A recent report from the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services has sparked widespread debate, branding the UK’s Financial Conduct Authority (FCA) as “incompetent at best, dishonest at worst.” Based on two and a half years of testimony from 175 respondents, including whistleblowers, victims, and current and former FCA employees, the report outlines critical failings in the regulator’s operations and culture while proposing significant reforms.
Findings: A regulator under fire
The report paints a troubling picture of the FCA, highlighting a “defective culture” and systemic issues that hinder its effectiveness. Key findings include:
- Slow and inadequate responses: The FCA was frequently criticised for its inability to act promptly on evidence, often failing to prevent or address misconduct in financial services.
- Hostile internal culture: Employees described a toxic workplace, with some claiming they were bullied or sidelined for raising concerns or challenging decisions.
- Poor whistleblower management: The regulator’s treatment of whistleblowers was deemed inadequate, with allegations of neglect and retaliation against those attempting to report wrongdoing.
- Conflicts of interest: The “revolving door” between the FCA and financial institutions was seen as a contributing factor to regulatory capture and reluctance to take decisive action.
- Accountability and transparency gaps: Respondents cited issues with the FCA’s lack of accountability, its opaque decision-making processes, and limited stakeholder engagement.
- Mismanagement of resources: Inefficient use of resources and ineffective leadership were called out as significant barriers to fulfilling its mandate.
Recommendations for reform
The APPG’s report outlines several proposed reforms, aiming to rebuild trust and improve the FCA’s effectiveness:
- Cultural overhaul: Addressing systemic issues in how the FCA handles individual cases, engages with stakeholders, and supports its staff.
- Consumer protection focus: Prioritising consumer protection as the FCA’s core objective, stripping back conflicting subsidiary goals like fostering economic growth.
- Enhanced accountability: Establishing a supervisory council to review the FCA’s performance and making the regulator more accountable to Parliament, with reduced political interference.
- Integrity and governance: Holding the FCA to the same high standards it imposes on regulated firms, with stronger internal governance and clear enforcement of rules.
- Whistleblower protections: Implementing robust protections for whistleblowers and ensuring they are supported and shielded from retaliation.
- Tackling conflicts of interest: Introducing stricter rules for managing “revolving door” appointments, including mandatory gardening leave for staff moving to the private sector.
- Effective use of powers: Ensuring the FCA uses its full range of powers to intervene and sanction where necessary.
- Transparency in operations: Requiring greater openness in regulatory decisions, interventions, and sanctions to foster trust among stakeholders.
FCA’s response
While the FCA has rejected the report’s characterisation, acknowledging past mistakes but claiming significant internal transformation, the APPG insists that change has been insufficient. FCA spokespersons emphasise their commitment to protecting consumers and the economy but have faced criticism for a perceived gap between rhetoric and action.
Implications for businesses
For firms operating in the financial services sector, these findings are a stark reminder of the importance of robust compliance practices. While the FCA faces scrutiny, businesses should remain vigilant, ensuring their own governance and compliance frameworks are above reproach.
At Neopay, we believe this report underscores the necessity of transparent, accountable, and well-structured regulatory systems. As compliance specialists, we assist firms in navigating these challenges, ensuring not only adherence to regulations but also fostering a culture of integrity and accountability.
The APPG’s recommendations, if implemented, could have a significant impact on the regulatory landscape. Until then, businesses must adapt proactively, maintaining a high standard of conduct amidst evolving expectations.
To read the full APPG’s Report on the Call for Evidence about The Financial Conduct Authority, click here.
