The FCA’s 2024/25 Business Plan

Published on March 29, 2024 by Luis Melendez

As we approach the end of the first quarter of 2024, we see a substantial increase in the use of large language models and artificial intelligence across different fields of interest. Amid geopolitical turmoil, the presidential elections scheduled for this year and significant changes in the finance and regulatory sectors, the Financial Conduct Authority (FCA) has released to the public domain its 2024/25 Business Plan.

The new plan continues on from the guidelines established in its 2022/25 strategy built on the following fundamental pillars:

• Protecting consumers

• Ensuring market integrity

• Promoting effective competition

• Ensuring international competitiveness and growth

Reducing and preventing financial crime, putting consumer needs first and strengthening the UK’s position in global wholesale markets are the basis of its public commitments.

Duty to consumers. This came into effect in 2023. The FCA has set a new deadline for firms to ensure and provide optimal and right consumer outcomes, in line with continued analysis of socioeconomic difficulties, services required and financial inclusion. The FCA is shifting its focus to reviewing a firm’s treatment of consumers in difficult circumstances and how it factors in inflation, interest rates and the cost of living.

Enforcement action will continue on from that stipulated in 2023, taking a data-driven approach from a regulatory and supervisory perspective. The annual funding requirement (AFR) has increased 10.7% since 2023 to GBP755m, significantly boosting capital for developing technology and information systems. GBP40m will be allocated exclusively for reinforcing the FCA’s technological approach.

The FCA is also looking to increase its ability to combat market abuse by (a) implementing the Treasury’s Future Regulatory Framework, also known as the Smarter Regulatory Framework (SRF), (b) publishing annual results in 3Q 2024 for peer review of market abuse and (c) enhancing its ability to detect and prevent market abuse in a cross-asset environment by using advance analytics and network visualisations. Aiming to minimise the adverse impact on consumers and markets, it plans to implement an anti-market-abuse regime for cryptocurrencies in 2024, requiring crypto exchanges to detect and prevent market-abuse behaviour such as insider trading and market manipulation.

Environmental, social and governance priorities comprise a new pivotal pillar that the FCA wants to embark on for the transition to sustainability by incorporating one key element across markets. The anti-greenwashing regime generates trust, transparency, credibility and integrity in the consumer base that demands services and products that are more sustainable.

Digital markets are evolving rapidly, and the FCA aims to manage risks to secure benefits to consumers and gain a better and wider understanding of these markets. Its pilot programme “AI and Digital Hub” aims to analyse and assess the impact on the UK from a benefit/risk standpoint, attempting to maximise and deliver the best possible outcomes for both sides.

The FCA is also focusing on misleading claims about products, making principal firms responsible for ensuring compliance with established rules and regulations. Appointed representatives (ARs) must avoid misconduct that can result in damaging market integrity. New guidelines and rules became effective in December 2022, aiming to improve a principal firm’s oversight of its ARs by increasing the amount of detail shared with the regulatory entity. This practice raises standards across the realm of financial services.

Ensuring international competitiveness is the FCA’s secondary objective; it factors in the following criteria, aiming to establish them in the mid- to long term:

• Sustainable economic results

• Enabling UK-based firms to compete in international markets

• Considering the views of relevant international standard-setting bodies: the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO)

The key takeaways relating to the FCA’s 2024/25 Business Plan centre on four basic concepts:

• Protecting the consumer

• Prioritising consumer safety and establishing clear and concise conditions

• Ensuring that market best practices are aligned with current rules

• Fostering an environment that promotes competition

• Building up the UK as a financial brand with international reach and investor awareness

Sustainability has become a pivotal criterion in the regulator’s strategy for the coming years, driven by consumers demanding services and products more in line with the FCA’s vision.

The FCA also has a clear plan to implement, develop and boost use of technology, analytics and top-of-the-line resources to automate the detection and prevention of market abuse. It has significantly increased its budget allocation for this.

It plans to maximise awareness of and extend the UK’s global reach as a brand for wholesale markets by providing a wide range of services to attract investments. It also aims to make the process of applying for authorisation smoother for those firms and individuals, reducing bureaucracy significantly.

It plans to make the UK a data-driven entity, sourcing and creating a functional structure that develops, supports and stimulates local economy, so it can become a major market for investment opportunities.

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Sources:

• Business Plan 2024/25 | FCA

• A Smarter Regulatory Framework for financial services – GOV.UK (www.gov.uk)

• GC23/3: Guidance on the anti-greenwashing rule | FCA

• Our Strategy 2022 to 2025 (fca.org.uk)

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