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• UK: FCA Business Plan 2024/25: a quick guide to the FCA’s key priorities

UK: FCA Business Plan 2024/25: a quick guide to the FCA’s key priorities

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On 19 March 2024, the FCA published its Business Plan for 2024/25 setting out its planned programme of work for the coming year. The FCA states that it remains resolute in supporting the vital role the financial sector plays in the UK’s long term economic growth, embracing the potential benefits that technology presents for the FCA and the firms it regulates whilst also continuing to protect consumers and ensure market integrity. The FCA’s key objective for the final year of its 3-year strategy is to achieve better outcomes for consumers and markets.

• FCA Business Plan key areas of focus for 2024/2025
• Economic and geopolitical challenges ahead
• FCA commitments - new areas of focus for the coming year
• New FCA Approach Documents published
• FCA resources and resilience

In the FCA’s Business Plan for 2024/2025 , the FCA sets out how it will continue to deliver the  commitments in its 3-year strategy which focus on:

• reducing and preventing serious harm,
• setting and testing higher standards; and
• promoting competition and positive change. 

The 2024/2025 FCA Business Plan considers each of these themes in turn, with details of the FCA’s planned work against its commitments, including work already started. Details of the outcomes it wants to achieve are also provided. Each commitment is linked to  outcomes and metrics  to help measure progress and performance.  The FCA states that it will provide an update on its performance in the summer including metrics on how it is achieving its new objective to support the international competitiveness and growth of the UK economy in the medium to long term.

FCA Business Plan key areas of focus for 2024/2025

The FCA states that it will prioritise the following areas of focus for 2024/2025:

Protecting consumers by:

testing if firms are meeting the higher standards set by the Consumer Duty;

supporting consumers ’s long term financial wellbeing for consumers and unlocking innovation in retail investment markets through the Advice Guidance Boundary Review;

working with regulatory partners to ensure pension products deliver value for money and working with consumers to help them better engage with their pensions; and

continuing to develop the FCA’s use of Artificial Intelligence (AI) to help prevent fraud and scams to improve the experience of consumers and firms

Ensuring market integrity by:

monitoring risks in markets and taking action where appropriate;

finalising far-reaching capital markets reforms;

continuing to lead the debate on how the right form of regulation can support growth for UK markets, with a number of significant policy changes in or approaching consultation; and

continuing to invest in data and technology to support rigorous market oversight.

Promoting effective competition by:

continuing to promote competition and innovation to deliver good outcomes for customers;

identifying where more effective competition can better deliver fair outcomes under the Consumer Duty; and

looking to market reforms that bring the benefits of innovation and digitalisation.

Contributing to UK competitiveness and growth by:

• improving the attractiveness and global reach of UK wholesale markets
• supporting firms to invest, innovate and expand through the FCA’s Sandboxes and Innovation pathways; and
• continuing to make it quicker and easier for firms to apply for authorisation and strengthening.

The FCA identifies the following key uncertainties in the economic and geopolitical environment over the year ahead which it will continue to monitor in light of its objectives for the coming year:

• Higher interest rates and persistent inflation – monetary policy is likely to remain restrictive in the medium term to return inflation to the 2% target;
• Global financial risks – higher levels of public debt in major economies could affect UK financial stability;
• Geopolitical risks – remain high, dampening global growth and affecting shipping and trade, with the potential for shocks to cause severe disruption.

The FCA states that in the coming year it will continue to deliver the following 13 commitments focusing on reducing and preventing financial crime, putting customers’ needs first and strengthening the UK’s position in global wholesale markets. The following is a snapshot of some of the key 2024/2025 activities in relation to the 13 commitments.

Reducing and preventing financial crime

As for last year’s Business Plan reducing and preventing financial crime remains one of the FCA’s areas of particular focus, with desired outcomes including slowing the growth in investment and Authorised Push Payment (APP) fraud victims and losses.

The key new activity for 2024/25 will be increasing investment in the FCA’s systems to use intelligence and data more effectively within its financial crime work, so that it can target higher risk firms and activities. This will be complemented by continuing to:

• Focus on proactive assessments of anti-money laundering systems and controls for those firms deemed higher risk;
• Use data to target the firms that are more susceptible to receiving the proceeds of fraud and ensure they do more to stop the flow of illegitimate funds; and
• Strengthen its supervision of firms’ sanctions systems and controls.

The FCA will also carry on using its powers to disrupt, pursue and sanction those committing and enabling financial crime, as well as aiming to improve its ability to identify and request platforms remove unauthorised financial promotions, associated websites and social media accounts.

The FCA makes the point that while the financial services sector must continue to take the lead in identifying potential harm for supervisory and/or enforcement action (such as continuing action to tackle scams and fraudulent websites),  other partners and sectors also have an important role to play. Given this, other continuing activities this year will include active engagement with partners including the National Economic Crime Centre (NECC) to strengthen the system-wide response to financial crime.

Putting consumers’ needs first

The Consumer Duty remains the focal point of this second core commitment. The FCA makes it clear that it will continue to focus its interventions where there is greatest risk of harm or where more work is needed by firms to identify and address gaps and to meet the higher standards of the Duty. This will include supervisory work to test firms’ implementation of the Duty and to improve delivery of good consumer outcomes, with specific areas including complaints-handling and root cause analysis, consumer support journeys, consumer understanding, fair value and closed products and services. 

In terms of its wider work, this will include responding to cost of living pressures, financial inclusion, access to cash and addressing consumer difficulties in accessing required financial products and services. Specific continuing activities will include:

• Finalising changes to its mortgage, consumer credit, and overdraft rules to improve outcomes for consumers in financial difficulty. 
• Implementing new rules to ensure consumers and businesses have reasonable access to cash and continued supervision of branch closures. Take a look at our Engage article for more on the FCA’s recent consultation on a new regulatory regime for access to cash.
• Holding a Financial Inclusion TechSprint.
• Consulting on changes to its debt advice rules to improve outcomes for vulnerable consumers.

