging fair competition in the financial industry to benefit consumers.

Regulation primarily affects the financial industry for individuals such as independent financial advisers and mortgage advisers, law firms and banks. However, it’s also applicable to other settings. For example, it applies to the retail sector, as a lot of highstreet and online shops now offer consumers the option to pay on store credit and store cards or even take out loans like they would at a bank.

How many firms does the FCA regulate?

As of May 2020, the Financial Conduct Authority claimed to regulate the conduct of over 59,000 businesses. Alongside these duties, the prudential affairs of businesses are monitored by the Prudential Regulation Authority (PRA), overlooking 49,000 firms.

Often confused with the FCA, the PRA supervises financial businesses to ensure that their products and services are safe for consumers and don’t conflict with the standards outlined in government legislation. The FCA took over from the Office of Fair Trading in 2014 and the PRA replaced the Financial Services Authority in 2013 following the financial crash.

What powers do the FCA have?

Not only is the FCA a regulator for companies that handle and manage finances, but they’re also able to enforce powers over the individuals or companies that breach relevant legislation.

If an individual or company doesn’t comply with the standards set by the FCA, they possess powers to:

  • issue warnings, alerts and fines
  • restrict or suspend future activity
  • seek criminal prosecution in cases of financial crime
  • apply for restitution orders, insolvency orders, winding up orders and injunctions from relevant courts
  • publish detailed information when a warning, decision or final note has been made
  • request that web hosting companies deactivate websites of wrongdoers.

Who regulates the Financial Conduct Authority?

The purpose and approach of the Financial Conduct Authority is detailed in specific UK legislation. In the Financial Services and Markets Act 2000 (FSMA), the government is able to explain in specific terms what the FCA is, how it functions and all relevant legislation that applies to them.

As the FCA abides by specific rules outlined in UK legislation, they are required to operate in a transparent way and provide detailed information to parliament, law firms and individual consumers when necessary.

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