Message from the Chair

Charles Randell
Chair FCA
We will continue to transform our own organisation.
We were prepared for change and challenge during 2019/20, and – even before the coronavirus pandemic – the year certainly brought both. Changes we achieved include the extension of the Senior Managers and Certification Regime, to drive change in the culture of financial firms; and changes to the rules to prevent harm in high-cost consumer credit products such as rent-to-own.
Challenges we continue to tackle include unfair pricing in general insurance; and tackling the internet marketing of unsuitable high-risk and scam investments, which cause such misery to those who sign up.
Highlights from 2019/20

Christopher Woolard
Interim Chief Executive
The 30% of personal current account holders in the most deprived neighbourhoods could see a reduction in overdraft charges of around £101m a year.
Financial data
Our financial statements provide details of our income and expenditure for the year ended 31 March 2020.
Cross-sector priorities
To develop our understanding of how to build healthy cultures we broadcast 3 webinars with expert panellists to over 2,000 participants. We also hosted 2 CultureSprints with participants designing innovative solutions to transform culture.
We launched a Transforming Culture LinkedIn page to share resources on driving healthy cultures.
We also set up a working group to look at how to drive purpose in both individual sectors and the wider industry. The group’s valuable contribution to the debate is reflected in our Discussion Paper on driving purposeful cultures captures the group’s contribution.
On 9 December 2019, we extended the Senior Managers and Certification Regime (SM&CR) to nearly all FSMA-authorised firms.
In December 2019, together with the Bank of England we published a policy summary and Consultation Paper on how firms can strengthen their operational resilience.
We identified third-parties as the root cause of 16% of reported incidents in 2019/20. Our consultation encourages firms to improve their engagement with outsourced and third-party service providers.
Change management is the greatest cause of technology incidents reported to us. We have been working with a sample of firms to better understand this.
To ensure the UK’s financial markets are robust we share intelligence with the Government and other agencies. In 2019-20, we worked with the Government to develop their Economic Crime Plan (ECP).
We have strengthened our anti-money laundering capacity to use data and intelligence more smartly to increase our reach, focus on areas of highest risk and make more in-depth regulatory assessments.
Our Financial Lives survey has developed our understanding of risk to consumers. We found that 1 in 10 UK adults have received an unsolicited call, email or text in the past 12 months claiming to offer pension advice, which may have been fraudulent.
We launched a campaign targeted at investment scams, generating over 324,000 views on Facebook and Instagram and driving over 16,000 people to our ScamSmart: online trading webpage.
Our investigations of pricing practices in General Insurance, Cash Savings and Mortgages show consumers don’t always achieve fair value and some pay a loyalty penalty.
We looked at a number of markets to examine pricing practices more closely.
In our Feedback Statement on Fair Pricing in Financial Services we explain how we intend to judge when pricing practices are unfair and when we will put this into practice.
Our General Insurance Pricing Practices Market Study interim report aims to make general insurance markets work well for consumers and ensure long-standing customers are treated well.
In January 2020 we published our Consultation Paper on introducing Single Easy Access Rates (SEARs) for cash savings.
The data revolution and technological developments mean that firms know more about customers than ever before. This can lower costs and lead to greater participation that can benefit consumers. But it can also expose people to harm.
Our Call for Input on open finance explores the opportunities and risks, and what role we should play.
In our work on data ethics, we have developed a deeper understanding of how financial services use AI and data. Working with the Bank of England we published our joint survey on machine learning and established the AI Public-Private Forum to help us better understand how machine learning/AI is driving change.
We are also working with the Alan Turing Institute to clarify the role that data ethics can and should play in the design, use and monitoring of AI.
Our guidance on cryptoasset activities helps firms better understand whether they need to be authorised and what they need to do to ensure they comply with our requirements.
As chair of the Global Financial Innovation Network (GFIN), we work with financial services regulators and global bodies to share intelligence and best practice on the implications of innovation. GFIN’s One Year On report sets out its progress.
Demographic change, developments in the employment and housing markets and a long period of low interest rates have all affected people’s financial needs.
In our Discussion Paper on intergenerational differences we gave our initial analysis of how specific factors have changed the needs and circumstances of different generations. In our Feedback Statement we identify key areas where we have a role to play.
We want to ensure consistent outcomes for vulnerable consumers. In our guidance consultation we set out how our Principles for Businesses require firms to treat vulnerable consumers fairly.
Our work has highlighted the need to have the right regulatory framework to support our work and to make best use of our regulatory toolkit.
We want an open discussion and debate about the potential merits and consequences of a new consumer principle. As part of this, we published a Feedback Statement on duty of care and potential alternative approaches.
We have also begun research to better understand users’ experiences of our Handbook and how we can improve it.
Last year we published our first annual Perimeter Report. It explains our role, how we manage issues on the edge of our perimeter and responds to specific challenges.
We proposed a new disclosure rule to improve premium-listed issuers’ climate-related disclosures.
