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