Recommendations & Conclusions
17 items
1
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
It is not immediately clear that Mr Bailey’s concerns about the distinction between “responsibility” and “culpability” in Dame Elizabeth’s draft report would have “compelled” him to make his “free-standing” objection. However we accept that it is likely that his strong concerns over the “responsibility” vs “culpability” point may have led …
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It is not immediately clear that Mr Bailey’s concerns about the distinction between “responsibility” and “culpability” in Dame Elizabeth’s draft report would have “compelled” him to make his “free-standing” objection. However we accept that it is likely that his strong concerns over the “responsibility” vs “culpability” point may have led him to make his “free-standing” objection to the inclusion of named responsible individuals, and that in the absence of his concerns about the distinction between “responsibility” and “culpability” he might not have put forward his “free- standing” objection. We cannot of course be certain about this and if we were satisfied that there was strong and clear evidence that Mr Bailey had misled the Committee on this point, it would be a serious matter. But the evidence does not support that particular conclusion, and we do not believe that Mr Bailey misled the Committee. We note that the revisions made by Dame Elizabeth to the draft report, clarifying that an identification of responsibility was not an attribution of culpability, met the essence of Mr Bailey’s request, and we believe that it is in the wider interest to regard this issue as closed.
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Government response AI summary
The government response describes the FCA's holistic recruitment approach for senior leadership roles, including internal succession planning and global searches, but does not address the committee's conclusion regarding Mr. Bailey's objections or the 'responsibility' versus 'culpability' distinction.
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HM Treasury
2
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
We welcome the FCA’s approach to recruitment for some senior executive roles, which involved global searches, but we believe that the FCA was wrong not to have engaged in a fuller recruitment programme for the Executive Director for Transformation role, including the consideration of potential recruits from outside the FCA. …
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We welcome the FCA’s approach to recruitment for some senior executive roles, which involved global searches, but we believe that the FCA was wrong not to have engaged in a fuller recruitment programme for the Executive Director for Transformation role, including the consideration of potential recruits from outside the FCA. It appears that there was a missed opportunity to consider fresh leadership for the Transformation programme. We also question whether there would have been a significant slowdown in the progress of the Transformation programme had Megan Butler not been recruited to oversee it. Another recruit might have been supported by Megan Butler for at least a period to help assist with this role, or Megan Butler might have taken on that role on a temporary basis whilst the recruitment process was conducted.
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Government response AI summary
The government response discusses the application of Senior Managers Regime principles to FCA senior managers and its impact on accountability and variable remuneration for control failings, but does not address the committee's specific criticism regarding the recruitment process for the Executive Director for Transformation role.
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HM Treasury
4
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
We recommend that the default position should be that the FCA take a holistic approach when recruiting for critical roles, rather than engaging in a restricted recruitment process. For time-critical appointments, the FCA should consider appointing on an interim basis until a wider search, considering where appropriate both internal and …
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We recommend that the default position should be that the FCA take a holistic approach when recruiting for critical roles, rather than engaging in a restricted recruitment process. For time-critical appointments, the FCA should consider appointing on an interim basis until a wider search, considering where appropriate both internal and external candidates, has been completed.
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Government response AI summary
The government's response provides a general update on the FCA's transformation and business plan, but it does not specifically address the recommended changes to recruitment processes for critical roles or the use of interim appointments.
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HM Treasury
6
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
We recognise that the demands of some of these senior executive positions at the Financial Conduct Authority are heavy, and that individual accountability for organisational failings may deter strong candidates from applying for them. But an over-reliance on collective responsibility may deny visible accountability and could lessen confidence in the …
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We recognise that the demands of some of these senior executive positions at the Financial Conduct Authority are heavy, and that individual accountability for organisational failings may deter strong candidates from applying for them. But an over-reliance on collective responsibility may deny visible accountability and could lessen confidence in the organisation as a result. We are not wholly persuaded that the balance struck by the FCA on this occasion has strengthened its standing in the eyes of those it regulates or the wider public. (Paragraph 49) Culture at the FCA
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Government response AI summary
The government response focuses on ensuring consumer awareness of risks in unregulated activities, preventing misleading impressions of regulation, and the 'Use it or Lose it' exercise to remove unused firm permissions, but does not address the committee's concerns regarding senior executive accountability within the FCA.
