Alongside the FCA’s mission-creep through its consumer protection principles into the consumer duty and (semi-)novel forms of activity such as crypto, the universe of potential misconduct continues to expand. Over time, oversight of a widening scope is likely to narrow the regulator’s assessment of what constitutes the most egregious misconduct in any setting.
The result looks like an even greater reliance on supervisors to address issues falling below this threshold through supervisory means. If so, companies’ relationships with their supervisors will become more important than ever.
Striking early
Recent years have seen the FCA increasingly willing to intervene. Whether it be its proactive response on Gap insurance or motor financing, the regulator has sought to quell its previous criticisms of lethargy, received in the wake of the collapse of the Woodford Fund and the British Steel Pension Scheme.
Companies can and should also act swiftly by remediating any misconduct as early as possible. The development of redress schemes to reimburse impacted consumers has formed part of the FCA’s strategy for calculating financial penalties in recent notices.
Therefore, it makes sense for companies at risk of enforcement to consider, at an early stage, whether redress would be appropriate. At the enforcement stage, a business may be given credit for the sums spent on redress schemes as part of the investigation itself and any penalty calculations.
The FCA is seeking to show its assertiveness — another FCA buzzword — by forcing changes to market behaviours through its interventions. While those interventions may be welcomed by customers and some of the market, prompt and decisive action in advance of (and potentially in the place of) enforcement action may become more commonplace.
The regulator has a range of supervisory tools to halt customer harm, which are most effective when imposed by agreement with the “offending” companies. All that remains to be seen is how this will impact any enforcement actions against those companies that consented to restrictions on their conduct at the FCA’s request, and whether clemency might be afforded from enforcement action itself.
The shifting sands of the handbook
The FCA’s approach to enforcement cannot be considered in a vacuum. It must be viewed alongside the recent development of the rules on consumer protection, most notably the consumer duty. It is clear to see that the duty has recalibrated the market’s approach to compliance.
The duty requires a rich understanding and delivery of individualised customer outcomes. This should not be underestimated when considering the FCA’s approach to enforcement.
