Financial Conduct Authority

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The Financial Conduct Authority is a financial regulatory body, which operates independently of the govt, and is financed by charging fees to members of the financial services industry.[1] The FCA regulates financial firms providing services to consumers, and maintains the integrity of the financial markets in the United Kingdom.[2] It focuses on the regulation of conduct by both retail and wholesale financial services firms.[3]

The FCA is the conduct regulator for ~58,000 financial services firms and financial markets, and the prudential regulator for 18,000+ of those firms.[4] The FCA maintains a Financial Services Register, which is a public record of firms, individuals and other bodies that are, or have been, regulated by the PRA and/or FCA.[5]

Financial Ombudsman Service

The FOS is an ombudsman, established to help settle disputes between consumers and UK-based businesses providing financial services, eg. banks, insurance companies, investment firms and financial advisers. See also the Which Guide.

Procedure: Before the FOS can get involved, the consumer must first give the business an opportunity to look into the complaint itself. The business has 8 weeks to resolve the complaint; if they do not, or the consumer is unhappy with the response, then they can refer the complaint to the ombudsman service.[6]

Compensation: The FOS has the authority to require a company to offer financial compensation, correct a consumer's credit file, or offer an apology.[7][8]

An "Independent" Assessor is appointed by the FSO's board to investigate the level of customer service provided from an impartial and independent standpoint. The Assessor is contactable only by email or letter.[9]

Criticism: The FOS has come in for much criticism, especially after a Channel 4 Dispatches investigation.[10][11] In response, the FOS board commissioned an Independent Review[12] in Apr.2018 by Richard Lloyd,[13] despite clear conflicts of interest.[14] Lloyd found that overall, FOS provides an effective and essential service, although there were "a number of key areas requiring improvement".[15]

Two websites have been set up for dissatisfied complainants: Ombudsman Problems[16] and Consumer Action Group who comment: FOS is the "banks preferred route for complaints. Under-resourced and mocked by the banking industry."

Timeline

Apr.2019
Conservatives (May)
Compensation: The Cap was raised to £350,000.[17]
Jan.2019Treasury Committee: Caroline Wayman and Sir Nicholas Montagu appeared before the Treasury Select Committee.[18]
2018Paper Tiger: The FCA spent 4 years investigating Royal Bank of Scotland's GRG unit, only to say it was stymied because commercial lending is unregulated in the UK.[1][2] MPs and business groups called for a change in the law to give small companies greater protection.[3] Biased in favour of banks: FOS was accused of siding with banks to meet targets.[4] Caroline Wayman's introduction of a "pods" system in 2016 led to inadequately trained staff "churning out" decisions as they scrambled to meet targets.[5]
2017Unhappy Staff: This is Money unearthed a flood of negative reviews from staff, indicating growing dissatisfaction by management blindly following PwC "improvements".[19]
2016Unhappy Staff: Caroline Wayman continued rolling out her "pods" system. The move resulted in "quite a number" of experienced and knowledgeable staff left in frustration after the move was announced in Summer 2016.[4]
Oct.2014Treasury Committee: Caroline Wayman appeared before the Treasury Select Committee in response to a poll that revealed 58% of advisers considered FOS unfair in its decisions on financial advice.[20]
Jul.2014Caroline Wayman was appointed as Chief Ombudsman. She introduced a new system in which generalist teams, or "pods", handled cases, rather than specialists focused on particular fields, which resulted in "quite a number" of experienced and knowledgeable staff leaving in frustration.[4]
Jan.2012
Cons/LibDem (Cameron/Clegg)
Compensation: The Compensation Cap was raised to £150,000, despite businesses lobbying against the increase.[21]
Nov.2011Freedom of Information: The Financial Ombudsman Service became covered by the Freedom of Information Act 2000; there are instructions on the FOS website on how to go about making a request.
Nov.2009
Labour (Brown)
Money-transfer operators also came under the FSO's remit.
2000
Labour (Blair)
The Financial Ombudsman Service was established to deal with complaints from consumers about most financial matters including: banking, financial advisers, building societies, insurance, mortgages, pensions, savings and investments, credit cards and store cards, loans and credit, hire purchase and pawnbroking, financial advice, stocks, shares, unit trusts and bonds.[22][23] The FOS is funded by fees from the financial services sector.[24][25] The initial Compensation Cap was set at £100,000.[26] (Financial Services and Markets Act 2000)
FOS's board is appointed by the Financial Conduct Authority, with appointment of the chairman subject to approval by HM Treasury. The board's role includes guarding FOS's independence from undue influence by the Financial Services Industry, trade bodies, regulators, consumer groups and govt. Board members are not involved in individual complaints.[27]
ToDo: FCA Select Cttee, MindNode (search for "Ombudsman")

