Compliance expert warns of FCA ‘fine line’ issue

A UK-based regulatory and compliance consultant has warned that the FCA has to tread a fine line in upholding its statutory responsibilities to protect consumers without being branded as unfairly harsh on small businesses.

Julian Korek, managing director and business unit leader, compliance & regulatory consulting at Duff & Phelps, said that many small businesses dealing with financial services are still unaware of their responsibilities and expressed concerns relating to the amount of work that is being undertaken by the regulator in monitoring their activity.

“Nearly 1,400 referrals were made to the FCA’s Threshold Conditions Team in the year ending 30 June 2017, which resulted in nearly 15% of firms losing their authorisation to undertake regulated business,” said Korek. “However, this is a relatively low number compared to the total number of small regulated firms which include high street companies, such as mortgage brokers, motor dealerships and so on.

‘Unequal burden’

“These firms create an unequal burden on the resources of the FCA compared to the sum total of business they transact, but collectively they also create many thousands of jobs. The FCA has to tread a fine line in upholding its statutory responsibilities to protect consumers without being branded as unfairly harsh on small businesses.”

Korek’s comments come after recent public statement’s from FCA top level management and the Bank of England, about the additional burden on the UK regulator and financial services industry in general, brought about by Brexit.

“Some firms just don’t know what regulation really means in practice until they are authorised,” added Korek. “So many new firms are coming under the regulator’s umbrella and not all of them grasp what they have to do to meet threshold conditions.

“Threshold conditions are there for a reason and for the regulator to fulfil its statutory objectives; not meeting them is just not acceptable and quite different from other enforcement action.

“There are also a percentage of firms that simply ‘give up’ when they realise that they are not ready or equipped to undertake regulated activity in a safe manner,” he added.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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