New activities in 2024/25 will be:

• Multi-firm work and market studies across different sectors to drive up standards. This will include looking at unit-linked pensions and long-term savings products to test the transparency of charges across value chains, how firms assess overall product value and their response where they identify unfair value. There will also be multi-firm work on how quickly the insurance industry responds to claims, including where customers are more likely to show characteristics of vulnerability.
• As recently confirmed in a press release , a review of firms’ treatment of customers in vulnerable circumstances (with findings shared by the end of 2024).

Strengthening the UK’s position in global wholesale markets

The FCA wants to continue to strengthen its position in global wholesale markets and to host markets which support the domestic economy and growth.  The FCA’s aim is to have markets which are open to innovation, underpinned by high standards of market integrity and investor protection.  Key activities that the FCA will start in 2024/2025 include:

• Encouraging innovation and evolving markets by supporting industry work on T+1 accelerated settlement in order to increase efficiency.  The Accelerated Settlement Taskforce is currently exploring the potential for faster settlement of financial trades in the UK.

Work the FCA will continue in 2024/2025 in relation to wholesale markets includes:

• Concluding the review of the Listing Regime and publishing proposals for a new public offer and admission to trading regime.
• Consulting on regulatory changes to introduce more options on how to pay for investment research.
• Consulting on proposals for the commodity position limits regime to ensure venues are able to remain resilient during extreme events.
• Ensuring an orderly transition away from LIBOR and ensure derivative markets are ready to implement the new derivative reporting rules under UK European Market Infrastructure Regulation (UK EMIR) in September 2024.
• Opening the Digital Securities Sandbox applications during 2024.
• Launching the intermittent trading platform Private intermittent Share and Capital Exchange Service (PISCES) by the end of 2024.
• Finalising the consolidated tape for bonds before deciding on the approach for equities.
• Supporting asset management industry groups on tokenisation.
• Confirming the final rules for the Overseas Fund Regime applications gateway.

Preparing financial services for the future

The FCA states that in light of progress to date in implementing the government’s Smarter Regulatory Framework (SRF), it is moving this commitment down the priority list for 2024/25. It will, however, continue to work with HM Treasury and other regulatory authorities to ensure an efficient and appropriately sequenced workflow of the repeal of assimilated (formerly ‘retained EU’) law and its replacement, where appropriate, with rules (where appropriate, tailored to better suit UK markets). It will also continue to embed the changes to the regulatory framework, e.g. in relation to its accountability.

Dealing with problem firms

Ongoing work this year will include increasing its auto-detection capabilities of problem firms and individuals and identifying any barriers in its regulatory framework that might constrain its ability to take action

Taking assertive action on market abuse

The FCA is aiming to significantly increase the FCA’s capability to tackle market abuse, within a proportionate framework that supports innovation to lower industry costs.  The FCA highlights its ongoing work in the coming year includes:

• Developing improved market monitoring and intervention in Fixed Income and Commodities, covering both market abuse and market integrity.
• As part of the SRF process, it will issue a discussion paper on transferring the MiFID data reporting regimes for transactions (RTS 22) and reference data (RTS 23).  
• Assisting in delivering a proportionate market abuse regime for crypto assets and the PISCES facility.
• Extending the FCA’s data reporting supervision approach to EMIR, SFTR and Orderbook regimes.
• Publishing the results of the FCA’s peer review of market abuse systems and controls in providers of Direct Market Access.
• Publishing revised Market Cleanliness Data in Q3 2024 to capture anomalous trading compared to existing metrics.

Reducing harm from firm failure

Here the FCA emphasises the particular importance of its ability to respond to, and effectively manage, the impact of severe market shocks in the current environment. With a continuing increase in corporate insolvencies likely in 2024, its ongoing work will include continuing to use data and horizon-scanning mechanisms to spot firms at risk of failure and ensure an appropriate response – protecting consumers and ensuring market integrity - if they do fail.

Environmental, social and governance (ESG) priorities

The FCA highlights that its ongoing work this year in relation to ESG will include the following:

• Integrating the Sustainability Disclosure Requirements (SDR) and Investment Labels across the market, including the anti-greenwashing rule and guidance .
• Continuing to expand the SDR regime by publishing a consultation on extending the SDR to portfolio management in 2024.
• Engaging on new and emerging risks with UK and international partners.
• Progressing work on transition finance and preparing to have regard to a ‘nature’ regulatory principle coming into force.

Shaping digital markets to achieve good outcomes

Ongoing work to manage the risks from transformational technologies will include assessing the impact of AI on UK markets to better understand the associated risks and benefits and publishing the outcome of its November 2023  Big Tech Call for Inputs on data asymmetry between Big Tech firms and other financial services firms .

There is also a “heads up” that the FCA will continue to ‘robustly investigate’ digital consumer journeys and firms using sludge practices.

Improving the redress framework

Continuing initiatives this year will include the FCA’s work on redress Guidance for firms, complaints reporting, the Advice Guidance Boundary Review (see our Engage article here and related activity under ‘Enabling consumers to help themselves’ below), its proposed capital deduction for redress for personal investment firms and a review of lead generation in the claims management company (CMC) sector.

There is also a reminder that the FCA is aiming to set out its next steps on its review of historic discretionary commission arrangements in the motor finance market in Q3 2024. Our Engage article sets out more detail on the review, which was launched in January this year.

