In the FCA’s Business Plan for 2024/2025, the FCA sets out how it will continue to deliver the  commitments in its 3-year strategy which focus on:

• reducing and preventing serious harm,
• setting and testing higher standards; and
• promoting competition and positive change. 

The 2024/2025 FCA Business Plan considers each of these themes in turn, with details of the FCA’s planned work against its commitments, including work already started. Details of the outcomes it wants to achieve are also provided. Each commitment is linked to outcomes and metrics to help measure progress and performance.  The FCA states that it will provide an update on its performance in the summer including metrics on how it is achieving its new objective to support the international competitiveness and growth of the UK economy in the medium to long term.

FCA Business Plan key areas of focus for 2024/2025

The FCA states that it will prioritise the following areas of focus for 2024/2025:

Protecting consumers by:

• testing if firms are meeting the higher standards set by the Consumer Duty;

• supporting consumers ’s long term financial wellbeing for consumers and unlocking innovation in retail investment markets through the Advice Guidance Boundary Review;

• working with regulatory partners to ensure pension products deliver value for money and working with consumers to help them better engage with their pensions; and

• continuing to develop the FCA’s use of Artificial Intelligence (AI) to help prevent fraud and scams to improve the experience of consumers and firms

Ensuring market integrity by:

• monitoring risks in markets and taking action where appropriate;

• finalising far-reaching capital markets reforms;

• continuing to lead the debate on how the right form of regulation can support growth for UK markets, with a number of significant policy changes in or approaching consultation; and

• continuing to invest in data and technology to support rigorous market oversight.

• Promoting effective competition by:

• continuing to promote competition and innovation to deliver good outcomes for customers;

• identifying where more effective competition can better deliver fair outcomes under the Consumer Duty; and

• looking to market reforms that bring the benefits of innovation and digitalisation.

Contributing to UK competitiveness and growth by:

• improving the attractiveness and global reach of UK wholesale markets
• supporting firms to invest, innovate and expand through the FCA’s Sandboxes and Innovation pathways; and
• continuing to make it quicker and easier for firms to apply for authorisation and strengthening.

Economic and geopolitical challenges ahead

The FCA identifies the following key uncertainties in the economic and geopolitical environment over the year ahead which it will continue to monitor in light of its objectives for the coming year:

• Higher interest rates and persistent inflation – monetary policy is likely to remain restrictive in the medium term to return inflation to the 2% target;
• Global financial risks – higher levels of public debt in major economies could affect UK financial stability;
• Geopolitical risks – remain high, dampening global growth and affecting shipping and trade, with the potential for shocks to cause severe disruption.

FCA commitments - new areas of focus for the coming year

The FCA states that in the coming year it will continue to deliver the following 13 commitments focusing on reducing and preventing financial crime, putting customers’ needs first and strengthening the UK’s position in global wholesale markets. The following is a snapshot of some of the key 2024/2025 activities in relation to the 13 commitments.

Reducing and preventing financial crime

As for last year’s Business Plan reducing and preventing financial crime remains one of the FCA’s areas of particular focus, with desired outcomes including slowing the growth in investment and Authorised Push Payment (APP) fraud victims and losses.

The key new activity for 2024/25 will be increasing investment in the FCA’s systems to use intelligence and data more effectively within its financial crime work, so that it can target higher risk firms and activities. This will be complemented by continuing to:

• Focus on proactive assessments of anti-money laundering systems and controls for those firms deemed higher risk;
• Use data to target the firms that are more susceptible to receiving the proceeds of fraud and ensure they do more to stop the flow of illegitimate funds; and
• Strengthen its supervision of firms’ sanctions systems and controls.

The FCA will also carry on using its powers to disrupt, pursue and sanction those committing and enabling financial crime, as well as aiming to improve its ability to identify and request platforms remove unauthorised financial promotions, associated websites and social media accounts.

The FCA makes the point that while the financial services sector must continue to take the lead in identifying potential harm for supervisory and/or enforcement action (such as continuing action to tackle scams and fraudulent websites),  other partners and sectors also have an important role to play. Given this, other continuing activities this year will include active engagement with partners including the National Economic Crime Centre (NECC) to strengthen the system-wide response to financial crime.

Putting consumers’ needs first

The Consumer Duty remains the focal point of this second core commitment. The FCA makes it clear that it will continue to focus its interventions where there is greatest risk of harm or where more work is needed by firms to identify and address gaps and to meet the higher standards of the Duty. This will include supervisory work to test firms’ implementation of the Duty and to improve delivery of good consumer outcomes, with specific areas including complaints-handling and root cause analysis, consumer support journeys, consumer understanding, fair value and closed products and services. 