We set out what we will do to help tackle barriers to effective investor stewardship in our Feedback Statement.
We also finalised rule changes that require Independent Governance Committees to oversee and report on pension scheme providers’ environmental, social and governance and stewardship policies for workplace personal pensions and investment pathways.
Sector priorities
Wholesale financial markets
These markets are vital to the UK’s prosperity and economic growth, so need to be effective.
Investment management
A key contributor to the UK economy, this sector must be resilient and provide a range of good value products.
We want clean markets that make it difficult to commit market abuse and financial crime. Our new data alerts have helped firms correct large numbers of transaction reports. This improved data helps us detect and investigate potential market abuse.
This year we received a total of 5,336 Suspicious Transaction and Order Reports and 788 other external notifications. As a result, we opened 415 preliminary market abuse reviews and began 53 enforcement investigations.
Alongside the Bank of England, we have worked with firms to support an orderly transition from LIBOR. We have given firms individual feedback on their progress and published a feedback statement for all firms to consider in their transition planning. We have also clarified our expectations of firms, including through publishing answers to key questions on conduct risk and a joint letter with the PRA to firms’ senior managers.
MiFID II introduced new requirements for firms undertaking underwriting and placing business to manage conflicts, including conflicts between themselves and their issuer clients. In April 2019, we published the findings of our review of how firms have applied these requirements.
Over 2019/20, we have made changes to our Handbook to make investment costs more transparent, fund objectives clearer and improve performance reporting.
In May 2019, the independent Cost Transparency Initiative finalised a set of industry-ready templates to ensure the disclosure of costs and charges to institutional investors. This key recommendation of our Asset Management Market Study will give investors a clearer and more detailed understanding of the charges they pay.
Our final rules on disclosure, liquidity management and suspension of dealing for illiquid assets and open-ended funds came into effect. We also we issued a Dear CEO letter emphasising how critical liquidity management is for all AFMs.
Our rules introducing investment pathways aim to help non-advised consumers entering drawdown choose an investment product that matches their retirement objectives.
Our feedback statement suggested a package of potential measures to tackle a lack of competitive pressure and improve value in the non-workplace pensions market.
We want to improve outcomes for consumers from defined benefit (DB) pension transfers. So we set out new rules and guidance on pension transfer advice, particularly DB to defined contribution (DC) transfers.
We also changed our rules to extend the remit of IGCs. They will now have to consider and report on environmental, social and governance issues and oversee the value for money of investment pathways solutions for pension drawdown.
Retail banking and payments
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.
We expect firms to have robust systems and controls to protect customers’ funds. Our review of payments services firms’ safeguarding arrangements found they need to ensure they can properly identify client funds and hold them separate from other funds. We set out our expectations in a Dear CEO letter.
We want to ensure reliable payment services for all users. Our new rules make it clear that currency transfer service providers must not promote unachievable exchange rates or make unfair claims about competitors. By ensuring firms provide the right information, consumers can make better choices.
Our high-cost credit review resulted in measures to protect consumers across a wide-range of products.
We introduced remedies to boost competition and address repeated use of overdrafts and new pricing rules. Our estimates show 7 out of 10 overdraft users will be better off or see no change.
We also introduced a Rent-to-own price cap, which delivers estimated consumer benefits of between £19.6m and £22.7m a year.
Our new rules ensure ‘buy now pay later’ customers are better informed and are not charged backdated interest on sums they repay during an offer period.
Our Alternatives to High-cost Credit report set out the availability of lower-cost and non-credit options.
We introduced new mortgage lending rules removing barriers preventing some customers – ‘mortgage prisoners’ – from finding a cheaper mortgage deal. Around 14,000 customers should be able to switch products and make a meaningful saving.
We completed the transfer of claims management regulation to us on 1 April 2019. Since then, we have received more than 840 applications for full authorisation.
Our General Insurance Pricing Practices Market Study Interim Report found that competition is not working well for all consumers in these markets. Around 6 million home and motor policyholders paid high or very high prices in 2018 and were not getting a good deal on their insurance. We are considering remedies to tackle the harms we identified.
Our thematic reviews on the general insurance distribution chain found possible harm to consumers. So we introduced new guidance. Benefits should include better targeting of products, removal of poor value products, fair treatment of longstanding customers and firms taking swifter and more substantial action to rectify issues causing consumer harm.
Our work on consumers with pre-existing medical conditions found they often have problems finding affordable cover for their conditions. We introduced new signposting rules and guidance to help them find and access affordable insurance that covers their conditions.
Nine percent of UK consumers are currently invested in alternative assets, with an estimated 1.2% of British adults holding retail mini-bonds. But the real risks are often poorly communicated to retail consumers. To protect consumers we issued a temporary product restriction on marketing speculative mini-bonds to most retail customers. We also launched a communications campaign to improve consumers’ awareness of the risks.
We also imposed restrictions on how Contracts For Differences could be sold to retail clients.
And we have also consulted on a ban on investment products referencing cryptoassets.