Enabling consumers to help themselves

With an emphasis on the importance of providing consumers with good information to help them make good decisions – especially in the current challenging economic environment – the FCA’s ongoing work in relation to this commitment will include:

• Continuing to robustly assess firms’ applications to approve financial promotions for unauthorised firms. This Engage article provides a short guide to the new FCA financial promotions gateway which came into effect on 7 February 2024.
• Continuing supervision of cryptoasset firms’ financial promotions, increasing its technological capability to detect harmful financial promotions, developing its  InvestSmart  and Consumer Awareness (currently  ScamSmart ) campaigns and its work with social media platforms and search engines.
• Following the Online Safety Act, continuing work with OFCOM to successfully implement the legislation for financial services.
• Publishing a response following last year’s  Advice Guidance Boundary Review  discussion paper (see also related activity under ‘Improving the redress framework’ above).

Minimising the impact of operational disruptions

The FCA states that firms still face a high and growing level of cyber threats and operational resilience risks against a complex geopolitical backdrop.  It is also seeing increasing levels of systemic risk build up in the system due to reliance on critical third parties. It will continue to work on the following in the coming year:

• From 31 March 2025, all relevant firms will need to maintain their important business services without intolerable harm to consumers and markets.
• It will publish a consultation paper clarifying the FCA’s expectations on how firms should report operational incidents to the FCA.
• It will progress the proposed new rules in relation to the systemic risks presenting by critical third parties to the financial sector. 

Improving oversight of Appointed Representatives

In the wake of the new rules and guidance on appointed representatives (ARs) introduced in December 2022 (see our Engage article ), the FCA will continue to target its resources through deeper analysis of existing data and using significantly improved data, including from updated Gateway forms, new regulatory returns and a dataset covering all ARs. On the supervisory front, it is looking to continue to strengthen its scrutiny and engagement with principal firms as they appoint ARs as well as continuing ‘assertive supervision’ of high-risk principals.

The FCA has also published updated Approach Documents for:

• Supervision , summarising how the FCA carries out its regulatory oversight and designed to help firms, consumers and markets understand how it works, and to fulfil its accountability to Parliament and to the public;
• Consumers , setting out how the FCA uses its powers and tools to protect consumers of financial services, in line with its consumer protection objective; and
• Competition , explaining how the FCA identifies potential harm caused by a lack of competition, and what actions it can take to protect consumers.

The FCA states that to help meet its growing remit, its workforce will grow to more than 5000 people by the end of March 2024.  The FCA intends to continue to focus on ensuring it has the right skills to achieve its business objectives sustainably.  The FCA also intends to invest in its own operational effectiveness and resilience to protect consumers, ensure market integrity and promote effective competition. 

It is encouraging that in this year’s FCA Business Plan, the FCA commits to investing further in its data resources and technology, which could lead to more efficient and better outcomes for consumers and regulated firms particularly relating to data collection and authorisation procedures. In addition, the benefits of innovation and digitalisation appear to be at the heart of the upcoming 2024/2025 focus areas for the FCA particularly in the context of promoting the attractiveness and global reach of UK markets.  Perhaps surprisingly, the FCA states that it no longer considers the SRF as highly prioritised as it was in 2023/2024 but it does acknowledge that it will continue to be an important programme for the FCA during 2024/25. There remains a significant number of SRF core files on the list for review so we look forward to seeing further progress and clarity about how these files will be transferred to the regulator rulebooks during 2024/2025. 

The FCA states that it will update on its progress with its objectives in summer 2024, including against metrics on its new objective to support the international competitiveness and growth of the UK economy in the medium to long term. 

If you would like to discuss any aspect of the FCA’s Business Plan, please get in touch with one of the listed lawyers or your usual Hogan Lovells contact.

Authored by  Virginia Montgomery and  Melanie Johnson.

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FCA Business Plan 2024

The FCA has published its business plan for 2024/25

The FCA has published its business  plan  for 2024/25. As it is the final year of its three-year strategy there are, unsurprisingly, no new areas of focus and in fact the business plan is noticeably shorter in detail than usual. Overall, the plan shows increasing supervisory oversight of Consumer Duty, financial crime and market abuse. Alongside this, the FCA will be making proactive efforts to improve the competitiveness of the UK wholesale markets and support innovation and digitalisation across all sectors.

Actions against objectives

Against its three original objectives, as well as its new secondary objective, the FCA will undertake the following activities in the next year:

Protect consumers:

• Test if firms are meeting the high standards set by the Consumer Duty (including making sure pension products deliver value for money and consumers better engage with their pensions.)
• Support people's long term financial wellbeing through progression of its Advice Guidance Boundary Review. 
• Develop its use of AI to help prevent fraud and scams.

Ensure market integrity:

• Finalise capital markets reforms. 
• Lead the debate on how the right form of regulation can support growth for UK markets. 
•  Continue to invest in data and technology to support rigorous market oversight whilst monitoring risks in markets and engaging where appropriate. 

Promote effective competition:

• Promote competition and innovation to deliver good outcomes for consumers. 
• Identify instances where effective competition can better deliver fair value outcomes under the Consumer Duty. 
• Continue to look to market reforms that bring the benefits of innovation and digitalisation.

Secondary international competitiveness and growth objective:

•  Focus on embedding the secondary objective to facilitate international competitiveness of the UK economy — by enabling the seven key drivers of productivity.

Progress on public commitments

The FCA said it will continue to deliver on the 13 public commitments it set out in its three-year strategy. The FCA will focus (and the plan gives more specific detail) on the first 3 commitments.

Commitment 1: Reducing and preventing financial crime

the FCA is committing to increase investment in its systems to use intelligence and data more effectively to take assertive action to tackle financial crime — such as scams and fraudulent websites. It will also strengthen its supervision of firms' sanctions systems and controls and undertake proactive assessments of anti-money laundering systems and controls for those firms deemed higher risk.

