Being aware of your expectations from the Financial Conduct Authority (FCA) when working in the financial sector is extremely important. The FCA is in charge of monitoring the country’s financial sector so failing to comply can result in fines, prevention of services, and many more sanctions.
Use this article to bring you up to speed on the best ways to stay FCA compliant in 2023. Please use this information as a guide, but get in touch with a trusted legal firm to ensure you achieve FCA approval or for any investment advice.
1. Consumer duty
The FCA regulations surrounding new consumer duty were put in place to focus on the conduct of financial firms to guarantee the customers’ needs are being considered first and foremost.
This important change to the UK’s FCA regulation is part of the FCA’s three-year regulatory business plan for improving customer experiences.
Companies must be able to show how they manage data relating to any corporate activity. Also known as management information (MI). They must also be able to prove how they handle complaints. The FCA guide gives the full breakdown into the standard of care that is expected of businesses to prioritize the customer’s experience and reduce client risks.
2. Cost of living support
The cost of living crisis has been affecting everyone. The FCA has taken this knowledge on board and considered ways of assisting and helping those that it has impacted.
It has been confirmed that the FCA will be doing everything they can to organize repayment plans for those who might require the extra payment time.
They’ll also be providing assistance to those who are under pressure from credit companies and financial lenders.
Some of the ways that the FCA are carrying out these cost of living help are:
Buy Now Pay Later
Businesses in the UK that are in the Buy Now Pay Later sector are now required to follow the newly introduced Buy Now Pay Later regulations, ensure clear and ethical financial promotions, and keep a record of any contracts. These financial promotions should all follow the regulations that the FCA are trying to enforce.
Due to the cost of living crisis in the UK, there has been a rise in financial scams. As a result, financial scams have risen to the FCA’s attention and have led to an increase in checks. An example of these checks would be transaction monitoring, to ensure firms are following all regulations and in turn reducing the number of scams occurring.
To uphold the FCA compliance pressures on firms, they now have an expectation of quicker submission times when information is requested.
Some FCA requirements are that any documents, figures, or details that they request from businesses are of the expectation you should easily be able to access. They are also expected to be produced within a short time frame because they should be ready in case it’s ever requested.
Overall the best practice to stay FCA compliant since the cost of living crisis in the UK, is to have important information easily accessible at any moment. As well as following the clearer instructions and guidelines for the Buy Now Pay Later firms.
3. Fraud reduction in the financial services market
FCA staff have recently undertaken further regular training for financial crime to hopefully lead to reduced fraud cases and protected customers.
Fraud experts were brought in to support and identify any potential risks, such as insufficiently protected systems that could lead to cyber attacks where customer data could be accessed and leaked.
Following in the FCA’s footsteps, having a qualified specialist fraud and cyber security team can be worth the money spent to avoid such a breach to your private customer information. Finding your vulnerable areas and teaching your employees what to look out for will help support the reduction of financial crime.
Taking the steps yourself and listening to the advice provided in the FCA regulations are simple acts you can complete yourself.
4. Customer feedback for financial services firms
A main point for the FCA is the client feedback received on how this feedback is handled to ensure constant fair treatment of customers.
Feedback can often present issues in firms that the FCA likes to be aware of. Examples of this would be GDPR mistakes and negative customer service reports.
The FCA expects this data, good or bad, to be collected regularly in case it’s ever needed for review, as well as the firm’s staff to be trained from their mistakes and shown the best way to deal with a complaint or negative feedback.
5. Organize and protect records
Being organized and managing your records seems simple enough, right? Well this is an important expectation for FCA compliance.
Regulatory compliance documentation such as risk exposure, third-party contracts, financials, and many other important records are vital to keep safe and have to hand if ever needed.
Storing these records in a protected environment and securely is crucial to avoid loss of any documentation or breaches of data.
Protecting the firm’s data and your clients data should be top priority for firms in the financial industry.
6. Accurate data in the financial services sector
They can review your business data without you even being aware that it’s happened.
They look over your data with the chance of noticing patterns, any issues, and trends in the firms data. This is why it’s vital to submit accurate and correct data within a good timeframe so the FCA can carry this out.
All of your data should be correct and ready for an inspection at any time, as you’ll never know when the FCA is looking.