Articles

  • Mar.26.2018: Ombudsman must clean up act before expanding reach. The Financial Ombudsman Service needs to put its house in order before it can be given more responsibilities, according to Nicky Morgan, chairwoman of the Treasury Select Committee. The ombudsman was set up by parliament and funded by industry to rule on disputes between financial firms and consumers and small businesses. It can make binding decisions and award up to £150,000 in compensation. After claims that the service hurt consumers by issuing flawed judgments in favour of banks, MPs are questioning proposals to expand its remit so that its adjudication services can be used by more small and medium-sized businesses. The Financial Conduct Authority has recommended expanding the service so that more small companies have an outlet for complaints. Last week a former senior employee told The Times that siding with banks had "always been a problem". Ms Morgan backed proposals from the APPG on Fair Business Banking to create a permanent tribunal service for small companies with complaints against financiers. The group has commissioned the Centre for Policy Studies to come up with “concrete policy recommendations” for a new independent dispute resolution mechanism, including how it will be funded, who will be able to access it and on what basis it will make decisions. RBS has helped to fund the study. James Hurley, The Times.

Payment Systems Regulator

  • Jun.2017: The PSR announced its final decision regarding reforms to the infrastructure of the payment systems in order to encourage “better and more innovative services for customers”.[28] Its Dec.2016 review found that the central infrastructure for the main retail payment systems – Bacs, Faster Payments and LINK – did not offer effective competition, and recommended two main changes.
  • Apr.2015: The Payment Systems Regulator officially launched and became fully operational, with full regulatory and concurrent competition powers alongside the Competition & Markets Authority.
  • Apr.2014: The FCA created the Payment Systems Regulator as a separate body, funded by the firms it regulates.[29] The PSR's role is "to promote competition and innovation in payment systems, and ensure they work in the interests of the organisations and people that use them".[30] (Financial Services (Banking Reform) Act 2013, §40)
  • 2000: The call for a regulator to oversee the payment systems industry began with a series of reviews, starting with the Cruikshank Report in 2000. This was followed by a number of govt-led reviews, reports and consultations.[31]

Timeline

Apr.2019
Conservatives (May)
The Money and Pensions Service was formally launched.[32] The MPS is funded by levy payers and by the Department for Work & Pensions; the legislation establishing the Money and Pensions Service moved devolved responsibility for the funding of debt advice to each national govt.[33]
Mar.2016
Conservatives (Cameron)
The Money and Pensions Service: HM Treasury announced that the Money Advice Service, the Pensions Advisory Service and Pension Wise would be combined to form a single, smaller, guidance body.[34]
Apr.2014The FCA took over regulation for the consumer credit industry from the Office of Fair Trading.[35]
Apr.2013 Financial Conduct Authority: the Financial Services Authority was abolished; its responsibilities were split between two new, separate, agencies: the FCA and the Prudential Regulation Authority of the Bank of England. The PRA and FCA work closely together on certain issues/firms. The main difference is that FCA works with firms to ensure fair outcomes for consumers, eg. regulating consumer credit. The PRA ensures that firms act safely and reduce the chance of getting into financial difficulty. The Act gave the Bank of England responsibility for financial stability, bringing together macro and micro prudential regulation, and created a new regulatory structure consisting of the Bank of England's Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority.[36] (Financial Services Act 2012)
Apr.2011 Money Advice Service: the CFEB was rebranded.[37]
Jun.2010
Cons/LibDem (Cameron/Clegg)
George Osborne, then Chancellor of the Exchequer, announced plans to abolish the FSA and separate its responsibilities between a number of new agencies and the Bank of England.[38] (So much for the single body to "stand up for consumers" promised in Jul.2009.)
The Financial Conduct Authority would be responsible for policing the financial activities of the City and the banking system.
A new Prudential Regulation Authority would carry out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies.[39]
Apr.2010
Labour (Brown)
The FSA established the Consumer Financial Education Body as a consequence of the Thorensen Review in 2009.[40] The CFEB was required to, and was responsible for, enhancing the public’s understanding and knowledge of financial matters and their ability to manage their own financial affairs.[41] The CFEB was funded by a statutory levy on the Financial Services Industry. (Financial Services Act 2010)
Jul.2009Consumer Protection Agency: then Shadow Chancellor George Osborne promised a new agency to protect consumers. In a White Paper, Osborne disingenuously laid responsibility for the financial crisis at Labour's door, despite it being his own party, the Conservatives, which had so blithely deregulated the financial services sector in pursuit of its neoliberal ideology.[42] The FSA would be abolished, and its responsibilities combined with those of the Office of Fair Trading, in a single body to "stand up for consumers".
The new body was to be called the "Consumer Protection and Markets Authority", until the Treasury Select Committee pointed out that this name could mislead consumers.[43]
2007-2009Financial Crisis of 2007–2008Wikipedia-W.svg Due to regulatory failure of the banks, the govt decided to restructure financial regulation and abolish the FSA.[44] After a series of scandals, culminating in the collapse of Barings BankWikipedia-W.svg, there was a desire to bring an end to the "self-regulation" of the Financial Services Industry, and to consolidate regulatory responsibilities which had been split amongst multiple regulators.
Jan.2005The FSA took over regulation of general insurance intermediaries (excluding travel insurance).
Dec.2004The FSA took over regulation of mortgage businesses.
Dec.2001The FSA started exercising its statutory powers by regulating banks, insurance companies and financial advisers; it took over the functions of the Personal Investment Authority.[45] It took over the role of the Securities and Futures Authority, which was a self-regulatory organisation responsible for supervising the trading in shares and futures. (Financial Services and Markets Act 2000)
Oct.1997
Labour (Blair)
The Financial Services Authority was born from the ashes of the Securities and Investments Board. Its board was appointed by HM Treasury. It was funded entirely by fees charged to the Financial Services Industry.
Jun.1994
Conservatives (Major)
The SIB revoked recognition of the Financial Intermediaries, Managers and Brokers Regulatory Association as a self-regulating organisation; members moved to the Personal Investment Authority.
Jun.1985
Conservatives (Thatcher)
The Securities and Investments Board was incorporated as a company limited by guarantee.CH The Chancellor of the Exchequer was the sole member of the company, and delegated certain statutory regulatory powers to it under the (Financial Services Act 1986).