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HM Treasury
7
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
The FCA plays a vital role as the UK’s financial conduct regulator and prudential regulator for most financial services firms. Its work affects millions of financial services customers and it is important that it has the right culture to facilitate its objectives. We support the views of the current FCA …
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The FCA plays a vital role as the UK’s financial conduct regulator and prudential regulator for most financial services firms. Its work affects millions of financial services customers and it is important that it has the right culture to facilitate its objectives. We support the views of the current FCA senior leadership team that the organisation needs to become a more “proactive”, “agile”, “decisive” and joined- up regulator that is willing to act, including in the face of uncertainty, to protect consumers and financial markets.
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Government response AI summary
The government response outlines its annual perimeter report and engagement with the Treasury on perimeter issues, without addressing the committee's conclusion regarding the FCA's culture and the need for it to be more proactive, agile, and decisive.
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HM Treasury
8
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
We welcome the FCA’s ongoing transformation programme which has cultural change as one of its priorities. We however note that the FCA has undergone numerous structural and operational changes since its inception, with more changes expected as part of the ongoing transformation. We recognise that culture change takes time but …
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We welcome the FCA’s ongoing transformation programme which has cultural change as one of its priorities. We however note that the FCA has undergone numerous structural and operational changes since its inception, with more changes expected as part of the ongoing transformation. We recognise that culture change takes time but recommend that the FCA Board sets itself an end date for the transformation programme and that it creates milestones at which improvements and evidence of changes in culture can be reviewed. These milestones and reviews should be put into the public domain. At the completion of the transformation programme, the FCA should ensure it has in place measures that will ensure that its improved culture is maintained and embedded.
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Government response AI summary
The government's response focuses on the regulatory perimeter and interaction with HM Treasury, providing no specific commitment or discussion regarding the FCA setting an end date, public milestones, or cultural maintenance for its transformation programme.
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HM Treasury
9
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
The FCA accepts that there were failings in the contact centre during the Relevant Period as identified in Dame Elizabeth’s report, and has begun taking steps to address these. We welcome the operational improvements that have been made since the publication of Dame Elizabeth’s report, including the training of call-handlers …
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The FCA accepts that there were failings in the contact centre during the Relevant Period as identified in Dame Elizabeth’s report, and has begun taking steps to address these. We welcome the operational improvements that have been made since the publication of Dame Elizabeth’s report, including the training of call-handlers and changes to contact centre policies.
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Government response AI summary
The government response discusses the FCA's resource allocation, regulatory perimeter changes, business plan, and fees consultation, but does not address the committee's conclusion about contact centre failings or welcomed operational improvements.
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HM Treasury
10
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
The FCA should ensure that it keeps its contact centre policies and training up to date to ensure clarity and consistency, not just in relation to firms such as LCF but to the wider organisation. (Paragraph 76) The regulatory perimeter and the scope of the FCA’s remit
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The FCA should ensure that it keeps its contact centre policies and training up to date to ensure clarity and consistency, not just in relation to firms such as LCF but to the wider organisation. (Paragraph 76) The regulatory perimeter and the scope of the FCA’s remit
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Government response AI summary
The government's response discusses the FCA's surveillance work, partnerships with law enforcement, and a forthcoming perimeter report, completely failing to address the recommendation regarding contact centre policies and training.
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HM Treasury
11
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
The case of LCF illustrates how important it is that the FCA looks at a regulated firm’s activities both within and outside the perimeter of regulation. The FCA’s failure to consider issues raised in LCF’s unregulated bond business led to red flags being missed. (Paragraph 92) 50 The Financial Conduct …
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The case of LCF illustrates how important it is that the FCA looks at a regulated firm’s activities both within and outside the perimeter of regulation. The FCA’s failure to consider issues raised in LCF’s unregulated bond business led to red flags being missed. (Paragraph 92) 50 The Financial Conduct Authority’s Regulation of London Capital & Finance plc
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Government response AI summary
The government's response discusses the complexities of reconfiguring the FCA to prosecute fraud and its limitations in this area, rather than addressing how the FCA will improve its oversight of firms' activities both within and outside the regulatory perimeter to avoid missing red flags.
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HM Treasury
12
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
The “halo effect” appears to be inevitable as long as authorised firms also carry out unregulated activities. We reiterate the recommendation made by our predecessors that the FCA should ensure that it requires authorised firms to make clear explicitly the risks to customers associated with their unregulated activities.
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The “halo effect” appears to be inevitable as long as authorised firms also carry out unregulated activities. We reiterate the recommendation made by our predecessors that the FCA should ensure that it requires authorised firms to make clear explicitly the risks to customers associated with their unregulated activities.