It’s also a good idea to keep a watch of any of these patterns in your data before the FCA notices them so you can report them early. Any changes in data can be normal and nothing to worry about – for example any rises or falls in the market for your assets. But, it’s a good idea to be aware of these changes anyway.
7. Full business visibility
You must be able to show the FCA how larger business decisions take place and how that information is then relayed to the rest of the business.
Among the many FCA values includes a focus on overall integrity and culture in corporate business, especially within the senior management team. Monitoring how senior managers handle their decision making is something you’ll need to be fully prepared to give viability over.
Having a well defined communication process within firms can be a great way to spread information throughout the firms in a controlled and organized manner. Covering all bases and having a clear strategy for sharing decisions throughout the company avoids the risk of inspection and complaint from the FCA regulator.
Setting defined expectations when it comes to processes in the business and sharing information will help support this initiative. A good way to do this could be through training throughout each department to bring your staff up to speed on any news surrounding the workplace or any strategies and processes.
Another good option would be a reward scheme. Those who are proving to be carrying out new processes or their roles to the expectation will receive a reward. This will give a further incentive in the company to stick to the regulated activities as asked.
8. Understanding FCA authorization and obligations
Yes, this article is about best practices for staying in line with the FCA conduct rules in 2023. But part of that is taking responsibilities for these actions rather than completing each action like a checklist, and effectively meeting the standards of the FCA.
These obligations tend to be recurring events that should be embedded into your firm’s everyday work.
Not following the obligations risks sanctions from the FCA.
The FCA’s main goals all surround making positive changes to work culture and customer experience. To do this, each organization is responsible for their own actions.
If all are compliant, this would change the financial sector for the better and provide trust and protection for customers.
But this change and acceptance starts with yourself. Getting into a routine and making these obligations your new normal will be a part of FCA best practice for 2023.
Pushback on financial regulation could potentially have a negative impact on your business and impact your reputation. Reputation is a big factor of gaining and keeping consumers in this field as firms with the most trustworthy and reliable status will be considered first. It’s down to the organizations themselves to do their due diligence.
9. Financial safeguarding
Protecting your customer funds is a big priority to remain compliant with FCA regulations.
You must be able to prove and show evidence demonstrating how you safeguard these funds, including:
- Any relevant contracts involved
- Insurance documentation
- Agreements made
- And any other sufficient records you or the FCA deem relevant
Showing your exact method used to safeguard the funds with evidence and the required documents will all add to the positive impact the FCA are working towards. It shows the FCA you’re following the compliance requirements.
Customer protection is a priority for all businesses involved with finance as you’re being trusted by your clientele. Proving you’re an honorable and reliable company through how your customers’ financials are handled will be an important action the FCA will likely need to know about.
10. Third-party relationships
Storing your contracts and documentation for any third-party relationships is a requirement for FCA compliance.
Being aware of the third-parties conduct and behavior is a necessity outlined by the FCA.
There’s an expectation to be knowledgeable on the third-party. This includes having evidence of your partnership such as a contract, as well as evidence that the third-party is trustworthy and reliable. These are all critical to staying compliant.
You’ll need to be able to produce this evidence should it ever be requested.
Being aware of the relationship you’re getting yourself into isn’t a decision that should be taken lightly in the financial industry. Research and checks into your potential connection should take place before any commitment.
Having all the correct documentation stored safely is a crucial action to take to protect your firm from any accusations or disagreements.
What is the FCA?
The FCA is the UK’s main finance regulator. With the job to protect the country’s financial industry, they are there to ensure firms are following the regulations and investigate and sanction any that aren’t.
Every financial firm in the country is required to be authorized by the FCA and gives the business the license to practice. This increases the following of the principles and ethics in the financial sector that the FCA are working to uphold.
What is FCA regulatory compliance?
FCA compliance is where firms follow the regulations and all of the rules put in place by the FCA to improve customer experience, reduce fraud, and push anti-money laundering. If you are compliant then you are behaving and carrying out your work in the financial sector in an honest manner.
Overall, FCA compliance can be easy when you accept these changes into your everyday routine. Staying up to date on any new regulations implemented by the FCA and having your files and figures ready to be produced will save you a lot of hassle down the line.
The main thing to bear in mind is that if you are honest in the financial sector and doing all you can to protect your clients and their data, you should have nothing to worry about. Doing your research into the guidelines and triple checking your process, client protection, and organization management will help you spot areas for improvement in the market.