Fighting financial crime, protecting consumers’ needs, and bolstering wholesale markets are the regulator’s key priorities for the year ahead.

By Rob Moulton, Nicola Higgs, Becky Critchley, and Charlotte Collins

On 19 March 2024, the FCA published its Business Plan for 2024/25, setting out its priorities for the year ahead. While the Business Plan now takes on less significance than it did historically given other publications in circulation such as the FCA’s 3-year Strategy and the Regulatory Initiatives Grid, it still provides useful information for firms regarding the FCA’s areas of focus and ongoing workstreams.

The FCA is now entering into the final year of its 3-year Strategy, which pinpointed three important themes: reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change. While last year’s Business Plan aligned with these themes, this year’s has pivoted slightly to place its key focus on the following three areas: reducing and preventing financial crime, putting consumers’ needs first, and strengthening the UK’s position in global wholesale markets. The last of these is significant as it highlights the FCA’s emphasis on its reforms to the UK’s primary markets. There is also great importance placed upon the FCA’s ability to develop and enhance its capabilities as a data-led regulator, particularly in relation to market abuse and financial crime.

In this blog post we summarise the FCA’s work in these three areas of focus and draw attention to significant aspects of the 10 remaining priority areas earmarked by the FCA.

Strengthening the UK’s Position in Global Wholesale Markets

In addition to continuing its work on primary markets reform, including the new public offer and admissions to trading regime, the FCA plans to support industry work on T+1 settlement. It will continue with a host of workstreams within the Wholesale Markets Review, including revising rules on investment research, preparing for new reporting rules under UK EMIR, assisting the government with developing the PISCES framework, and progressing work on the consolidated tape for bonds. The FCA also plans to improve market integrity through increased expertise, capacity, and capabilities, and carry out increased market monitoring of fixed income and commodities markets.

Reducing and Preventing Financial Crime

The FCA notes that it will continue to take a data-led approach to identifying potential harm. It will maintain its focus on investment fraud, authorised push payment fraud, money laundering, and financial sanctions compliance. The FCA has been undertaking significant work in all of these areas recently. In line with its emphasis on data the FCA will also increase investment in its systems in order to use intelligence and data more effectively within its financial crime work.

Putting Consumers’ Needs First

The FCA will continue to focus on Consumer Duty implementation, considering interventions when there is greatest risk of harm to consumers or when firms need to do more to meet the Duty’s higher standards. It will continue with its supervisory work to test firms’ implementation of the Consumer Duty and to improve firms’ delivery of good consumer outcomes. In terms of new work, the FCA intends to carry out multi-firm work and market studies across different sectors to drive up standards. As recently announced, it will also conduct a review of firms’ treatment of customers in vulnerable circumstances.

Other Priorities

  • Smarter Regulatory Framework: The FCA notes that it has made significant progress to date in reviewing and replacing assimilated law (previously known as retained EU law), and therefore no longer considers this to be a highly prioritised commitment. However, it continues to be an important workstream that will likely require significant investment, with many files still to be reviewed. This is reflected in the FCA’s budget; although the estimated annual cost for this workstream is down by 11% from last year, it still remains by far the largest exceptional project in the FCA’s budget.
  • Market Abuse: In line with its work on becoming a data-led regulator, the FCA plans to significantly increase its capacity to tackle market abuse, particularly its detection of cross-asset class market abuse. The FCA will develop improved market monitoring and intervention in fixed income and commodities markets. Signifying its ambitions to remain a key player on the global stage, the FCA will increase its resources and capability to influence international markets data strategy. Planned work for this year includes publishing the results of its peer review of market abuse systems and controls in providers of Direct Market Access, issuing a Discussion Paper on transferring the MiFID data reporting regimes for transactions and reference data into the Handbook, and adding more anomalous trading data to its Market Cleanliness Data.
  • ESG: As well as working on integrating its new Sustainability Disclosure Requirements, investment labelling regime, and anti-greenwashing rule, the FCA reaffirms its commitment to consult on expanding the regime to portfolio management services in 2024. The FCA will also progress work on Transition Finance and prepare to have regard to the new nature-related regulatory principle that will apply to the FCA from the start of 2025.
  • Digital Markets: The FCA will continue its work assessing the impact of AI on UK markets and is due to report back to the government by the end of April 2024 on its strategic approach to AI. The FCA signals its commitment to maintaining its pro-innovation and technology-agnostic approach. It also states that it will investigate digital consumer journeys and firms using sludge practices.
  • Operational Resilience: Noting the 31 March 2025 deadline for firms to comply with the new operational resilience framework, the FCA plans to publish a Consultation Paper clarifying its expectations on how firms should report operational incidents to the regulator. It will also continue its work on developing a regulatory framework for critical third parties.

Notably, the FCA’s annual funding requirement is expected to increase by almost 11% this year. Partly this is down to “exceptional” projects including the Smarter Regulatory Framework, the Advice Guidance Boundary Review, work on access to cash, open banking, the new stablecoin regime, and the InvestSmart campaign. However, the FCA’s base budget for ongoing regulatory activities is expected to increase by 8.7% (or 9.7% when taking into account new charges relating to the Consumer Duty and financial promotions regime). This reflects the regulator’s ever-increasing workload, particularly given its more prominent role in the post-Brexit UK regulatory landscape.