In terms of its wider work, this will include responding to cost of living pressures, financial inclusion, access to cash and addressing consumer difficulties in accessing required financial products and services. Specific continuing activities will include:

• Finalising changes to its mortgage, consumer credit, and overdraft rules to improve outcomes for consumers in financial difficulty. 
• Implementing new rules to ensure consumers and businesses have reasonable access to cash and continued supervision of branch closures. Take a look at our Engage article for more on the FCA’s recent consultation on a new regulatory regime for access to cash.
• Holding a Financial Inclusion TechSprint.
• Consulting on changes to its debt advice rules to improve outcomes for vulnerable consumers.

New activities in 2024/25 will be:

• Multi-firm work and market studies across different sectors to drive up standards. This will include looking at unit-linked pensions and long-term savings products to test the transparency of charges across value chains, how firms assess overall product value and their response where they identify unfair value. There will also be multi-firm work on how quickly the insurance industry responds to claims, including where customers are more likely to show characteristics of vulnerability.
• As recently confirmed in a press release, a review of firms’ treatment of customers in vulnerable circumstances (with findings shared by the end of 2024).

Strengthening the UK’s position in global wholesale markets

The FCA wants to continue to strengthen its position in global wholesale markets and to host markets which support the domestic economy and growth.  The FCA’s aim is to have markets which are open to innovation, underpinned by high standards of market integrity and investor protection.  Key activities that the FCA will start in 2024/2025 include:

• Encouraging innovation and evolving markets by supporting industry work on T+1 accelerated settlement in order to increase efficiency.  The Accelerated Settlement Taskforce is currently exploring the potential for faster settlement of financial trades in the UK.

Work the FCA will continue in 2024/2025 in relation to wholesale markets includes:

• Concluding the review of the Listing Regime and publishing proposals for a new public offer and admission to trading regime.
• Consulting on regulatory changes to introduce more options on how to pay for investment research.
• Consulting on proposals for the commodity position limits regime to ensure venues are able to remain resilient during extreme events.
• Ensuring an orderly transition away from LIBOR and ensure derivative markets are ready to implement the new derivative reporting rules under UK European Market Infrastructure Regulation (UK EMIR) in September 2024.
• Opening the Digital Securities Sandbox applications during 2024.
• Launching the intermittent trading platform Private intermittent Share and Capital Exchange Service (PISCES) by the end of 2024.
• Finalising the consolidated tape for bonds before deciding on the approach for equities.
• Supporting asset management industry groups on tokenisation.
• Confirming the final rules for the Overseas Fund Regime applications gateway.

Preparing financial services for the future

The FCA states that in light of progress to date in implementing the government’s Smarter Regulatory Framework (SRF), it is moving this commitment down the priority list for 2024/25. It will, however, continue to work with HM Treasury and other regulatory authorities to ensure an efficient and appropriately sequenced workflow of the repeal of assimilated (formerly ‘retained EU’) law and its replacement, where appropriate, with rules (where appropriate, tailored to better suit UK markets). It will also continue to embed the changes to the regulatory framework, e.g. in relation to its accountability.

Dealing with problem firms

Ongoing work this year will include increasing its auto-detection capabilities of problem firms and individuals and identifying any barriers in its regulatory framework that might constrain its ability to take action

Taking assertive action on market abuse

The FCA is aiming to significantly increase the FCA’s capability to tackle market abuse, within a proportionate framework that supports innovation to lower industry costs.  The FCA highlights its ongoing work in the coming year includes:

• Developing improved market monitoring and intervention in Fixed Income and Commodities, covering both market abuse and market integrity.
• As part of the SRF process, it will issue a discussion paper on transferring the MiFID data reporting regimes for transactions (RTS 22) and reference data (RTS 23).  
• Assisting in delivering a proportionate market abuse regime for crypto assets and the PISCES facility.
• Extending the FCA’s data reporting supervision approach to EMIR, SFTR and Orderbook regimes.
• Publishing the results of the FCA’s peer review of market abuse systems and controls in providers of Direct Market Access.
• Publishing revised Market Cleanliness Data in Q3 2024 to capture anomalous trading compared to existing metrics.

Reducing harm from firm failure

Here the FCA emphasises the particular importance of its ability to respond to, and effectively manage, the impact of severe market shocks in the current environment. With a continuing increase in corporate insolvencies likely in 2024, its ongoing work will include continuing to use data and horizon-scanning mechanisms to spot firms at risk of failure and ensure an appropriate response – protecting consumers and ensuring market integrity - if they do fail.

Environmental, social and governance (ESG) priorities

The FCA highlights that its ongoing work this year in relation to ESG will include the following:

• Integrating the Sustainability Disclosure Requirements (SDR) and Investment Labels across the market, including the anti-greenwashing rule and guidance.
• Continuing to expand the SDR regime by publishing a consultation on extending the SDR to portfolio management in 2024.
• Engaging on new and emerging risks with UK and international partners.
• Progressing work on transition finance and preparing to have regard to a ‘nature’ regulatory principle coming into force.

