When the Financial Services Authority (FSA) became the Financial Conduct Authority (FCA) in 2013 it was meant to inject a breath of fresh air into Britain’s biggest regulatory body. However, from the very beginning it was described as simply an “expensive rebrand”.
Formed in the mid 1980s, as the Securities and Investments Board (SIB), the organisation was meant to provide some oversight for one of the UK’s biggest and most lucrative industries – financial services.
Over the course of the last 30 years it has undergone many a change of tact and appearance, taking us to its latest iteration – no longer in charge of prudential regulating financial firms, investment banks, building societies and insurance companies but responsible for policing the financial activities of the city and its banking system.
The latest development in the rollercoaster story of the FCA is the resignation of its current chairman, former KPMG boss John Griffith-Jones.
As head since the organisation become the FCA in 2013, Griffith-Jones has not had an easy ride. There has been constant controversy surrounding his previous role at KPMG, during which he oversaw the auditing of mortgage lender HBOS.
Then, in May of this year, the FCA spent £70,000 on a new logo which many felt was almost identical to its predecessor – four years after over £1m was allocated to change from FSA to FCA.
So, what might you ask, is the role of the FCA when it comes to British SMEs? In 2015 the industry body sought to review its approach to small and medium-sized businesses.
Back then, Christopher Woolard, director of strategy and competition at the FCA, said: “Small businesses are a vital part of the UK economy. We need to consider whether we’re doing our part in delivering an effective, proportionate regulatory framework that gives them the confidence required to use the financial services they need to grow.
“We want people to tell us whether our rules are appropriate: do they strike the right balance between protecting small businesses and encouraging firms to offer services to SMEs, to compete and to innovate?”
The FCA noted that only a “small majority” of SMEs are unable to take complaints to an ombudsman, but acknowledged more needed to be done to help those with less experience in dealing with financial products.
Noticeable FCA involvement in SME issues has largely been in the field of finance and access to funding. Across banking referrals, crowdfunding and bank failings, the FCA has had its say – but has it really done anything meaningful to support the efforts of entrepreneurs and the SMEs they build and run? Or should it actually have an agenda to promote the interests of SMEs.
Financial Conduct Authority future
Discussing the regulatory changes that SMEs and entrepreneurs in the financial services sector need to be aware of, Laura Harvard, legal director at law firm Shakespeare Martineau, told Real Business the alternations will be about introducing much higher levels of accountability at all levels and the overall regulatory framework that impacts their business operations.
“The FCA is planning to do more to tackle money laundering. As well as promising to use its teeth to prosecute the worst offenders, the regulator is going to review the way money-laundering supervision is managed by professional bodies such as the Institute of Chartered Accountants and the Solicitors Regulation Authority (SRA),” she also explained.
“The FCA has also promised to take a closer look at how firms are lending to consumers, taking into consideration suitability and affordability assessments to ensure good customer outcomes are maintained; and prevent potential mis-selling.”
Paresh Davdra, CEO and co-founder of RationalFX & Xendpay, believes the FCA has been an “imperative support” for SMEs. “Through introduction of new regulations across the entire financial industry since 2013, it has helped to safeguard the interests of entrepreneurs and businesses through its vision of financial stability. It has allowed many businesses to expand into Europe with a license that acts as a passport for UK businesses, enabling them to serve customers in new markets.”
Continuing with the subject of supporting SMEs, Adam Tavener, chairman of Alternative Business Funding (ABF) and Clifton Asset Management, said there is no specific requirement for the FCA to promote the interests of entrepreneurs or protect SMEs in any different way to other ordinary retail investors.
“The responsibility of the regulator is to ensure stable and orderly financial markets and to protect unsophisticated investors from unscrupulous practice. That said, in delivering its brief the FCA will have an impact on small business, albeit often indirect. In banking, for instance, a regime which requires higher solvency margins and encourages a claims culture makes major lenders far less likely to have an appetite for SME lending. Similarly, an ever-increasing PI and redress burden on intermediaries means cost increases passed directly on to business owner customers.”
Ultimately, Tavener believes, entrepreneurs, particularly, are often dependent on innovative financial products to help them achieve their aims, yet such innovation is often stifled by a “sceptical regulator”.
The future of the Financial Conduct Authority is no less certain than at any other point in its chequered 30-year history. The introduction of new measures and polices in the coming years, under the guardianship of a new chairman, will go a long way towards determine the future role our financial regulator has to play.
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