Have you heard of the Financial Conduct Authority (FCA) but youâre not sure exactly what it does? If so, you wonât be the only one. Many people have heard of the FCA but arenât sure exactly what it does.
To give you a brief summary, theyâre there to protect consumers. The FCA make sure that consumers are being treated fairly by regulating financial services firms in the UK.
Table of Contents
What is the Financial Conduct Authority (FCA)?
The FCA was set up by the 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 Acts 2000.
In the main, the FCA exists to make sure that financial companies operate in a fair, honest, and effective way. This is to ensure that consumers and businesses who use financial companies are treated fairly.
With their head office in London, they regulate the conduct of 50,000 financial companies 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 this, the Financial Services Authority (FSA) regulated financial activity in the UK.
It was following the financial crisis in 2008, that the government decided to change the structure of the FSA. 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. It was brought in to try and reduce fraud and improve security.
It means that when consumers pay for things, they have to go through an extra layer of security. This helps to verify that the person named on the account is the one paying.
Strong customer authentication rules mean that you can be verified in one of three ways.
- By entering a PIN or passcode.
- By using biometrics, such as your fingerprint.
- By using a device like your phone.
What are the main objectives of the FCA?
The FCAâs objectives are:
- To protect consumers from bad conduct.
- To protect the integrity of the UK financial system.
- To promote effective competition in the interests of consumers.
What does the Financial Conduct Authority do?
The FCA achieves its objectives noted above by checking that firms can meet the requirements they set. They do this before they authorise the firm. The FCA then supervises the firms to make sure they continue to meet the rules.
The FCA has the power to:
- Regulate the marketing of financial products.
- Set minimum standards on financial products.
- Instruct firms to change or withdraw promotions that it finds are misleading to consumers.
- Investigate firms and individuals where it deems it necessary.
What principles do the FCA set for firms to follow?
The FCA has a handbook that sets out the principles that all authorised firms must follow. Within the handbook are some key principles that ensure minimum standards are met. The table below lists these principles and gives a brief description of each of them.
| The principle | What it means | |
| 1 | Integrity. | A firm must conduct its business with integrity |
| 2 | Skill, care and diligence. | A firm must conduct its business with due skill, care and diligence. |
| 3 | Management and control. | A firm must take reasonable care to organise and control its affairs responsibly and effectively. With adequate risk management systems in place. |
| 4 | Financial prudence. | A firm must maintain adequate financial resources. |
| 5 | Market conduct. | A firm must observe proper standards of market conduct. |
| 6 | Customers’ interests. | A firm must pay due regard to the interests of its customers and treat them fairly. |
| 7 | Communications with clients. | A firm must pay due regard to the information needs of its clients. It must communicate information to them in a way which is clear, fair and not misleading. |
| 8 | Conflicts of interest. | A firm must manage conflicts of interest fairly. Both between itself and its customers and between a customer and another client. |
| 9 | Customers: relationships of trust. | A firm must take reasonable care to ensure the suitability of its advice. And of its discretionary decisions for any customer who is entitled to rely upon its judgment. |
| 10 | Clients’ assets. | A firm must arrange adequate protection for clients’ assets when it is responsible for them. |
| 11 | Relations with regulators. | A firm must deal with its regulators in an open and cooperative way. And must disclose to the FCA appropriately anything relating to the firm of which that regulator would reasonably expect notice. |
How Does the Financial Conduct Authority Protect Consumers?
Financial Services play a part in everyoneâs lives. Whether youâve 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 protect consumers who use these financial services.
These rules include the following points:
- Firms must treat their customers fairly.
- Firms must deliver appropriate products and services.
- Firms must put customer protection above their own profits or income
Who Funds the FCA?
Although the FCA works with His Majestyâs Treasury, it isnât funded by the government. The FCA is financed through the fees it charges to the 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 is a fee thatâs charged when a firm wants to change or add a 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. Examples of these include:
- 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 who want to carry out certain financial activities in the UK must register with the FCA. Registration doesnât just apply to businesses. Individuals who want to carry out certain activities must register with them too.
Examples of businesses and individuals who must register with the FCA are:
- Banks
- Financial Advisers
- Finance companies
- Insurance companies
How Do I Know if a Company is Registered with the FCA?
If you want to find out if a company is registered with the FCA, search on their register. The register will tell you other information about the company too. This includes the following:
1. If the company is authorised by them
They may have been authorised in the past but are not anymore. Youâll be able to find out if they are currently registered.
2. The companyâs contact details
The company is obliged to enter this information. If you’ve been given contact details by a company, check they’re legitimate. Do this by checking them against the details on the register.
3. What it is authorised to do
The registration will show what financial activities the company is authorised to carry out.
4. If itâs covered by the Financial Ombudsman Service (FOS)
The FOS is an official body set up by the government. It settles disputes between financial firms and its customers.
5. If the company is covered by the Financial Services Compensation Scheme (FSCS)
If a company is covered by the FSCS, money that you hold in an account with them is safe. If the company stops trading and you lose your money, the FSCS will pay compensation. You can claim up to ÂŁ85,000 against any money you lost.
How can I do a search on the FCA register?
Itâs easy to do a search on the FCA register, just follow these simple steps.
- Go to the official FCA website where youâll find a tab for consumers. From here youâll be able to click through on the heading: ‘Check if a firm is FCA authorised‘.
- This will take you through to an information page where you can click a link which says, âSearch the registerâ. To help you skip to this point, follow this link and itâll take you straight there.
- You then enter either the name or the postcode of the firm or person you want to check. This will give you a list of people or companies with that name or postcode. Select the one that youâre looking for and youâll see their information.
What if a company says theyâre registered with the FCA, but they arenât?
The FCA register includes companies who claim theyâre authorised by them, but they arenât. These fraudulent companies can be found on the register with warnings to tell you theyâre not authorised.
Itâs worth checking if the company youâre dealing with is one of these scammers. You can do this by searching for them in the same way that you would for a company whoâs authorised.
Final words
The FCA is an independent body that regulates financial activities in the UK. This includes activities such as banking and insurance. It protects consumers by authorising firms to carry out certain activities. It only gives permission to companies who show they can follow the rules and maintain them.
You should always check that the finance company youâre 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 and here is our registration number.
Disclaimer: The information and links given here are for your reference only. Please refer to the FCA website to know more detailed information.