Have you heard of the Financial Conduct Authority (FCA) but you’re not sure exactly what it does? If so, you aren’t the only one. Many people have heard of the FCA but aren’t sure exactly what it does.
To give you a brief summary, they’re here to protect consumers. The FCA makes sure that consumers are being treated fairly. They regulate financial service providers in the UK.
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What is the Financial Conduct Authority (FCA)?
The FCA was set up by the UK government in April 2013 to set minimum standards that firms must follow. It replaced the Financial Services Authority, which existed before. Its role is defined by the Financial Services and Markets Act 2000.
The FCA exists to make sure that financial institutions operate in a fair, honest, and effective way. This is to ensure that consumers and businesses who use financial services providers are treated fairly.
Based in London, they oversee the conduct of 42,000 financial firms in the UK.
The History of the Financial Conduct Authority (FCA)
In December 2012, the FCA was given approval from the monarch. On 1st April 2013, it came into force. Before, the Financial Services Authority regulated financial activity in the UK.
Following the financial crisis in 2008, the government decided to change the structure of the FSA to promote financial stability. This is why the FCA was created.
One of the main changes that has happened since the FCA began was in September 2019. This was when the FCA introduced Strong Customer Authentication (SCA) rules. SCA rules are used to combat money laundering and improve security.
What are the main objectives of the FCA?
The FCA’s objectives are:
- To protect consumers from bad conduct in the financial sector.
- To protect the integrity of the UK financial system.
- To promote effective competition in the interests of consumers and financial stability.
What does the Financial Conduct Authority do?
The FCA achieves its objectives by checking that firms can meet the requirements they set. They do this before they authorise the firm. The FCA checks that firms keep following the rules and act responsibly in the consumer credit industry. Here we are listing a few powers which FCA has:
- Authorizing or registering financial firms and individuals
- Issuing rules and guidance
- Enforcing regulations
- Prohibiting individuals from performing specific functions
- Seeking injunctions and restitution orders
- Commencing criminal prosecutions
How Does the Financial Conduct Authority Protect Consumers?
The financial services industry plays a part in everyone’s lives. Whether you’ve got a savings account, a pension, a bank account, or any type of loan, it should be regulated by the FCA. This means that the firms must follow particular rules to ensure consumer protection in financial services. To add a few of them:
- Firms must treat their customers fairly.
- Firms must deliver appropriate products and services.
- Firms must put customer protection above their own profits or income, promoting healthy competition.
Who Funds the FCA?
Although the FCA works with His Majesty’s Treasury, it isn’t funded by the government. The FCA is financed through the fees it charges to finance companies. There are three types of fees:
1. Application
This fee is charged when a firm asks the FCA to authorise them.
2. Change to permissions
This fee is charged when a firm wants to change or add permission for an authorised activity.
3. Annual (periodic)
This is the annual fee that firms must pay each year to stay registered.
The FCA also charges fees and levies for other costs, such as:
- The Financial Ombudsman Service
- Financial Services Compensation Scheme
- Money and Pension Service
- Illegal Money Lending Team
Who Needs to be Authorised by the FCA?
Businesses in the financial services industry must register with the FCA. Individuals who want to carry out certain financial activities must register too.
Examples of businesses and individuals who must register with the FCA are:
- Banks
- Credit unions
- Financial advisers
- Insurance companies
Final Words
The FCA is an independent body that regulates the UK financial services industry. This includes activities such as banking, insurance, and the consumer credit industry. It protects consumers by allowing firms to carry out certain activities. It only gives permission to companies that demonstrate they can follow the rules and maintain them.
You should always check that the finance company you’re dealing with is registered with the FCA. Do this by checking on the FCA register before doing any business with them.
Lending Stream is regulated and authorised by the FCA. Our registration number is 689378.
Disclaimer: The information and links given here are for your reference only. Please refer to the FCA website for more detailed information.