Annual Report and Accounts 2018/19

Summary for the year ended 31 March 2019

Message from the Chair

Charles Randell

Chair FCA

Change is here to stay for all of us, so the FCA must change too.

This Annual Report covers the sixth year of the FCA’s existence and my first as Chair. It’s an opportunity both to reflect on the FCA’s performance in its first chapter and to look forward to the challenges of the future.

Looking back to the FCA’s first chapter

The FCA began in 2013, when the Financial Services Authority’s prudential and conduct roles were divided between the Prudential Regulation Authority and the FCA. The FCA then had two major tasks. The first was tackling the mountain of conduct issues in large firms identified in the wake of the financial crisis. The second was taking over regulating and supervising some 34,000 consumer credit firms and tackling major consumer harm in parts of this sector.

FCA staff can be rightly proud of its achievements in this first chapter. They include the PPI programme, enforcement cases which levied around £3 billion of penalties and redress, and bold interventions which transformed the high cost credit sector, including capping payday lending charges. Our staff have also overseen the successful roll-out of the Senior Managers and Certification Regime to large firms, fundamentally changing senior managers’ accountability for their firms’ conduct failings.

The FCA today

The current, second chapter of the FCA’s life began with the publication of our Mission in 2017, under the leadership of Andrew Bailey. This makes consumer harm a clear guiding principle when we prioritise and allocate our resources. We also published a series of documents explaining how we will approach our work in the future. However, the job of fully implementing these to ensure we can identify serious harm, and respond to it as quickly and as effectively as possible, is by no means complete.

As we transform the FCA, we recognise the serious questions that consumers and businesses have asked about aspects of our past performance. The weight of the tasks in the FCA’s first chapter and their demand on our resources led to a focus on regulated activities in large firms and a more reactive supervisory approach to smaller firms and activities at our regulatory boundary.

Reviewing our past actions

We must be transparent about what we can and cannot deliver within our current remit, but also address whether we could have done more. So we are doing two things. First, publishing a report alongside this Annual Report to explain the perimeter of our regulation, to foster understanding and discussion of the limits of our remit. Secondly, commissioning an independent review of our supervision of London Capital & Finance, an authorised firm which issued retail mini-bonds and whose failure has had a profound impact on its investors.

We are also proceeding with independent reviews of two cases which go back to the period before the FCA came into existence: the FSA’s supervision of the Connaught Income Series 1 Fund, a retail investment fund which collapsed in 2012, and the supervisory interventions initiated by the FSA for Interest Rate Hedging Products, which many banks sold to small businesses and which led to a major redress programme.

Completing the FCA’s transformation

Change is here to stay for all of us, so the FCA must change too.

Technology change means major new risks to our objectives can develop more rapidly than ever. These risks increasingly come from beyond large authorised firms and regulated products, such as when scammers use the internet to target victims. We must continue to develop our own use of technology and our supervision and enforcement capabilities to respond rapidly where our remit allows.

Global change includes the UK’s withdrawal from the European Union. We have started the debate about the future of UK regulation and that will be a priority for the FCA this year. We will work closely with the Treasury as part of their review of related issues including the payments system and regulatory co-ordination. One key question is about the freedom to focus more on principles and outcomes than detailed rules – the duty of care debate is part of this. But equally important is whether UK regulation should permit ordinary consumers to be exposed to high risk, often unregulated, products. It’s clear that risk warnings alone are not enough to provide adequate levels of protection for some of these products.

Our stakeholders expect us to provide more protection to consumers in an uncertain, fast-changing world, and to provide it faster.

So we are not waiting for the outcome of the reviews of Interest Rate Hedging Products, Connaught and London Capital and Finance as we continue to embed the Mission and transform how we operate. We are already implementing a new approach to authorising and supervising firms, to ensure we are better at spotting and stopping firms which should not be authorised and can supervise smaller firms more proactively. We are extending the Senior Managers and Certification Regime to smaller firms, in a proportionate way. We are acting swiftly against firms with harmful business models: banning the sale of binary options to retail consumers, heavily restricting the sale of Contracts for Difference and setting out reforms to the peer-to-peer lending market so consumers are better protected.

