{"id":989,"date":"2021-07-16T15:14:17","date_gmt":"2021-07-16T15:14:17","guid":{"rendered":"https:\/\/elbornes.com\/?post_type=publications&p=989"},"modified":"2021-07-16T15:56:55","modified_gmt":"2021-07-16T15:56:55","slug":"re-start-the-fca-sets-out-its-stall-for-the-forthcoming-months-and-into-2021","status":"publish","type":"publications","link":"https:\/\/elbornes.com\/publications\/re-start-the-fca-sets-out-its-stall-for-the-forthcoming-months-and-into-2021\/","title":{"rendered":"Re-start: the FCA sets out its stall for the forthcoming months and into 2021"},"content":{"rendered":"

First published by Elborne Mitchell LLP,\u00a0www.elbornes.com<\/a>, 9 September 2020<\/p>\n

It was only going to be a matter of time before the FCA returned to focus on the main issue of the day, being the protection of the consumer. The FCA\u2019s Dear CEO letter dated 4 September 2020 has not failed to disappoint and has neatly swept up topics which regulated firms likely have not focused on during the Covid-19 crisis, as well as a few resulting from it. Understandably, the FCA is asking firms to focus on risks to consumers or markets and how they might be reduced.<\/p>\n

This Dear CEO letter appears to be the starting gun for re-shaping the FCA\u2019s approach to regulation and intervention. It intends to focus on different portfolios or business types to monitor firms effectively and target those firms that pose the greatest risk of harm. This suggests that the FCA will be gathering more information from firms in the forthcoming months and actively monitoring indicators as well as testing risks at particular firms. The FCA\u2019s intention is clear when it states:\u00a0\u201cWhere we conclude that firms, and\/or individuals are not meeting our expectations, we will act\u201d.<\/i><\/p>\n

Although the letter is directed at General Insurance intermediaries serving retail and\/or commercial customers, and Loss Assessors and firms for which broking of insurance products is ancillary to their primary business, the points made hold good for many intermediaries.<\/p>\n

Although the FCA remains focused on resilience (and orderly wind-down for firms exiting the market) in the context of Covid-19, the letter serves as notice on intermediaries to redouble their efforts to consider carefully their distribution chains and the roles of entities within them. It focuses on the need for robust governance and controls to ensure good outcomes for customers, the required oversight of businesses, the use of incentive arrangements and business models which may provide poor control over sales and renewals, as well as conflicts of interest. In this regard, the FCA singles out Appointed Representatives as an example of where risks arise.<\/p>\n

The FCA remains concerned about customers being sold (or rather mis-sold) unsuitable or poor value products as well as the use of inappropriate sales tactics. It states that customers should receive sufficient, clear information at the point of sale and the need for a firm to have healthy cultures and behaviours embedded throughout an organisation – the key message being governance and oversight arrangements are the drivers for change.<\/p>\n

Whilst acknowledging firms that have placed customers at the heart of their business model during the Covid-19 crisis will prosper and emerge from the crisis in a positive position, the FCA notes other firms have struggled. The FCA points to a risk that a number of firms may fail due to shortfalls in staffing or capital, and it sets out key messages in its prior publications regarding financial resilience. These include firms:<\/p>\n