Posted by John North, Partner
On 1 September 2016 Withy King LLP merged with Royds LLP. The trading name for the merged firm is Royds Withy King. All content produced prior to this date will remain in the name of the firms pre-merger.
Who is your new regulator? FCA, PRA and FPC
On 1st April 2013, the FSA was replaced by the FCA, PRA and FPC. This section outlines who will be looking out for investors and supervising financial conduct under the Financial Services Act 2012. The Financial Services Authority was abolished on the …
On 1st April 2013, the FSA was replaced by the FCA, PRA and FPC. This section outlines who will be looking out for investors and supervising financial conduct under the Financial Services Act 2012. The Financial Services Authority was abolished on the 1st April 2013 and the majority of its undertaking was transferred to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) under the Financial Services Act 2012 (the Act). The Act will also transfer supervisory responsibility for clearing houses from the FSA to the Bank of England (BoE). Firms that are already regulated by the FSA will be automatically transferred and so will not need to reapply to the FCA or the PRA for their existing authorisations and regulatory approvals to be continued.
The new regulators
Financial Conduct Authority
The FCA is the UK financial services regulator responsible for the conduct of all firms that were regulated by the FSA (including those subject to supervision by the PRA). It will also be responsible for prudential regulation of smaller firms that do not fall under the PRA’s jurisdiction, so smaller firms will only have one regulator.
Prudential Regulation Authority
Prudential regulation primarily relates to the capital solidity and liquidity of financial institutions. The PRA is responsible for the prudential regulation of capital-intensive firms, including banks, insurers and certain investment firms. These firms are dual-regulated firms because, while the PRA regulates prudential issues, the FCA acts as the conduct regulator.
Financial Policy Committee
The FPC will be a committee of the Court of Directors of the BoE responsible for macro-prudential regulation. It will be responsible for considering macro issues affecting economic and financial stability and for responding to any threats which it identifies. Unlike the PRA and the FCA, the FPC will not have direct regulatory responsibility for any particular types of firm.
Impact on firms
The new regulators, particularly the FCA, now have powers that the FSA did not including the power to intervene as it deems fit to protect investors. The new regime will short circuit the previous delay caused by having to wait for the outcome of court proceedings. The Government has also used the Financial Services Act 2012 to introduce changes to the regulatory regime under FSMA, such as the regulation of LIBOR setting and broadening the scope of offences relating to financial deception. The changes signify a new and more risk-averse governmental approach to regulation, designed to avoid another financial meltdown.
The regulators have been criticised in the past for being reactive rather than proactive, and for being staffed by ‘life time’ regulators who do not understand the industry in which the operate. Judgement based regulation that provides powers to step in and take pre-emptive measures to protect consumers shows a marked change in the regulatory mind-set and a possibility of addressing the first concern (although concern has now been expressed as to whether this will result in a financial services sector that has to justify itself off the back foot: Many firms will see increasing costs which will be passed on to investors which in turn might shrink an already diminished market. Greater complexity of legislation emanating from Brussels can also be expected). As to the lack of understanding of the industry, whatever the structure this perhaps will only improve with a strategy of moving members of the financial institutions and back into the industry. Let’s see what happens.
For further details on any of the issues covered in this update please contact Angela Stallard, Partner in Corporate and Commercial Department on 020 7583 2222 or email@example.com
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