In this second chapter, our focus is on transforming our capabilities, our use of technology and our regulatory framework to put us in the best position to deliver our objectives.

Concluding remarks

I would like to thank all the consumers, consumer representatives, voluntary organisations and firms who have given me frank and useful insights on our work, in meetings in Stratford, Edinburgh and around the UK during the past year.

I also thank all the FCA staff and Board members who have helped me in my firstyear as Chair. I would pay tribute to Brad Fried, who left the Board at the end of June 2018 to become chair of Court at the Bank of England, and to Ruth Kelly and Jane Platt, who retired on 31 March 2019 on completion of their Board terms. I was delighted to welcome Richard Lloyd, who joined the Board on 1 April 2019, bringing further consumer insight and experience to support and challenge our work.

Highlights from 2018/19

Andrew Bailey

Chief Executive

We are transforming our response to incidents to intervene more swiftly, directly and severely.

Video: The year in numbers


  • requiring 40% of sponsor firms to improve their market systems and controls
  • assessing over 1750 separate whistleblowing allegations
  • extending the Senior Managers & Certification Scheme to all 560 insurers
  • taking over the supervision of over 90 e-money firms and account information payment services


  • launching 484 preliminary market abuse investigations
  • carrying out 91 enforcement investigations
  • imposing 16 financial penalties on firms, totalling £227.3m


  • determining 4,400 applications for authorisation
  • registering 953 claims management companies for Temporary Permission

Protection highlights

  • issuing 522 warnings about unauthorised firms, up from 328 the previous year
  • launching the next phase of our PPI campaign - 73% of UK adults now aware, with over 3 million visiting our website
  • over 523,000 people visited our ScamSmart website to find out how to avoid being victims of fraud
  • bringing in new rules for Rent to Own products, saving some of the most vulnerable customers up to £22.7m a year

Read the full highlights in the report

Financial data

Our financial statements provide details of our income and expenditure for the year ended 31 March 2019.

Cross-sector priorities

Firms’ culture and governance

Part of our role involves encouraging firms to actively focus on improving their cultures.

Financial crime and anti-money laundering

Our aim is to make the UK's financial markets hostile to criminals.

Data security, resilience and outsourcing

Our aim is to ensure the UK’s financial system markets stay resilient.

Innovation, big data, technology and competition

We want innovation, technology and data to work for consumers.

Treatment of existing customers

We want to ensure that all firms treat their longstanding customers fairly.

Long term savings, pensions and intergenerational

How demographic change affects the UK’s financial needs.

High-cost credit

We want to help ensure protection for customers of high cost credit.

Read more on Cross-sector priorities

EU withdrawal

Our work in this space covers 4 main areas: advising Government on technical matters, working with regulated firms, designing a temporary permissions regime and cooperating with international bodies and other regulators. We expect this work to increase in 2018/19.

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Our approach to Brexit

We have dedicated significant resource to coordinating and managing work on EU withdrawal across the organisation.

Read more about EU withdrawal

Sector priorities

Wholesale financial markets

These markets are vital to the UK’s prosperity and economic growth, so need to be effective.

Investment management

This sector is a key contributor to the UK economy, so it is important that we encourage competition.

Pensions and retirement income

Saving for retirement has a fundamental impact on financial wellbeing in later life.

Retail banking

This is central to the lives of virtually every consumer, business and organisation in the UK.

Retail lending

Most UK households use credit products like credit cards, mortgages and loans every day.

General insurance and protection

These products allow individuals and businesses to protect themselves against uncertainty.

Retail investments

When consumers get professional advice about investments, they need to know it meets their needs.

Read more on Sector priorities