What is the purpose of the Financial Conduct Authority (FCA)?

legal_updates

The FCA has an overarching strategic objective of ensuring the relevant markets function well.

Author: John McDougall
Published:
Reading time: 3 minutes

This article is 1 month old.

Read our disclaimer keyboard_arrow_down

This website content is intended as a general guide to law as it applies to the motor trade. Lawgistics has taken every effort to ensure that the contents are as accurate and up to date as at the date of first publication.

The laws and opinions expressed within this website may be varied as the law develops. As such we cannot accept liability for or the consequence of, any change of law, or official guidelines since publication or any misuse of the information provided.

The opinions in this website are based upon the experience of the authors and it must be recognised that only the courts and recognised tribunals can interpret the law with authority.

Examples given within the website are based on the experience of the authors and centre upon issues that commonly give rise to disputes. Each situation in practice will be different and may comprise several points commented upon.

If you have any doubt about the correct legal position you should seek further legal advice from Lawgistics or a suitably qualified solicitor. We cannot accept liability for your failure to take professional advice where it should reasonably be sought by a prudent person.

All characters are fictitious and should not be taken as referring to any person living or dead.

Use of this website shall be considered acceptance of the terms of the disclaimer presented above.

The Financial Conduct Authority’s (FCA) recent review of the motor finance sector has provided a detailed insight into how they operate and the outcomes that have been achieved.

Up until this review, perhaps your only dealings with the FCA may have been when you applied for your FCA authorisation to become a credit broker.

Some people still refer to the FCA as the Financial Services Authority (FSA), however, this changed in 2013 when the FSA was abolished after a government review of financial services following the financial crisis of 2007-2008. The responsibilities of the FSA were split between the Financial Conduct Authority and the Prudential Regulation Authority of the Bank of England. On 1st April 2014, the FCA took over responsibility for regulating the consumer credit firms from the Office of Fair Trading (OFT).

The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this, it has three operational objectives:

  • secure an appropriate degree of protection for consumers
  • to protect and enhance the integrity of the UK financial system
  • to promote effective competition in the interests of consumers

These are supported by the FCA’s Principles (PRIN), which “are a general statement of the fundamental obligations of firms and the other persons to whom they apply under the regulatory system.” [FCA Handbook] In short, if you are regulated by the FCA, these are the principles that you should adhere to:

  1. Integrity
  2. Skill, care and diligence
  3. Management and control
  4. Financial prudence
  5. Market conduct
  6. Customers’ interests
  7. Communications with clients
  8. Conflicts of interest
  9. Customers: relationships of trust
  10. Clients’ assets
  11. Relations with regulators

Only this month, a dealer failed to be open and co-operative with the FCA, therefore failing to comply with PRIN 11 – Relations with regulators which resulted in the removal of their permission to carry on regulated activities. Would you sell as many cars without the ability to offer finance to your customers?

Highlighted below is another example of the FCA in action last year:

Admittedly, this was a lender rather than a credit broker. However, the FCA’s rules apply to all firms. This was a breach of PRIN 6 – Customers’ interests and PRIN 7 – Communications with clients and the CONC rules relating to the unfair treatment of customers in the consumer credit sector. As a credit broker, you MUST comply with the FCA’s Consumer Credit sourcebook (CONC).

If you require more information on PRIN/CONC or any advice regarding the FCA’s rules and guidance, please give us a call.

John McDougall

Legal Advisor

Read more by this author

Getting in touch

You can contact us via the form or you can call us on 01480 455500.