Trouble viewing this email? Read it online

cummings-logo-2013 (2).jpg

Welcome to LEGAL LONG, a briefing on a relevant issue in the financial services industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.


Claire Cummings

020 7585 1406

FCA approach to supervision


The FCA has recently published a document outlining its approach to supervision and this note summarises the key provisions of that approach. The document sets out: (i) the FCA’s role in ensuring fair and honest markets; (ii) why and how the FCA prioritises its supervision work; and (iii) how, in practice, the FCA supervises the firms and individuals it regulates. The aim of FCA regulation is to serve the public interest by improving the way the UK financial system works and how firms conduct their business

Why the FCA supervises

The FCA defines supervision as the continuing oversight of firms and of individuals controlling firms to reduce actual and potential harm to consumers and markets. The FCA takes a forward looking and strategic approach in its supervisory work which includes looking both at the conduct of individual firms and, more widely, at how retail and wholesale markets are evolving.

Supervision by portfolio. The FCA supervises most firms as members of a portfolio of firms that share a common business model and analyses each portfolio and agrees a strategy to take action on firms posing the greatest harm. The FCA communicates its expectations, priorities and examples of good or poor practice.

Dedicated supervision teams. The FCA dedicates a supervision team to each of the small number of firms with the greatest potential impact on consumers and markets. That team has a view of the whole firm across all sectors in which it operates, assesses the potential harm that the firm may cause and agrees a strategy to reduce or prevent it.

FCA Supervisory Principles

The FCA’s supervisory principles are:

• forward-looking
• focussed on strategy and business models
• focussed on culture and governance
• focussed on individual as well as firm accountability
• proportionate and risk-based
• focussed on two-way communication
• coordinated
• focussed on correcting systematic harm that has occurred and stop it happening again

FCA Priorities and Focus

Cross-market priorities. The FCA aims to ensure that firms and markets: (i) are stable and resilient; (ii) are not used as conduits for financial crime, such as money laundering; (iii) maintain effective control over personal data that they hold; and (iv) do not fail in a disorderly way causing harm to markets or consumers.

Retail markets. Within retail markets, the sources of harm that the FCA priortises include consumers (i) being sold products that are unsuitable for their needs; (ii) being given credit that they cannot afford to repay; (iii) not receiving appropriate support when they are vulnerable or in financial difficulty; (iv) not receiving adequate help where things go wrong; and (v) being misled by firms or not being given enough information to fully understand a product’s total cost or the risks and obligations they may be taking on.

Wholesale markets. When supervising participants in wholesale markets, the FCA particularly focusses on the following areas: (i) user protection: the management of conflicts of interest, ensuring participants are clear about the capacity they are acting in and so the obligations they owe to others; and (ii) market integrity: the prevention of misconduct to maintain the cleanliness and stability of our financial markets.

How the FCA supervises

Meeting threshold conditions. When the FCA authorises a firm, it assesses whether it meets the Threshold Conditions. Once authorised, firms need at all times to meet threshold conditions to remain authorised.

Making decisions. To help use their regulatory tools efficiently and cost-effectively the FCA has a decision-making framework which guides how we identify and mitigate the risk of harm. The first step is identification of harm though the use of business model analysis and the assessment of the drivers of culture.

The second step is use of diagnostic tools. The FCA uses a broad range of expertise in its diagnostic work including day-to-day supervision undertaken by sector-dedicated supervisors. The FCA also works closely with other organisations, domestically and internationally, on issues that affect shared objectives.

The third step is use of remedy tools. The FCA has four main objectives when using remedies: (i) to stop actual harm as quickly and proportionately as possible; (ii) to ensure firms have put things right (including redressing customers affected); (iii) yo address the root causes of potential harm; and (iv) to hold the firm and/or individuals in the firm to account as appropriate where there has been misconduct (this could involve enforcement action).

The fourth step is evaluation. The FCA regularly evaluates its supervisory activities. This consists of both firm evaluation and portfolio evaluation. For the largest regulated firms the FCA completes regular firm evaluations which will agree the FCA’s view of the firm, agree the FCA's work programme for that firm and also evaluate the effectiveness of the previous work programme. In addition, the FCA completes regular portfolio analysis for each portfolio and the outcome of each analysis will be individual portfolio strategies which will be agreed internally and shared with the portfolio of firms.

This document is for general guidance only. It does not contain definitive advice.


We have taken great care to ensure the accuracy of this version of Legal Long. However, Legal Long is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from, action taken or refrained from on the basis of this publication. If you would like to be removed from the mailing list of this publication please click unsubscribe below. Nothing within this communication may be copied, re-printed or similar without prior written permission from Cummings.

Authorised and regulated by the Solicitors Regulation Authority. Please contact us if you would like to arrange a meeting. This message (including any attachments) from the law firm of Cummings is confidential and may contain information which is proprietary, privileged or otherwise legally protected against unauthorised use or disclosure. If you are not the intended recipient, please do not read, copy, distribute, disclose or otherwise use or place any reliance on any information in this message or any attachments; and please alert the sender by return e-mail, delete this message and any attachments from your system and destroy any hard copies. Neither Cummings nor the sender accepts liability for any corruption, interception or unauthorized amendment of messages or attachments transmitted by e-mail. It is your responsibility to scan this message and any attachments for computer viruses in accordance with good working practice. The firm is not authorised by the Financial Conduct Authority, but is authorised and regulated by the Solicitors Regulation Authority (for the code of conduct please see and undertakes certain activities in relation to investments which are limited in scope and incidental to its legal services or which may reasonably be regarded as a necessary part of its legal services.


Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

22 04 2019

Subscribe a friend | Unsubscribe

email sent by multimail