FCA eyes fresh clampdown with ‘game changing’ consumer duty and beefed up AI
The Financial Conduct Authority (FCA) is looking to tighten enforcement of its “game-changing” consumer duty rules and will ramp up its use of artificial intelligence, as it laid its priorities for the year ahead out today.
In its annual plans published this morning, the City watchdog said it had made “significant progress” in delivering on a strategy set out by chief Nikhil Rathi two years ago, which looked to transform the FCA into a more “innovative, more assertive, more adaptive” regulator.
Under the plans, the regulator said it would now look to further prioritise its stringent consumer duty rules laid out last summer which have piled more pressure on companies to deliver “good outcomes” for customers.
The rules have already prompted sweeping overhauls at some of the City’s biggest firms and forced bosses to set aside hefty provisions to change the structure of products and services.
In one of the most dramatic effects of the regulation to date, Britain’s biggest wealth manager St James’s Place was forced to overhaul its fee structure after pressure from the regulator.
The consumer push and improving the appeal of the UK’s capital markets formed a key part of a three year strategy laid out by Rathi two years ago.
In a statement today, the City’s top regulator said the introduction of the consumer duty had been “game-changing” and the regulator had delivered the “most far-reaching reforms to wholesale market regulation and the listing regime in decades.”
“We remain resolute in supporting the vital role the financial sector plays in the UK’s long-term economic growth, embracing the potential benefits that technology presents both for us and the firms we regulate, while also continuing to protect consumers and ensure market integrity,” Rathi added.
As part of the plans, the FCA said it had also hiked its funding requirement from government by 10.7 per cent to £755m.
The regulator is expected to begin taking firmer action against firms in the coming year under the consumer duty. Rathi warned in a speech last week that while the FCA would be “pragmatic” and was not look to “trip firms up”, it would be “tackling breaches that pose the greatest risk of harm”.
As part of its priorities for the year, the FCA said it is also developing its use of Artificial Intelligence (AI) to “help prevent fraud and scams to improve the experience of consumers and firms when they contact us”.
The automation push comes after the FCA’s capacity has been stretched in recent years as the government expands its remit into new areas including cryptocurrency and environmental, social and governance [ESG] labelling.
Ministers also changed the purpose of the FCA to include a secondary objective of growth and competitiveness amid fears that firms were being hamstrung by overly burdensome rules.