Shaping digital markets to achieve good outcomes

Ongoing work to manage the risks from transformational technologies will include assessing the impact of AI on UK markets to better understand the associated risks and benefits and publishing the outcome of its November 2023 Big Tech Call for Inputs on data asymmetry between Big Tech firms and other financial services firms.

There is also a “heads up” that the FCA will continue to ‘robustly investigate’ digital consumer journeys and firms using sludge practices.

Improving the redress framework

Continuing initiatives this year will include the FCA’s work on redress Guidance for firms, complaints reporting, the Advice Guidance Boundary Review (see our Engage article here and related activity under ‘Enabling consumers to help themselves’ below), its proposed capital deduction for redress for personal investment firms and a review of lead generation in the claims management company (CMC) sector.

There is also a reminder that the FCA is aiming to set out its next steps on its review of historic discretionary commission arrangements in the motor finance market in Q3 2024. Our Engage article sets out more detail on the review, which was launched in January this year.

Enabling consumers to help themselves

With an emphasis on the importance of providing consumers with good information to help them make good decisions – especially in the current challenging economic environment – the FCA’s ongoing work in relation to this commitment will include:

• Continuing to robustly assess firms’ applications to approve financial promotions for unauthorised firms. This Engage article provides a short guide to the new FCA financial promotions gateway which came into effect on 7 February 2024.
• Continuing supervision of cryptoasset firms’ financial promotions, increasing its technological capability to detect harmful financial promotions, developing its InvestSmart and Consumer Awareness (currently ScamSmart) campaigns and its work with social media platforms and search engines.
• Following the Online Safety Act, continuing work with OFCOM to successfully implement the legislation for financial services.
• Publishing a response following last year’s Advice Guidance Boundary Review discussion paper (see also related activity under ‘Improving the redress framework’ above).

Minimising the impact of operational disruptions

The FCA states that firms still face a high and growing level of cyber threats and operational resilience risks against a complex geopolitical backdrop.  It is also seeing increasing levels of systemic risk build up in the system due to reliance on critical third parties. It will continue to work on the following in the coming year:

• From 31 March 2025, all relevant firms will need to maintain their important business services without intolerable harm to consumers and markets.
• It will publish a consultation paper clarifying the FCA’s expectations on how firms should report operational incidents to the FCA.
• It will progress the proposed new rules in relation to the systemic risks presenting by critical third parties to the financial sector. 

Improving oversight of Appointed Representatives

In the wake of the new rules and guidance on appointed representatives (ARs) introduced in December 2022 (see our Engage article), the FCA will continue to target its resources through deeper analysis of existing data and using significantly improved data, including from updated Gateway forms, new regulatory returns and a dataset covering all ARs. On the supervisory front, it is looking to continue to strengthen its scrutiny and engagement with principal firms as they appoint ARs as well as continuing ‘assertive supervision’ of high-risk principals.

New FCA Approach Documents published

The FCA has also published updated Approach Documents for:

• Supervision, summarising how the FCA carries out its regulatory oversight and designed to help firms, consumers and markets understand how it works, and to fulfil its accountability to Parliament and to the public;
• Consumers, setting out how the FCA uses its powers and tools to protect consumers of financial services, in line with its consumer protection objective; and
• Competition, explaining how the FCA identifies potential harm caused by a lack of competition, and what actions it can take to protect consumers.

FCA resources and resilience

The FCA states that to help meet its growing remit, its workforce will grow to more than 5000 people by the end of March 2024.  The FCA intends to continue to focus on ensuring it has the right skills to achieve its business objectives sustainably.  The FCA also intends to invest in its own operational effectiveness and resilience to protect consumers, ensure market integrity and promote effective competition. 

Next steps

It is encouraging that in this year’s FCA Business Plan, the FCA commits to investing further in its data resources and technology, which could lead to more efficient and better outcomes for consumers and regulated firms particularly relating to data collection and authorisation procedures. In addition, the benefits of innovation and digitalisation appear to be at the heart of the upcoming 2024/2025 focus areas for the FCA particularly in the context of promoting the attractiveness and global reach of UK markets.  Perhaps surprisingly, the FCA states that it no longer considers the SRF as highly prioritised as it was in 2023/2024 but it does acknowledge that it will continue to be an important programme for the FCA during 2024/25. There remains a significant number of SRF core files on the list for review so we look forward to seeing further progress and clarity about how these files will be transferred to the regulator rulebooks during 2024/2025. 

The FCA states that it will update on its progress with its objectives in summer 2024, including against metrics on its new objective to support the international competitiveness and growth of the UK economy in the medium to long term. 

If you would like to discuss any aspect of the FCA’s Business Plan, please get in touch with one of the listed lawyers or your usual Hogan Lovells contact.

Authored by Virginia Montgomery and Melanie Johnson.