Office of Fair Trading

Apr.2014 The Office of Fair Trading was closed. Its responsibilities passed to a number of different organisations: the Financial Conduct Authority became the regulator for the consumer credit industry; the Competition & Markets Authority for issues relating to anti-competitive practices, cartel activity (eg. price-fixing, bid-rigging, output quotas/restrictions or market-sharing arrangements) or a market not working well; and the Citizens Advice Bureau for advice or help with consumer problems and to report issues relating to trading standards.[6]
The sectoral regulators which shared concurrent competition and consumer powers with the OFT continued to share these powers with the CMA. These include OfCom, OfGem, the Office of the Rail Regulator, OfWat, the Civil Aviation Authority, the Financial Conduct Authority, the Utility Regulator of Northern Ireland (URegNI) and Monitor (competition powers only). Monitor became part of NHS Improvement in Apr.2016.[46]
Apr.2013
Cons/LibDem (Cameron/Clegg)
Local authority Trading Standards Services took on the lead role in enforcing consumer protection law, including at the national level.[47][48] See Trading StandardsWikipedia-W.svg
2002
Labour (Blair)
The Office of Fair Trading became formally independent from govt, and was given additional powers. The role of the Director General of Fair Trading was abolished and his powers given to the OFT, in an attempt to depersonalize the competition investigation process.[49] (Enterprise Act 2002)
1973
Conservatives (Heath)
OFT: The Office of Fair Trading was established as a a non-ministerial govt department. The OFT's goal was to make markets work well for consumers, ensuring vigorous competition between fair dealing businesses and prohibiting unfair practices such as rogue trading, scams, and cartels.[50] Where appropriate, OFT investigations were referred to the Competition Commission, to enforce action, consumer awareness campaigns or to published recommendations to govt. (Fair Trading Act 1973)