Commitment 2: Putting consumers' needs first

the FCA is undertaking a review on how well embedded consideration of vulnerable customers is and the outcomes that are being generated. Alongside, and aligned to this, the FCA will continue to focus its interventions where there is greatest risk of harm or where more work is needed by firms to identify and address gaps and to evidentially meet the higher standards of the Consumer Duty. New work announced include reviews of unit-linked pensions and long-term savings products to test the transparency of charges across value chains, how firms assess overall product value and their response where they identify unfair value.

Commitment 3: Strengthening the UK's position in global wholesale markets

the FCA will continue to update the regulatory framework in areas such as Listing Rules, investment research and ongoing UK MiFID reviews. It will look to encourage and support innovation and evolving markets i.e. tokenisation, digital securities sandbox, and the launch of the Private intermittent Share and Capital Exchange Service (PISCES) by the end of 2024. It will also look to continuously improve the authorisation process as well as its market monitoring capabilities.

Actions for Firms

The FCA does announce some detailed supervisory reviews within the plan, so it is well worth firms reviewing the relevant sections to check their alignment on these specific areas of focus to FCA's expectations — as well as validate the firm's focus to the broader objectives and public commitments.

KPMG's Regulatory Insight Centre will be monitoring this year for forward signals from the FCA on significant changes to its next three-year strategy and where, and how it pivots from here. Sign up to our distribution list  here  to be kept informed.

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FCA Publishes Business Plan for 2023/24 Blog Global Financial Regulatory Blog

The Future Regulatory Framework and Consumer Duty will be key areas of focus for the coming year.

On 5 April 2023, the FCA published its Business Plan for 2023/24. The Business Plan sets out a number of priority areas for the regulator, tied into its three main areas of focus: reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change.

The FCA highlights four of these priority areas that will receive additional emphasis over the coming year. These priority areas indicate a strong focus on developing the Future Regulatory Framework, including consulting on Handbook Rules to replace elements of onshored EU legislation as well as progressing the Edinburgh Reforms; and on consumer protection, including effectively implementing the new Consumer Duty.

Four Priority Areas

In the coming year, the FCA’s four main priority areas will be:

• Preparing financial services for the future
• Strengthening the UK’s position in global wholesale markets
• Putting consumers’ needs first
• Reducing and preventing financial crime

1. Preparing Financial Services for the Future

The FCA will work with HM Treasury to advance the Future Regulatory Framework Review, the Edinburgh Reforms, the Wholesale Markets Review, and the Listing Review. The FCA emphasises that it will support changes that advance its operational objectives, including its new international competitiveness and growth objective.

The Future Regulatory Framework Review will involve replacing large swathes of retained EU legislation with FCA rules, which the FCA anticipates will be a significant programme of work against a demanding timetable. This will provide an important opportunity to review and adapt various areas of the regulatory framework. Firms will need to be prepared to quickly review and comment on proposals. The FCA states that it expects to invest £12.7 million in its work on the Future Regulatory Framework over the next year, indicating the scale of this work.

2. Strengthening the UK’s Position in Global Wholesale Markets

The FCA wants to help ensure that the UK continues to be seen as a leading global market, and also wishes to strengthen its ability to respond to market volatility. The FCA notes that this year it plans to publish further proposals for changes to MiFID II, the Prospectus Regulation (including a new public offer regime), the Securitisation Regulation, and the Short Selling Regulation, and to see what improvements it can make to asset management regulation.

Specifically in relation to MiFID II, the FCA plans to publish:

• New rules on transparency for equity markets, tick sizes, waivers, and trade reporting
• New guidance on the trading venue perimeter
• A consultation on the design and implementation of the consolidated tape
• Consultations on the commodity position limits regime and on transparency for bonds and derivatives

The FCA also plans to complete its Wholesale Data Market Study. The FCA notes that it is investing significantly in its technology and data capabilities so that it can oversee markets effectively.

3. Putting Consumers’ Needs First

The Consumer Duty, which takes effect on 31 July 2023, is a key priority for the FCA and it will invest significant resources to ensure the Duty is implemented and embedded effectively. The FCA notes in particular that additional funding for implementing the Duty will enable it to create a new Interventions team within the FCA’s Enforcement division. This team will be operational when the Duty takes effect, and will enable the FCA to take “rapid action” when consumer harm is detected.

Further, the FCA plans to consult on changes to its mortgage, consumer credit, and overdraft rules to improve outcomes for consumers in financial difficulties. It will also design regulatory rules for providers of buy-now-pay-later products.

The FCA will continue to prioritise protecting customers from unfair treatment, with more staff allocated to ensure firms support consumers who are struggling financially given the current cost-of-living crisis.

4. Reducing and Preventing Financial Crime

The FCA’s focus here is on preventing scams and fraud, and protecting consumers against the harm that these can cause. The FCA hopes to raise standards by working on a strengthened authorisation process, improving assessments of regulated firms, and dedicating more staff to investigating and prosecuting offenders.

In relation to anti-money laundering, the FCA plans to increase the volume of proactive assessments of firms’ anti-money laundering systems and controls, and develop further data-led analytical tools to use in its anti-money laundering supervisory work.

Other Areas of Focus

Other priority areas over the coming year include:

ESG : The FCA plans to progress its ongoing work on ESG, in addition to monitoring how effectively firms and listed companies are implementing climate-related financial disclosures. The FCA’s ongoing work includes publishing the final rules on its Sustainability Disclosure Requirements and investment labels (now due in Q3 2023), and providing feedback to its Discussion Paper on ESG governance.

