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What is the Role of the Financial Conduct Authority?

A breakdown of how the UK's financial regulator operates and why you should ensure that your business maintains compliance with its guidance.

Posted: 7th September 2020 by Finance Monthly
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No matter which area of finance or business that you operate in, knowledge of the regulatory climate that you work in is essential. If you are working in the UK, which has one of the world's largest financial services industries and is home to many of the world's most important financial institutions, then you will need to become acquainted with the Financial Conduct Authority (FCA).

This is the government body that is responsible for the regulation of any and all financial services activities that take place in the UK or involve UK-based companies, individuals, and entities. They create and regularly update the framework and regulations governing areas such as trading, banking, currency, accounting, and dividends, to name just a few.

Falling afoul of the FCA can not only be ruinous for your business and career plans, but it can also land you in prison. Furthermore, you will not be able to legally conduct financial services activities in the United Kingdom without the approval of the FCA. With that in mind, let's summarise what the FCA actually does and how their remit affects you.

Preventing Misconduct

The most important role of the FCA is to prevent misconduct by financial services companies. They will investigate and enforce against classic types of misconduct such as insider trading and shadow-banking, but that's not all. They also work to prevent anti-competitive behaviour such as monopoly building, the mis-selling of financial products, and any attempts at market manipulation.

Regulating Trustworthy Companies

The FCA also helps financial services companies by providing them with a badge of legitimacy. For example, if you are looking for a qualified UK CFD broker service, you will find that the most well-regarded companies proudly advertise that they are regulated by the FCA. If a company is regulated by the FCA, then potential customers and clients can know that they are trustworthy and abide by rigorous ethical standards.


Dispensing Advice

The FCA is a massive organisation with thousands of employees and an annual budget of £600 million. Much of these resources are directed towards giving essential legal and compliance advice to the 58,000 companies that the FCA is responsible for regulating. This service is extremely valuable for smaller companies that might not have the resources to fully navigate the regulatory environment on their own. In a business environment where only the top dogs can afford a legal team of their own, the advice provided by the FCA can be a life-saver.

Launching Legal Investigations

The FCA also has powerful enforcement mechanisms and can launch their investigations into companies and individuals, rather than simply referring potential incidents of misconduct to the police. As an arm of the UK government, the FCA reserves the right to investigate any person or entity that they have a reasonable suspicion of being guilty of financial crime. Investigations launched by the FCA can and do lead to the suspension of licenses, multi-million-pound fines, and the arrest and imprisonment of those found guilty of a crime by a British court. That's why compliance is crucial.

If you want to do business in the UK, joining the FCA and paying a membership fee is definitely a worthwhile pursuit. The cost of applying for FCA regulation currently stands at £1500, but this is a worthwhile investment.

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