The Financial Conduct Authority’s more aggressive approach to regulation has seen the creation of a regulatory “hit squad” which signals a shift in the relationship between supervisors and firms.
Under the FCA, fewer supervisors are allocated to specific firms. Instead firms are categorised into one of four conduct supervision categories, ranging from C1 which cover banks and insurers, down to C4, covering smaller firms including almost all advisers. C1 and C2 firms have a nominated supervisor, while C3 and C4 firms do not.
A new team has emerged under this structure called the “events-driven” team, which is part of FCA supervision.
Law firm Norton Rose Fulbright global head of financial services Jonathan Herbst, a former head of European law at the FSA, says this team has resulted in a noticeable change in firm supervision under the FCA.
He says: “Firms that do not have a supervisor never quite know when the regulator is going to show up. There are certainly firms that do not have a supervisor that are on the FCA’s radar. We will find there are quite large asset managers, large brokers, and indeed IFAs that do not necessarily have a supervisor but that does not necessarily mean these firms are not going to be of interest.
“Firms that do not have a supervisor will find there is effectively a new supervision team taking the lead, a kind of hit squad descending on firms. Firms have got to be a lot more on their toes now.”
The FCA declined to comment.
Plan Money director Peter Chadborn says: “We are the ones that end up paying for failure, so if we want a better regulator we will have to stomach this new approach.”