Market abuse: The FCA plans to significantly improve its capability to detect and prosecute fixed income and commodities market manipulation, through increased data capture, improved analytics, a dedicated non-equity manipulation team, and increased enforcement resources. It is also focusing on timely and accurate disclosure of inside information, with greater emphasis on detecting potentially misleading disclosures, and will conduct more work on the transparency of PDMR dealings and developing a strategy for combatting unlawful disclosure.

Financial resilience : There is a new focus on firms’ financial resilience to reduce the risk of firm failures. The FCA notes that it plans to introduce a new regulatory return requiring 20,000 solo-regulated firms to provide a baseline level of information about their financial resilience. The FCA also plans to use its powers more assertively to start relevant insolvency processes when necessary to help reduce harm. It aims to include a more detailed assessment of financial matters as part of the authorisations process, and monitor higher-risk business models during the first year after authorisation and during periods of high growth.

Financial promotions : The FCA will continue its work against non-compliant financial promotions. It plans to increase its technological capability to search across social media platforms to continue to identify illegal financial promotions faster and in larger volumes. It also plans to work with “fin-fluencers” to educate them about their obligations when promoting financial services. Further, once the relevant legislation is in place, the FCA will introduce the application gateway for firms wishing to be able to approve financial promotions for unauthorised entities.

Operational resilience : The FCA plans to assess how well firms are able to remain within their impact tolerances ahead of the 31 March 2025 deadline for firms remaining within these tolerances under the operational resilience framework. The FCA will also clarify to firms how they should report operational incidents.

The regulatory gateway : Noting that 23% of firms applying for authorisation were unsuccessful during 2022/2023, the FCA will “continue to be less risk averse” at refusing authorisation and taking action to remove authorisation when necessary. In particular, it will look to take quicker and more decisive action against firms that do not meet the Threshold Conditions.

Digital markets : The FCA will continue its work relating to the risks and opportunities arising from the digitalisation of finance services. In particular, it plans to publish feedback to its Discussion Papers on Big Tech and artificial intelligence. It will also continue its work on Open Banking and continue to investigate whether the customer journey for digital financial products and services enables consumers to take decisions in their best interests.

Overall, the FCA’s Business Plan for this year contains few surprises, with no significant new body of work planned. Reviewing, updating, and revising the UK regulatory framework will take up significant time and resources. It should not be underestimated how time-consuming this work will be for the regulator, particularly when it has publicly been struggling with resourcing. While the Business Plan notes that the FCA has already worked on increasing its headcount, it also acknowledges that the FCA is conscious of the need to resource this substantial undertaking.

The FCA is also very much expected to focus strongly on consumer outcomes this year, given the go-live date for the Consumer Duty and consumers’ current struggles due to the cost-of-living crisis. Firms will have already been aware that the FCA almost cannot emphasise enough how much weight it is putting on the new Duty, but in case any have missed this message, it is repeated in the Business Plan. Between these significant initiatives, it seems that the FCA will have limited bandwidth for other activities this year.

What is interesting, however, is how much the FCA’s new objective relating to international competitiveness and growth features in the Business Plan, as the FCA re-orientates itself to the new political realities. This objective will be particularly relevant to the FCA’s work on the UK regulatory framework. Further, while systems and data are not the most exciting topics, it is also noteworthy that the FCA has ambitions to complete a major upgrade to its core regulatory system, and improve its intelligence capabilities through the automation of analytics tooling. In a number of areas throughout the Business Plan, the FCA speaks of enhanced data and analytics tools that will help it to supervise firms and markets, and firms should be conscious of the FCA’s increasing sophistication in this regard.

This article is made available by Latham & Watkins for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. Your receipt of this communication alone creates no attorney client relationship between you and Latham & Watkins. Any content of this article should not be used as a substitute for competent legal advice from a licensed professional attorney in your jurisdiction.

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The UK’s Financial Conduct Authority ("FCA") has published its  2024/25 business plan , setting out its priorities for the next 12 months. Against a backdrop of 13 public commitments focusing on: reducing and preventing financial crime; putting consumers’ needs first; and strengthening the UK’s position in global wholesale markets, the FCA is, among other promises, committing to:

• use and expand intelligence systems and data collection systems to target higher risk firms and activities, slow the growth in fraud tackle financial crime;
• put consumers’ needs first, including in relation to unit-linked pensions and long-term savings products to test how value is being disclosed and delivered. Ongoing supervisory work testing the implementation of the Consumer Duty will clearly play a big part in delivering this commitment.
• strengthen the UK’s position in global wholesale markets by encouraging innovation and evolving markets through supporting work on bringing in T+1 settlement and delivering on the FCA’s Primary Market policy reforms. Continuing work on reforming the regime governing payment for research, reviewing and reforming the Listing Regime and ensuring markets are ready to implement new derivative reporting rules under UK EMIR is also key.

The business plan also sets out a broad budget, and among the headline items in “Exceptional Projects” is £11.3 million for implementation of the Smarter Regulatory Framework as the FCA continues work on repealing EU law and replacing it with firm-facing FCA rules. 

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FCA Business Plan 2021-22: A faster future FCA

Author: Simon Treacy

In his first Business Plan since becoming Chief Executive of the Financial Conduct Authority, Nikhil Rathi promises to make the FCA a more innovative, assertive and adaptive regulator.

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FCA Business Plan 2024/25 – what should firms expect? 

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Introduction 

On 19 March 2024, the FCA published its 2024/25 Business Plan detailing its key areas of focus for the coming year. 

The FCA’s areas of focus for the year ahead takes into account the uncertain economic and geopolitical environment and the new regulatory framework. 

They are also based on this year being the final year of the FCA’s 2022-2025 strategy which set out the following objectives: (1) reducing and preventing serious harm; (2) setting and testing standards; and (3) promoting competition and positive change. 

