Martin Wheatley launched the FCA approach document, called "Journey to the FCA". The document stresses FCA will build on the successes of FSA, in particular continuing to pursue its credible deterrence initiative. It will also use the new powers the amended FSMA will give it. Martin Wheatley specifically stressed the product intervention powers, which will allow FCA to ban products for up to 12 months without consultation where appropriate. He said firms should not be afraid of this, because the approach will be based on a proper understanding of the issues so firms selling the right products, in the right way to the right consumers should have nothing to fear.
The document sets out the three purposes of FCA – ensuring market integrity, promoting effective competition and requiring firms to put customer well-being at the heart of their business. It stresses that firms' culture must embed good conduct. It then looks in detail at FCA's new powers and its role in:
- financial stability, specifically to ensure relevant markets function well;
- delivering good market conduct: the paper acknowledges a renewed focus on wholesale markets;
- product governance and intervention: this section sets out FSA's efforts to date, articulates FCA's policy and confirms it will not become involved in product pre-approval;
- financial promotions: it outlines the process FCA will use to ban misleading promotions;
- publicising enforcement action: FCA can, after consulting the target of a warning notice, publish the fact of the notice and the start of enforcement proceedings;
- new powers on recognised investment exchanges, sponsors and primary information providers;
- super-complaints: FCA will develop a process for submission of super-complaints and how it will deal with them;
- consumer credit: FCA expects to take responsibility for consumer credit in 2014, with a full regulatory regime being in effect from 2016; and
The paper goes on to look at the authorisation process, and specifically the new threshold condition requiring firms to show adequate contingency planning in their business models. It also looks at the processes for approved persons, change of control, waiver applications and passporting. The paper also confirms FSA's role in relation to e-money and payment services firms and mutuals.
The next part of the paper looks at FCA's supervisory model, which is based on three pillars – the firm systematic framework (FSF), event-driven work and issues and products. FSA will divide firms into supervisory groups and expects to have separate categories for supervising the conduct of:
- banks and insurance groups with a large retail client base and universal/investment banks with large client asset and trading operations;
- other firms with large numbers of retail clients or which are large wholesale firms;
- other firms with retail customers or a significant wholesale presence; and
- smaller firms, including almost all intermediaries.
The first two categories of firm will have nominated supervisors. FCA will also divide its prudentially-regulated firms into categories, depending on whether they are prudentially critical, significant or insignificant.
The next part of the paper deals with FCA's enforcement attitude, noting FCA will build on FSA's work and, particularly, how it will work to stop firms being used for financial crime. Finally, the paper looks at FCA's understanding of the markets, which it will build through its new Policy, Risk and Research Division, and how it plans to maintain relationships with stakeholders. Separately, Martin Wheatley spoke to BBA on FCA’s approach, how it will work with banks, and the LIBOR reform initiative.