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In October last year, FSA published its Journey to the FCA document, setting out its latest thinking in the development of the Financial Conduct Authority (the FCA). FSA will summarise and communicate the feedback they have received before ‘legal cutover’ to the FCA, expected in April 2013.
The Journey to the FCA outlines FSA’snew approach to conduct supervision, under which some firms may have a lot of contact with supervisors and others may only have periodic contact. FSA’sapproach will depend on the categorisation of your firm, and FSA will be writing to all firms to confirm your supervision classification before April 2013.
FSA’s conduct supervision model will be based on three pillars: the Firm Systematic Framework (FSF); event-driven activity; and issues and products work. Because much of the FSF and event-driven work will be firm-specific, the supervisory updates in this newsletter will be mainly about FSA’s issues and products work. This is where FSA are focusing on parts of the market or products that are putting or may put consumers at risk and undertaking thematic work to assess or mitigate the risks.
FSA is looking to intervene earlier to prevent consumer detriment, as well as working more closely with trade bodies and firms to achieve results. Its work on telematics is one example where FSA have considered emerging conduct risks in developing technology and are working with a trade body, the Association of British Insurers, to communicate these concerns at an early stage.
FSA is also considering different ways of doing things, with a greater focus on consumer experience. So FSA has done consumer research in its thematic work on motor legal expenses insurance and FSA will deliver its findings shortly.
As well as changing its approach to supervising firms, FSA is developing its approach to competition as FSA becomes the FCA. Where there are problems in markets – for example, where competition is not working effectively for consumers – FSA will employ a range of actions. This will include ‘shining a light’ on the industry by researching how competition is working in a particular market. FSA’s first market study is on general insurance products sold as add-ons.