We look at key elements of the Business Plan and highlight the preparation firms should undertake to avoid becoming the subject of FCA regulatory action, including enforcement proceedings.  

The FCA’s focus for 2024/25 

The FCA’s areas of focus for the year ahead include: 

• protecting consumers by testing if firms are meeting the high standards set by the Consumer Duty, supporting consumers’ long term financial wellbeing through the Advice Guidance Boundary Review, and making sure pension products deliver value for money.
• ensuring market integrity by monitoring risks in markets and taking action where appropriate, as well as continuing to invest in data and technology to support rigorous market oversight. 
• promoting effective competition to deliver good out outcomes for consumers and identifying where more effective competition can better deliver fair value outcomes under the Consumer Duty. 

FCA commitments 

The FCA will continue to deliver its 13 public commitments, with a focus on: 

• reducing and preventing financial crime
• putting consumers’ needs first 
• strengthening the UK’s position in global wholesale markets

Other notable commitments for the coming year include: 

Environmental, social and governance (esg) priorities , improving oversight of appointed representatives (“ar”).

The FCA’s other commitments (which are not dealt with in this article) include preparing financial services for the future, dealing with problem firms, reducing harm from firm failure, shaping digital markets to achieve good outcomes, improving the redress framework, enabling consumers to help themselves, and minimising the impact of operational disruptions. 

Reducing and preventing financial crime 

The FCA referenced two national strategic documents, the Economic Crime Plan and the Fraud Strategy, and noted how its supervision and regulation play an important role in achieving the national ambition to reduce and stop financial crime. 

The FCA stated that it will continue to take a data-led approach to identify potential harm for supervisory and/or enforcement action, including continuing to take assertive action to tackle scams and fraudulent websites. The FCA will also use its powers through the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) to improve standards in the legal and accountancy sectors. 

In addition, the FCA will start and/or continue the following activities (some of which are included below) over the coming year to achieve its outcomes, including slowing the growth in investment fraud victims and losses, slowing the growth in Authorised Push Payment (APP) fraud cases and losses, and reducing financial crime: 

• increasing investment in FCA systems to use intelligence and data more effectively within its financial crime work, so it can target higher risk firms and activities. 
• using its powers to disrupt, pursue and sanction those committing and enabling financial crime. 
• focussing on proactive assessments of anti-money laundering systems and controls for those firms deemed higher risk. 
• using data to target the firms that are more susceptible to receiving the proceeds of fraud and ensure they do more to stop the flow of illegitimate funds. 
• strengthening its supervision of firms’ sanctions systems and controls. 

Financial crime and particularly fraud, money laundering and sanctions breaches remain a key priority for the FCA in the coming year. 

How should firms prepare? 

Firms should expect further detailed scrutiny of their financial crime systems and controls and would be well advised to ensure that these systems and controls are compliant with relevant legislation and regulations, and meet the FCA’s expectations, to avoid any potential regulatory scrutiny.  

Putting consumers’ needs first 

The Consumer Duty came into force last year for products and services still on sale to new customers or available for renewal by existing customers, which the FCA says “…represents a step change in our expectation of firms” . From 31 July 2024, firms will also need to ensure that closed products are delivering the right outcomes for consumers. 

The FCA’s Business Plan states that it will continue to focus its interventions on where there is the greatest risk of harm or where more work is needed by firms to identify and address gaps and to meet the higher standards of the Consumer Duty.

Among its planned activities, the FCA will assess firms’ treatment of customers in vulnerable circumstances and will continue its supervisory work to test firms’ implementation of the Consumer Duty (including complaints handling and root cause analysis, consumer support journeys, fair value and closed products and services). It will also continue its work to ensure people with savings receive a fair deal. 

How should firms prepare?

We have not yet seen Consumer Duty failings developing into formal investigations or enforcement action, however we anticipate such action being taken in the near future with the most serious breaches being prioritised. 

Firms should ensure that they have fully implemented the Consumer Duty for their open products and services (and are taking steps to implement the Consumer Duty for closed products and services, so that they are ready by 31 July 2024 deadline) and where firms have identified that they may not be delivering good outcomes to consumers, those firms are implementing corrective measures in a timely manner to show the FCA that they are acting on their Consumer Duty responsibilities.

Strengthening the UK’s position in global wholesale markets 

The FCA wants the UK to continue to strengthen its position in global wholesale markets and to host markets which support the domestic economy and growth. To do this, the FCA will encourage innovation and evolving markets by supporting industry work on T+1 settlement to increase efficiency, as well as delivering its set of Primary Market policy reforms (including concluding its review of the Listing Regime and publishing proposals for a new public offer and admission to trading regime). 

Taking assertive action on market abuse 

The FCA states that it will significantly increase its capability to tackle market abuse, including (1) increasing its ability to detect and pursue cross-asset class market abuse, (2) developing improved market monitoring and intervention in Fixed Income and Commodities, covering both market abuse and market integrity, and (3) assisting in delivering a proportionate market abuse regime for Cryptoassets. 

Firms should ensure that they have surveillance systems to capture cross asset class manipulation.

The FCA will integrate the Sustainability Disclosure Requirements and Investment Labels across the market, including the anti-greenwashing rule which will require all sustainability-related claims made by authorised firms to be fair, clear, and not misleading. 

Whilst this rule only takes effect from 31 May 2024, firms should start considering how they are going to integrate this now. 

The FCA’s 2024-25 Business Plan reminds principal firms that they are responsible for ensuring their ARs comply with FCA rules, however many principals fail to adequately oversee their ARs’ activities. As a result, consumers are at risk of being misled or mis-sold, while misconduct by ARs in the financial sector can undermine market integrity. 