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Government response AI summary
The government's response detailed the permanent ban on mass marketing of Speculative Illiquid Securities and ongoing consultations on the Prospectus Regulation, but did not address the recommendation for the FCA to require authorised firms to explicitly state risks associated with their unregulated activities.
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HM Treasury
13
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
In future, the FCA should set out in its annual perimeter report how its supervisory strategies and policies reflect the activities of authorised firms both within and outside the perimeter.
Government response AI summary
The government response discusses improving consumer support and guiding consumers towards better investment decisions through ongoing work, but does not address the recommendation for the FCA to detail its supervisory strategies in its annual perimeter report.
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HM Treasury
14
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
The perimeter is complex, and while the FCA has some limited powers to act beyond the perimeter, it does not have the remit to actively monitor or intervene outside the perimeter. We recognise the need for the FCA to make prioritisation decisions as its resources are finite.
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The perimeter is complex, and while the FCA has some limited powers to act beyond the perimeter, it does not have the remit to actively monitor or intervene outside the perimeter. We recognise the need for the FCA to make prioritisation decisions as its resources are finite.
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Government response AI summary
The government's response focuses entirely on the LCF compensation scheme and complaints, without addressing the conclusion regarding the complexity of the regulatory perimeter or the FCA's limited powers and resources beyond it.
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HM Treasury
15
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
We welcome the ongoing dialogue between the Treasury, the FCA, and other financial regulators on the perimeter, but the failings in the FCA’s regulation of LCF and constant movement of the perimeter are signs that further action is required.
Government response AI summary
The government response provides an update on the individual consideration and resolution of LCF complaints, promising a further update to the Committee by 30 September 2021. It does not address the committee's broader points about ongoing dialogue on the perimeter or the need for further …
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HM Treasury
17
Conclusion
Fourth Report - The Financial Conduct A…
Not Addressed
Both the FCA and the Treasury accept that the scope of the FCA’s remit is broad and continues to increase. The breadth of the scope has had some operational impacts on the FCA’s ability to carry out its work. We note that the Treasury’s intention is to consider the scope …
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Both the FCA and the Treasury accept that the scope of the FCA’s remit is broad and continues to increase. The breadth of the scope has had some operational impacts on the FCA’s ability to carry out its work. We note that the Treasury’s intention is to consider the scope when the ongoing FCA transformation programme has been delivered; but the timescales for delivery of the transformation programme are unclear.
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Government response AI summary
The government response discusses concerns about Financial Promotion Order exemptions for high-net-worth and sophisticated investors, highlighting them as a vulnerability requiring legislative changes. It does not address the committee's conclusion regarding the FCA's broad remit or the timescales for its transformation programme.
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HM Treasury
18
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
If the FCA Board were to set itself an end date for the transformation programme, as we recommend in Chapter 2, the Treasury would have a clear indication of when to begin its consideration of the scope of the FCA’s remit.
Government response AI summary
The government's response discusses online financial scams and Google's recent policy changes, and the need for legislation, completely failing to address the recommendation regarding the Treasury's consideration of the FCA's remit linked to the FCA's transformation programme.
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HM Treasury
19
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
Any changes to the perimeter must be matched with appropriate changes in the FCA’s resources, and the FCA should republish its priorities. The Treasury should publish a policy statement on how it will analyse changes to the FCA’s perimeter and what factors it will take into account.
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Any changes to the perimeter must be matched with appropriate changes in the FCA’s resources, and the FCA should republish its priorities. The Treasury should publish a policy statement on how it will analyse changes to the FCA’s perimeter and what factors it will take into account.
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Government response AI summary
The government's response focuses on ongoing work with online platforms to combat financial scams and the Online Safety Bill, rather than addressing the committee's specific recommendation regarding FCA resources and the Treasury's perimeter policy statement.
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HM Treasury
38
Recommendation
Fourth Report - The Financial Conduct A…
Not Addressed
Pending any legislative changes, the FCA should continue to work with online platforms such as Google to remove misleading and fraudulent adverts as quickly as possible, to protect customers from scams. (Paragraph 193) The Financial Conduct Authority’s Regulation of London Capital & Finance plc 53
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Pending any legislative changes, the FCA should continue to work with online platforms such as Google to remove misleading and fraudulent adverts as quickly as possible, to protect customers from scams. (Paragraph 193) The Financial Conduct Authority’s Regulation of London Capital & Finance plc 53
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Government response AI summary
The government's response focuses on the inclusion of fraud in the Online Safety Bill, upcoming consultations on online advertising, and a wider Fraud Action Plan, but does not explicitly state that the FCA will continue working with platforms to remove misleading adverts quickly.
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HM Treasury