Articles

  • Jun.21.2018: Judges query failure to go after senior Libor traders. A top civil court has attacked the Financial Conduct Authority for not pursuing more senior bankers over their involvement in rigging Libor. A ruling questioned the FCAs decision to pursue Arif Hussein, a former UBS trader, despite him being “relatively junior” and involved in only a “limited number of chats” linked with manipulating benchmark borrowing rates. Sacrificial goat. Harry Wilson, The Guardian.
  • May.09.2018: Former City watchdog manager turned down for mortgage application/ A former executive, who was one of the architects of tougher lending rules after the 2007 financial crisis, has criticised banks after she was turned down for a mortgage. Lynda Blackwell, a mortgage policy manager at the Financial Conduct Authority from 2004-2014, was denied a home loan after she became a self-employed consultant. Andrew Ellson, The Times.
  • Mar.11.2018: Investors misled by ‘cuckoo in nest’ funds. The FCA has rapped ‘closet trackers’ that do little to earn their large fees. Santander and Halifax have been ordered to change the marketing literature for some of their investment funds after the FCA ruled they were misleading investors over the extent to which they are "actively managed". (Santander Asset Management is the investment arm of the high street bank) Last year, the analyst Better Finance identified 165 potential closet trackers in a study of 2,332 funds, which included funds managed by Fidelity, HSBC, Halifax, JP Morgan, Schroders plc and Santander. Alan Miller, co-founder of wealth manager SCM Direct, described the FCA's move as "too little, too late". He said SCM Direct had highlighted the problem of closet trackers in 2013 and again in 2015, yet nothing had been done. Ali Hussain, The Times.
  • Nov.13.2014: Six banks fined more than $4bn in currency probe. Six banks have agreed to pay $4.33bn in fines to global regulators to resolve allegations that they attempted to manipulate foreign exchange rates. Citibank, HSBC, JP Morgan Chase, RBS and UBS will collectively pay $1.4bn to the US Commodity Futures Trading Commission and about £1.1bn ($1.75 billion) to the UK's Financial Conduct Authority. UBS will also make a payment in Switzerland. In addition, the US Office of the Comptroller of the Currency said Bank of America, Citibank and JP Morgan Chase will pay a combined $950m in penalties. Between 2008 and 2013, lax controls at the banks allowed traders to share confidential information and collude with their counterparts at other institutions in an effort to fix rates and increase profits. Sophia Yan, Alanna Petroff, Ben Rooney, CNN Money.

References

  1. ^ FCA proves to be a paper tiger in case of RBS mistreatment. Businesses were badly and systematically let down by GRG. The FCA, which has been investigating GRG for the past 4 years, knows that, but says it has been stymied because commercial lending is unregulated in the UK, and that it was unlikely to make action against individual members of the RBS senior management team stick either. Larry Elliott, The Guardian, Jul.31.2018.
  2. ^ No FCA action against RBS after mistreatment of small businesses. The FCA is to take no disciplinary action against Royal Bank of Scotland's Global Restructuring Group over its mistreatment of ~12,000 small business customers struggling after the banking crisis. Julia Kollewe, The Guardian, Jul.31.2018.
  3. ^ Change the law after GRG scandal, demand MPs. Regulator ‘does not have power’ to punish bank after it mistreated small companies. James Hurley, The Times, Aug.01.2018.
  4. ^ a b c Financial ombudsman ‘sided with banks’ to meet targets. Ministers are facing calls to overhaul the Financial Ombudsman Service amid concern that thousands of complaints may have been mishandled. Managers had "considerable concerns" when the ombudsman announced a new system in which generalist teams ("pods") handled cases, rather than specialists focused on particular fields. Rejecting complaints and siding with banks to meet targets has “always been a problem” at the watchdog, Mr Freedman said. The Consumer Credit Trade Association, which represents hundreds of small lenders, believes the ombudsman is "failing consumers and businesses alike" with inconsistent rulings. It wrote to the City minister John Glen, demanding the Treasury oversee a transformation “so both consumers and businesses can be confident that the reforms will take effect and improve outcomes for them". The ombudsman started experimenting in 2014 with the new system. James Hurley, The Times, Mar.19.2018.
  5. ^ Untrained staff at Financial Ombudsman Service used Google to check out PPI cases. FOS may have to reopen thousands of cases after an undercover investigation found that complaints had been handled by officials with inadequate training who had resorted to Google to understand the products involved. Investigators had been "churning" out decisions as they scrambled to meet targets. An insider was recorded saying that they had "just taken a chance and slung stuff through, with any old decision". When Rushanara AliWikipedia-W.svg MP, on the Treasury Select Committee, visited the Ombudsman in 2015, insiders said that cases had been pre-selected and rehearsed. "We 'managed' some of the visit to make the service look better than it was," one told Dispatches. Baroness Altmann said hundreds of thousands of people appear not to have been treated fairly. Callum Jones, The Times, Mar.12.2018.
  6. ^ OFT’s work and responsibilities after 31 March 2014. The Office of Fair Trading. Original archived on Feb.08.2014.