The FCA references the new rules and guidance which came into effect on 8 December 2022 (which can be found here ) and aim to improve principals’ oversight of their ARs, increase the information they give the FCA and raise standards across financial services to enhance consumer protection and help protect markets.

The FCA will, over the coming year, continue to target its resources through deeper analysis of existing data and using improved data covering all ARs and continue to strengthen its scrutiny and engagement with principal firms as they appoint ARs. The FCA will also continue its assertive supervision of high-risk principals through its regulatory tools and take appropriate enforcement action. 

The oversight of ARs by principal firms appears to remain a key area of concern for the FCA and accordingly, principal firms should ensure they have properly adjusted to the new regime. 

What should firms do next?  

As set out above, over the next year, the FCA will be scrutinising firms’ systems and controls in key areas such as financial crime and market abuse, as well as ensuring that firms have implemented the higher standards of the Consumer Duty and are meeting the new ESG and AR regimes. 

Now is an opportune time for firms to assess their financial crime and market abuse systems and controls and customer journey processes, as well as ensure that they have properly adjusted to the new AR regime. It is also a good time for firms to consider how they are going to integrate the FCA’s Sustainability Disclosure Requirements and Investment Labels in line with the FCA’s final rules and guidance (which can be found here ). Given that these areas are key priorities for the FCA, any shortcomings could lead to supervisory (i.e., VREQs, VVOPs, etc.) and/or enforcement action.  

Please do get in touch if you would like us to carry out any assessments on your systems and controls, and/or would like to discuss how the FCA’s plans for the coming year could affect your business and any mitigating steps you could take.

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The FCA Business Plan: What does it mean from a governance perspective?

United Kingdom |  Publication |  June 2022

Earlier this year the Financial Conduct Authority ( FCA ) published its latest Business Plan. The Business Plan itself took a different form when compared to previous incarnations by having a shorter summary of priorities and planned activities and cross referring to other documents including the three-year strategy and the regulatory initiatives grid. Notwithstanding this, the Business Plan contained, as usual, a number of nuggets for firms which will help guide them on the regulator’s expectations in certain areas. Governance is clearly an area of focus for the FCA and the Business Plan contains both explicit comments which firms should take on board and references to the FCA’s own governance arrangements which may be of assistance to firms considering potential enhancements in this area. In this article we will cover both these types of comments.

Appointed Representatives: One of the key reforms this year will be the changes to the Appointed Representatives Regime (AR). The FCA has already published a consultation paper outlining its proposed reforms, the catalyst of which has been a concern that principal firms are not adequately overseeing the activities of their ARs leading to a risk that consumers are being mis-led and mis-sold. Improving oversight of ARs was a topic mentioned in the Business Plan and principal firms were reminded in the consultation that they must effectively oversee their ARs and ensure that they have appropriate governance arrangements, effective risk frameworks, internal controls and adequate resources.  Operational Resilience: The Business Plan also mentioned that whilst operational disruptions are inevitable, firms must be operationally resilient. An important part of any operational resilience strategy should focus on having effective governance arrangements in place. Having clear organisational direction, transparency over roles and responsibilities and effective internal co-ordination all lead to better resilience outcomes. Market Abuse: The Business Plan also spoke of the FCA delivering assertive action on market abuse and working to ensure that firms and issuers have robust controls in relation to inside information and to disclose it to the market in an accurate and timely way. Understanding what good governance over the control of market abuse risks looks like and implementing the requisite processes to manage this, is critical for senior managers. ESG: Unsurprisingly, the Business Plan referenced the FCA’s environmental, social, and governance (ESG) priorities and this included embedding consideration of ESG issues in the authorisation process. This includes considering factors such as D&I, the nature of the firm and the products and services to be offered and increasing supervisory focus on asset managers. Crypto-assets: In relation to crypto-assets, the FCA made the point in the Business Plan that the UK currently only regulates such assets for money laundering purposes but these assets are increasingly being adopted and incorporated into existing financial services.  As per its statement in March the FCA reminded firms that when interacting with or exposed to crypto-asset services they remain responsible for assessing the risks to their business and consumers.  As mentioned above, the FCA made a number of comments regarding its own governance arrangements which may also be applicable to firms. These include the FCA:

• Noting that the Business Plan was being published when the external environment is changing rapidly and flagging its adaptive approach to allocating resources and monitoring performance to make it more agile and able to respond to market needs; respond to today’s challenges and prepare for those of tomorrow (such as by understanding the impacts of digital developments).
• Recognising the need to use resources efficiently so the FCA has weighed the different outcomes it wants to achieve, looking at factors such as severity and probability of harm.
• Framing its activities by reference to the outcomes they achieve rather than the processes it follows.
• Committing to reporting publicly on outcomes and developing a set of metrics to be used to measure progress.
• Investing in its capability to become a data-led regulator as part of its transformation programme and exploring how it can use technology such as AI and increasing resource in intelligence and analytics to help spot and track fraudulent activity.
• Streamlining its decision-making process (so that the Regulatory Decisions Committee focusses on contentious enforcement cases) so it can act more decisively and swiftly.
• Engaging with devolved administrations and having a Devolved Nations team, recognising that different areas of the UK often have different needs.
• Challenging itself to find the limits of its powers.

Firms may find it useful to consider how they can incorporate and evidence similar approaches to governance in the context of their own businesses with a view to being in a better position to demonstrate compliance with the FCA’s expectations.  

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Key takeaways from the FCA's Business Plan for 2023/24

FCA activity shows no sign of slowing down as the regulator revealed its Business Plan for 2023/24.

