The APPG noted that the regulator was ‘widely seen as incompetent’ and that a ’significant number of respondents believe the FCA sometimes acts in bad faith’
The FCA has been lambasted as “complacent, conflicted and captured” in an All Party Parliamentary Group (APPG) report, which is due to be presented during a meeting in Parliament later today (26 November 2024).
In the Investment Fraud and Fairer Financial Services APPG’s report, contributor Lord Sikka said: ”[This report] is a justifiably hard-hitting critique of the regulator – a regulator that I have been convinced for quite some time to not be fit for purpose.
“The FCA is complacent, conflicted and captured – and without a major overhaul it will never deliver on the responsibilities Parliament has given it to protect consumers.”
The report, which was created as the culmination of the APPG’s call for evidence on the financial services regulator, summarises and analyses the testimonies of 175 individuals who have engaged with the FCA in ways other than working in the industry – including former and current employees.
Via this analysis, the APPG noted that the regulator was “widely seen as incompetent” and that a “significant number of respondents believe the FCA sometimes acts in bad faith”.
It added that there was “a defective organisational culture” at the FCA that was “driven from the top”, while “transparency and accountability” was “lacking”.
Bob Blackman, member of Parliament for Harrow East and co-chair of the APPG, noted: ”The government has reasons for concern, in that the trust deficit in financial services is acting as a brake on growth – the opposite of what any administration wants for the economy.”
Consumer focus
The FCA is the regulator for the UK financial services industry and, while there were no insurance customers consulted in the creation of the APPG’s report, its conclusions are relevant to those in the sector who have complained about the burden of compliance.
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For example, while the FCA’s flagship Consumer Duty regulation came into force on 31 July 2023, a report from consumer organisation Smart Money People found that most vulnerable customers had seen no positive improvement in the way they have been treated by financial services companies since its implementation.
The Consumer Duty was aimed at improving consumer outcomes for the public when it interacted with financial services sectors, such as insurance, but while most insurers applauded this intention, there were criticisms of the ways the FCA went about implementing and communicating its new rules.
As a result, the regulator announced in Summer this year that it was opening an industry review into how it could streamline its regulation for the sector and remove unnecessary rules.
However, the APPG’s report’s findings, which suggested that the FCA was not up to the job of protecting consumers, should not necessarily make good reading for the sector.
That government is beginning to become interested in the organisation’s consumer protection mission would most likely see the sector receive more oversight, rather than less.
Indeed, the APPG’s reports main recommendations included the “need for government intervention” and the establishment of a Financial Regulators’ Supervisory Council, which would “conduct periodic reviews of the operational effectiveness of the FCA”.
Other recommendations included suggestions that restrictions be put in place for regulators joining regulared firms, changing how the FCA is funded and how its leadership team is selected.
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