Confidence of retail investments sector in FCA suffers

Maria Nikolova

Excessive regulation and the FCA’s “focus on the wrong things” are among the factors for the lack of confidence of many firms in the regulator.

The UK Financial Conduct Authority (FCA) has gotten some assessment from the firms it regulates and although the overall picture is positive, retail investment firms do not confirm to have high confidence in the regulator and its abilities to achieve its goals. If we had been allowed to talk in sentimental terms, we could have said that the retail investment firms hate the FCA. But interpreting the data in more neutral terms, we can safely say that the retail investments sector appears to show the tiniest approval of pretty much any aspect of the FCA’s work, be it enforcement or preparation for Brexit.

Let’s get to the numbers.

This year the FCA and FCA Practitioner Panel have once again carried out a joint survey of regulated firms to monitor the industry’s perception of the regulator and to what extent it is meeting its objectives. The joint survey was conducted by Kantar Public on behalf of the FCA and the Panel. Fieldwork took place between January and March 2018. In total, 2,613 firms completed the survey, constituting a response rate of 26%.

Over the last year, there has been an improvement in the perception of the FCA’s performance against all three of its operational objectives (consumer protection; protecting the integrity of the financial system; promoting effective competition). But this is where the positive news ends, as the retail investments sector offers a slightly different assessment.

For instance, the vast majority of firms (86%) were confident that the FCA was delivering on its strategic objective of ensuring financial markets function well. Levels of confidence were slightly lower in the Retail Investments sector (81%).

Across all objectives, the proportion of firms reporting higher levels of confidence was lower among the Retail Investments and Retail Banking sectors.

  • Consumer protection – 78% of firms in the Retail Investments sector were confident compared with 85% of firms overall;
  • Protecting integrity of the financial system – 78% of firms in the Retail Investments sector were confident compared with 85% of firms overall;
  • Promoting effective competition – 67% of firms in the Retail Investments sector were confident compared with 72% of firms overall.

Firms who reported lower levels of confidence in the FCA’s ability to meet its objectives were asked to describe their reasons for a lack of confidence. The most common reasons given by firms were: large firms have an unfair advantage over small firms (cited by 31% of firms who reported low levels of confidence), excessive regulation (31%) increased costs (15%) and the FCA focusing on the wrong things (13%).

Perceptions of the effectiveness of the FCA were lower in the Retail Investments sector (6.7) and highest among Retail Lending sector firms (7.6).

Trust levels across the different sectors are broadly the same. Retail Investment firms were the least likely to report an increase in trust (13%).

Furthermore, just three in ten firms (31%) agreed that the FCA acts proportionately, so that the costs imposed on firms in their sector are proportionate to the benefits gained by the sector, with 38% of firms saying that they disagreed with this statement. This appears to be a particular concern in the Retail Investment sector (surprise! – Ed.). Half of the firms in this sector (51%) disagreed with this statement, a significantly higher level of disagreement than firms in other sectors.

In all sectors apart from Retail Investments, three quarters of firms agreed that FCA enforcement action in their sector(s) is effective at reinforcing the FCA’s expectations. Firms in the Retail Investment sector were less likely to agree, with two thirds (67%) agreeing.

The support that the FCA says it is offering to firms throughout the Brexit process was not quite appreciated by retail investment firms either. Firms in the Investment Management and Retail Investments sectors are invariably the least likely to agree that the FCA is performing well in terms of communicating with and supporting firms through the Brexit process.

All firms were provided with an opportunity to express what they felt the FCA should be doing ahead of the UK’s withdrawal from the EU. Ensuring clear and regular communication with firms was cited as a priority by 14% of firms, while 13% of firms would like the FCA to communicate the effect that leaving the EU will have. Just under one in ten firms (9%) commented that it was too early to say what the FCA should be doing in this area.

The analysis of the findings has identified a number of areas for improvement which the FCA promises it will address over the coming year. These include transparency of regulation and more forward-looking regulation.

Read this next

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

Digital Assets

Coinbase scores minor victory vs SEC, but lawsuit to proceed

A federal judge in Manhattan, U.S. District Judge Katherine Polk Failla, ruled on Wednesday that the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Coinbase can largely proceed.

Web3

COTI Teams Up with Civic for Enhanced Digital Identity Control

СOTI and Civic are teaming up to enhance digital identity security in Web3, aiming to provide users with more control over their digital selves through innovative technology.

Digital Assets

BlockDAG Takes on Chainlink (LINK) Crypto, and RON With DeFi Card and 5000x Profit Potential

Explore BlockDAG’s innovative DeFi card, which transforms cryptocurrency into spendable cash, alongside Chainlink (LINK) crypto and Ronin’s advancements.

Digital Assets

Court finally decides on Sam Bankman-Fried sentence, experts predict 20 years

Sam Bankman-Fried, the former CEO of the now-defunct cryptocurrency exchange FTX, is set to face sentencing on Thursday in a pivotal moment that could see the entrepreneur beginning a lengthy period in federal prison.

Crypto Insider

DeFi Winter Thaws: A Look at the Emerging Landscape

The past year has seen a significant shift in the Decentralized Finance (DeFi) market, transitioning from a period of decline (“DeFi winter”) to a potential season of growth.

Digital Assets

KuCoin announces $10 million airdrop as users withdraw $1.2 billion

KuCoin – the fourth-largest crypto exchange in the world by trading volume – today announced plans to distribute $10 million worth of Bitcoin and its native KCS token via an airdrop event.

<