Building upon the FCA's three-year strategy, the 2023/24 Business Plan represents the 'sophomore' business plan outlining how the overall strategy will be delivered. It sets out the regulator's response to a number of current challenges including the uncertainties arising out of high interest rates, inflation, unemployment, declines in incomes and market volatility. 

The Business Plan for this year has been slightly re-structured to more closely align with the strategic themes and outlines a total of 13 regulatory commitments across three focus areas, which are:

• Reducing and preventing serious harm
• Setting and testing higher standards
• Promoting competition and positive change

The 13 commitments under the 2023/24 Business Plan are set out below, with the first four commitments being of the greatest priority:  

• Preparing financial services for the future 
• Putting consumers’ needs first 
• Reducing and preventing financial crime 
• Strengthening the UK’s position in global wholesale markets
• Dealing with problem firms 
• Improving the redress framework 
• Reducing harm from firm failure 
• Improving oversight of Appointed Representatives 
• Delivering assertive action on market abuse
• Enabling consumers to help themselves 
• Minimising the impact of operational disruptions 
• A strategy for positive change: our environmental, social and governance (ESG) priorities
• Shaping digital markets to achieve good outcomes

This article provides a brief summary on some key takeaways from the regulator's Business Plan for the year to come. 

Consumer Duty

Predictably, the FCA said it remains strongly focused on the Consumer Duty, which is due to come into force on 31 July 2023, specifically for those with live products and services.   The regulator has stressed that increased consumer protection and the Consumer Duty will represent a significant shift for regulated firms. The Duty imposes more stringent standards for consumer protection and will become an integral part of the regulator's approach and mindset in years to come.

The FCA will invest £5.3 million to ensure the Consumer Duty is successfully embedded and intends to steadily increase its headcount to accompany the transition.  Key information was provided about the metrics and KPIs that will be used from sources such as levels and root causes of Financial Ombudsman Service (FOS) complaints, to form a view as to whether firms are meeting the requirements under the Consumer Duty in the two outcomes relating to Consumer Understanding and Consumer Support. 

The FCA is also focused on improving the redress framework and is developing proposals to improve complaints reporting. The regulator will be consulting on guidance for firms regarding redress calculations and is currently consulting on access to the FOS  for small and medium enterprises that may have insufficient resources to resolve disputes through the legal system. 

Oversight of Appointed Representatives ("AR")

The FCA is set to continue with its action to tighten supervision in the principal/AR space. The Business Plan confirms that there will be further engagement and scrutiny in this area from a regulatory perspective. The FCA criticised Principals for not adequately overseeing their ARs' activities, thereby putting consumers at an increased risk of being misled. Principals will have to become familiar with the FCA's new rules and guidance to ensure compliance and minimise the risks associated with their ARs' possible mis-selling to consumers.  Reporting for principal firms under the new rules becomes fully effective later this year.  

Financial Crime & Market Abuse 

Consistent with previous year, the FCA has stated its intention to further its work in the prevention of regulated firm's being used to facilitate financial crime and it is developing metrics in this area to test the effectiveness of its strategy. 

Further, the FCA continues to actively target entities who become involved in Market Abuse practices to tackle the detrimental effect these have on market confidence and participation. 

The regulator is pinning its strategy on better education for its regulated entities to foster prevention and compliance. In parallel, the regulator is working to improve its detection and prosecution capabilities to detect market manipulation and abuse through increased data capture, improved analytics and a dedicated "equity manipulation team". 

Persons Discharging Management Responsibility (PDMR) will also be expected to provide additional transparency and engagement in respect of detecting potential insider dealing. 

The FCA is building a regulatory framework to support its ambition to foster a UK net-zero financial centre. The regulator intends to tighten its grip on mis-leading marketing and disclosure around ESG related product and "greenwashing" to protect consumers and promote trust in the market for ESG investment products. 

The FCA will further collaborate with key stakeholders in the ESG sphere through its ESG Advisory Committee to the Board, which it established in December 2022, to execute its ESG responsibilities. The regulator will also finalise and publish its rules on Sustainability Disclosure Requirements and investment labels. 

Data and Technology 

The FCA will increasingly rely on Data and Technology-led regulation programmes this year to improve their intelligence capabilities through automation of analytics tooling, detection of crime and faster responses to consumer harms. The regulator has also invested in cyber security and operational resilience to improve efficiency of its staff and regulated firms. 

We can expect that the FCA will continue to promote innovation and that reporting expected by firms will become more sophisticated, to improve their existing detection capabilities and promote speed and efficiency of supervision and intervention. 

Financial Regulatory Framework 

Finally, the FCA expects to invest £12.7 million in 2023/24 to support its "Preparing financial services for the future" strategic commitment. This forms part of the post-Brexit Future Regulatory Framework (FRF), which will transfer even more responsibilities to the FCA and will reinforce accountability, scrutiny and transparency for regulated entities. 

General Observations 

The Business Plan as pledged to further work that has been ongoing for a number of years in respect of the Financial Promotions Gateway, ensuring the ongoing resilience of firms from both a financial and operational perspective and how it will continued to share intelligence with other agencies to advance its operational objectives. Closer scrutiny of how firms meet the Threshold Conditions was also widely restated across the business plan, with the FCA planning to challenge firms at each stage of their lifecycle, starting from new firm authorisations.  

The FCA's activity is showing no signs of slowdown. To the contrary, during 2022 the FCA issued over 1,800 warnings about potential scam firms, which is 400 more warnings than the previous year. The regulator's headcount has also grown from 3,800 in early 2022 to almost 4,500 at the end of March 2023. Numbers are expected to grow again for the years 2023/24.  DWF have a depth of expert insight on regulatory natters across a range of regulatory topics and would be pleased to discuss with you what the business plan means of your firm and how it should be integrated into your business and compliance strategy this year.  

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