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  • UK Regulator Publishes Final Mission Approach Documents for Supervision and Enforcement
    04/24/2019
    The U.K. Financial Conduct Authority has published its finalized Approach to Supervision and Approach to Enforcement, following feedback to its consultation between March 21 and June 21, 2018 on drafts of the two approach documents. The documents should be read alongside the FCA's Mission document which was first published in October 2016 and most recently updated in November 2017. The documents form part of a series of formal approach documents explaining the FCA's approach to regulation in more depth.

    Approach to Supervision

    The Approach to Supervision document describes the FCA's supervisory function as the continuing oversight of firms and individuals controlling firms to reduce actual and potential harm to consumers and markets. It sets out the FCA's key supervisory principles, which are: (i) forward looking; (ii) a focus on strategy and business models; (iii) a focus on culture and governance; (iv) a focus on individual as well as firm accountability; (v) proportionate and risk-based supervision; (vi) two-way communication; (vii) co-ordinated supervision; and (viii) a focus on putting right systematic harm that has occurred and preventing it from happening again.

    The FCA describes its supervisory priorities in relation to retail and wholesale markets. Protecting retail and small business consumers from harm informs the FCA's approach to supervision of retail markets, while promoting fair, effective and transparent markets. This dictates FCA supervision in the wholesale arena. Issues common across retail and wholesale markets include stability, financial crime and control over personal data. The FCA targets key areas of regulated firms, including business models, culture and prudential soundness, to implement supervision of each priority issue.

    The FCA also explains how its ongoing monitoring of firms helps to ensure continued compliance with the Threshold Conditions imposed upon all regulated firms under the Financial Services and Markets Act 2000. It goes on to describe in detail how the FCA identifies and mitigates the risk of harm using its "decision-making framework" – a four-stage process involving identification of harm, diagnosis of the underlying causes of that harm and its potential impact on markets, utilization of various tools to remedy harm and finally an evaluation of the FCA's supervisory approach to specific firms or portfolios of firms.

    Approach to Enforcement

    The Approach to Enforcement document outlines the overriding principle guiding the FCA's approach to enforcement, which is a commitment to achieve fair and just outcomes in response to misconduct. It explains the key aspects of the FCA's approach to tackling serious misconduct, which include: (i) being responsive and efficient in detection; (ii) conducting efficient and fair investigations without pre-judgment of the outcome; (iii) the use of deterrent and restorative or remedial powers to deal with a finding of serious misconduct; and (iv) encouraging firms to voluntarily account for and redress concerns, as well as sanctioning those who fail to address harm.

    The Approach to Enforcement document goes on to describe the FCA's implementation of these underlying principles for each aspect of the enforcement process. The first stage involves identification of harm, which may be detected by the FCA's internal investigatory teams or through the FCA's collaboration with other regulators and enforcement agencies. The document also sets out the approach the FCA takes to investigating instances of potential misconduct, the powers available to it in conducting its investigations and the decision-making process surrounding the sanctions and remedies which may be imposed in response to a finding of misconduct, based mostly on the FCA's Decision Procedure and Penalties Manual.

    View the FCA's Approach to Supervision.

    View the FCA's Approach to Enforcement.

    View the FCA Mission.

    View details of the FCA's consultation on its Mission approach documents.

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