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For the FCA, does too big mean failure?

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

In the FCA’s short lifespan, it has seen a lot of change – at a market level but also internally. In the space of three years, the number of firms regulated by the FCA has more than doubled from 26,000 in 2013 to around 56,000 currently, with the number of approved persons regulated standing at 125,000.

Its sprawling remit has grown to include sectors such as payday lending and debt management, while bolting on the Payment Systems Regulator and gaining competition powers.

And this was long before Brexit reared its head, or the prospect of taking on the regulation of claims firms loomed large.

None of this is meant to elicit sympathy for the FCA (and I would be hard pressed to do so). But it begs the question of whether the regulator is overstretched, and whether this is having a knock-on impact on policymaking, on advisers, and on its overarching objective of consumer protection.

Following the financial crisis, the issue of “too big to fail” is often cited in relation to the firms the FCA regulates. But when it comes to the regulator, does “too big” actually equate to failure?

Threesixty managing director Phil Young notes the FCA’s broad remit renders the regulator increasingly more corporate, with the potential for all the infighting and budget wrangling that goes with a FTSE 100 firm.

Looking at the numbers, staff costs at the FCA have gone up 17 per cent over the past year, from £307.8m to £330.7m. The number of full-time staff has also risen 8.5 per cent, to 3,276, while the FCA’s budget has gone from £479m to £502m. The regulator is running with an extra 250-odd staff.

Yet the anecdotal evidence is that the FCA is struggling to cope, from Freedom of Information requests, to complaint handling, to authorisations. It is a source of constant frustration to advisers that whistleblowing reports go unheeded – is this because allegations are not taken seriously, or is it simply a staffing issue?

Earlier this week MPs issued a stark warning of “regulatory overload” and came up with the idea for a breakaway organisation to focus solely on enforcement. This would certainly concentrate regulatory efforts to where they are needed, particularly where issues like unregulated investments are concerned.

The alternative would be for advisers to cough up more money for the regulator to do its job effectively, which is an unpalatable option in the extreme.

Natalie Holt is editor of Money Marketing – follow her on Twitter here

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. The Answer is Yes.

    If advisers want a sensible system they will have to campaign for their own regulator of Professional Advisers

  2. Some years back a well noted TV naturalist, openly stated the Giant Panda had gone down a evolutionary cul de sac, adding all the money, research in the world would not bring it back, and surprisingly stated this resource would be better directed elsewhere, basically, if the Pandas cant start to reproduce and multiply on its own accord, then its the way of the Dodo for them !

    The FCA is the Giant Panda; to preoccupied with sitting on its very fat arse munching on its shoots and leaves trying to look cute and meaningful to the outside world but in reality failing to get the job done or any jobs done for that matter !

    My thought is to end it now, its a miserable blot, and every pound that gets credited to its bank account is a pound wasted, and by the report there is £502 million of them…………..my heart sinks

  3. If, as Garry Heath suggests, financial advisers should have their own regulatory body or at least a specifically defined subsidiary of the FCA, then so too should various other sectors. That way, an external supervisory body might manage to gain a reasonably clear picture as to which division is doing what, how well (or otherwise) they’re doing it and whether or not they’re managing to do it within a specific budget. The present system of handing the FCA ever more areas of responsibility when clearly it’s not managing to cope with those it already has clearly isn’t working and needs fundamental reform. After all, the endless just loves trying to reform everything and anything so a taste of its own medicine wouldn’t go amiss.

  4. I meant to write the FCA just loves trying to reform everything ~ dunno how the word endless crept in.

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