How the PRA’s new Early Account Scheme impacts individuals

Non-financial misconduct in financial services firms is back at the top of the agenda following the concurrent publication of the FCA’s Consultation Paper 20/23 (Diversity and inclusion in the financial sector – working together to drive change) and the PRA’s Consultation Paper 18/23 (Diversity and inclusion in PRA-regulated firms). The PRA and FCA appear to be agreed that (a) non-financial misconduct incidents are relevant when considering whether an individual has acted with integrity and that (b) for senior managers and certification staff, sometimes behaviour in their personal lives that is unconnected to their job will be relevant to their fitness and propriety to work in financial services. How are HR and Compliance professionals to respond to the new role of moral arbiter that these proposed guidelines point towards, and where will the practical and legal challenges arise?

The FCA released its 2022/23 Annual Report last week together with data on its key enforcement trends. We consider below some of the key takeaways.

Yesterday the FCA published its eagerly-awaited Business Plan for 2021/22 (the “Plan”), its publication having been delayed from April due to the pandemic and it being Nikhil Rathi’s first business plan since he was appointed Chief Executive Officer of the FCA last October.  And it has not failed to disappoint. The Plan launched with certain fanfare yesterday morning, accompanied by a high-energy and detailed speech from Rathi setting out a vision for a transformative and transforming FCA. A transformation that will allow the FCA to tackle head-on what Rathi references as the “profound forces [that] are reshaping financial services” and be poised to deal with future disruption, however that may materialise. In this blog we highlight some of the key priorities set-out in the Plan that will be particularly pertinent to our banking clients, before focusing on what we can expect from the promised “new” FCA under Rathi and its wider new leadership team.

Yesterday’s joint Discussion Paper (DP21/2) published by the Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA, together “the regulators”) on “Diversity and inclusion in the financial sector – working together to drive change” signals a step change in the degree of regulatory focus upon diversity and inclusion in financial services in the UK. While this theme has featured increasingly in FCA and PRA speeches – most pointedly in the speech by Nikhil Rathi on 17 March 2021 entitled “Why diversity and inclusion are regulatory issues” – yesterday’s DP points to a desire on the regulators’ part to create new regulation and to use their “hard/soft” supervisory powers to drive D&I improvements via the existing regulatory framework. We welcome the regulators’ joint efforts to clarify their expectations in relation to these critical topics and engage with all stakeholders on how to increase diversity and inclusion across the financial services industry in a sustainable way. As the regulators signal, the challenge will be doing this in a proportionate way reflecting the diversity of the financial services industry itself and in a way that is sensitive to existing requirements and pending proposals (including the FCA’s proposals for a new Consumer Duty, which we discussed in our separate blog). Below we highlight six of the key points that emerge from the DP.

On 14 May 2021, the FCA published Consultation Paper CP21/13 outlining much-anticipated proposals relating to the standards expected of regulated firms to ensure the protection of retail consumers. The Consultation Paper follows a recently published speech given by Charles Randell, Chair of the FCA and PSR, in which Mr. Randell outlined changes required to transform regulation and reshape the FCA to better protect consumers. Indeed change in this area has been on the cards for quite some time. In January 2020, fellow BCLP partner Nathan Willmott predicted in our Emerging Themes in Financial Regulation 2020 publication that the FCA would bolster the Principle 6 duty to treat customers fairly and add a new Principle and high level obligations requiring firms to adopt fair pricing practices. Although these proposals were delayed by the COVID-19 pandemic, which the FCA recognise in their Consultation Paper, it would appear that plans are now coming to fruition. At their core, the FCA’s proposals are driven by a desire to ensure that consumers have access to the range of products and services that meet their needs and offer fair value. In order to achieve this aim, the FCA is consulting on the introduction of a new Consumer Duty in relation to all products and services sold to retail clients (i.e. all clients other than professional clients and eligible counterparties). According to the FCA, the proposed duty would help to ensure a higher level of consumer protection in retail financial markets and encourage firms to “compete vigorously in the interests of consumers”. As we discuss below, the FCA proposes that the new Consumer Duty will comprise a new Consumer Principle outlining the overall standard of conduct expected of firms, along with three new behaviour-driven Cross-cutting Rules and four new Outcomes.