Regulator FCA


FCA – Financial Conduct Authority. The office of financial regulation and supervision – non-state financial regulator of Great Britain.

Britain is known for its conservatism, and regulatory activities of financial markets also are not the exception. But the FCA license is among the five most esteemed ones in the world. The similar level have only regulators in USA and Germany.

Main tasks performed by the controller can be described as follows:

  • organization of financial security for consumers in the financial sector (monitoring of the proper performance of the functions of each participant of financial markets, counteraction of fraud);
  • ensuring the integrity of the financial system in the UK;
  • regulation of relations between financial market participants for developing and maintaining fair competition.

History of the regulator began in 1985. The Office of securities and investments (SIB), which played a rather narrow range of responsibilities in the field of financial market regulation was created. As a result of reforms in 1997, the financial regulator with far greater authority – FSA (Financial Services Authority) appeared. Gained experience of SIB was significantly expanded – the regulator received unprecedented rights and opportunities, taking control of all spheres of the financial market, from banking and insurance industries, ending over-the-counter markets.

In 2013 the decision was made to split FSA into two separate units:

  • The FCA. Functions of the regulator were somewhat curtailed, but in General the powers and duties remained the same – control of market participants. Shortened functions only applied to the strategic objectives related to financial independence of the UK;

PRA. This unit is directly subordinate to the Bank of England, it took over the responsibility of security of the overall financial system of the country. In other words, the activities of the companies should not harm the UK economy. But to implement this task, the PRA (the prudential supervisor), structure was given the authority to monitor the top management of companies.

It is believed that the reason for splitting the FSA was a series of fraud with Libor rate, which the regulator failed to prevent due to their awkwardness and imperfection of the tools used. Then the scandal has affected other European banks, such as Barclays, UBS, Societe Generale.

Funding the FCA is performed by contributions from companies in the financial industry: investment companies, insurance and pension funds, brokerage firms and dealing centers, banks, etc. The specific feature is the autonomous functioning of regulator from state governments. However, not to confuse with the FCA, for example, КРОУФР (CRRFMP) CRFIN in Russia: in the second case it is the self-regulatory organization created by the participants of the currency market. The FCA is an independent regulator and enjoys the absolute trust of the Bank of England, in fact, being his “right hand” .

FCA functions:

  • settlement of disputes and disagreements between the entities of the financial field (as between legal entities and physical);
  • monitoring compliance with established standards and requirements of the provided investment products and financial services. The imposition of the ban on provision of financial services to consumers if they do not meet the standards. Prohibition of advertising of services, if the rules are violated;
  • strict control over the provision of full financial statements, analysis of transparency of activities of financial markets participants;
  • development of the set of measures aimed at reducing the number of financial crimes;
  • focuses on training corporate leaders (although this function is secondary).

It is not too easy to obtain FCA license: the company must have a certain level of capital to support the level of assets at the established control level, to allow annual inspection of the accounts, assets and its activities by independent auditors.

Interesting fact: FCA interprets brokerage activities as bookmaking, that is, with signs of high risks and high probability of shady schemes. That is why the demands to brokers are too strict. But, those Forex brokers, had been under the control of the British financial regulator for several years,  can truly be called.

Principles of regulation of trading work from FCA:

  • companies administered by the regulator, submit the reports, where they provide information about every transactions that was conducted. Report includes the information about the counterparties (both financial and non-financial), asset (currency, raw materials, loans), terms of the deal (interest rate, loan terms). The task of the regulator is to analyze all the information and see high-risk transactions or transactions with the signs of fraud. Timely detection of systemic risks minimizes bankruptcy (dummy as well) and is accompanied by the transparency of the financial market;
  • “role of management”. According to this principle, FCA is trying to optimize its intervention in company activities, believing that the management ensures the legitimacy of the business and minimize risks. That is why management staff of the company falls under the primary control;
  • FCA welcomes innovation in launching new financial services, but refers them to the sphere of higher risk. During the regulation process, FCA tries not to interfere with the work of such companies, but closely monitors compliance with legislation;
  • to ensure equal competition of British and international companies FCA considers the international aspects of financial activities and works continuously with departments in other countries, according the General principles of mutual work;
  • the regulator is loyal to any undertakings, because he tries not to use excessive regulatory barriers for a young business, knowing that competition and innovation are the engine of the economy.

Main activities in financial markets, which FCA pays attention to, could be divided into such groups:

  • all types of transactions in the investment field;
  • organization of collective investments, pension savings;
  • insurance market: the creation of insurance funds, investment, contracts of insurance;
  • scope of deposits: deposit management, consulting services;
  • programs for real estate transactions (the mortgage market, the mortgage relationship);
  • banking sector;
  • brokerage activities (including Forex).

Despite such a wide scope of activities, FCA successfully copes with all directions. And it’s not just because of the prestige of the financial controller license, but also because of its impartiality and effective response to potential risks. FCA license is considered prestigious, because:

  • disagreements between the clients and companies licensed by the FCA are resolved as quickly as possible. In contrast to the bureaucratic system of Arbitration courts of Russian regulators, FCA quickly deals with the situation, and decisions are legitimate (accepted categorically, although it can be challenged by the relevant authorities);
  • the controller ensures the reimbursement of amounts up to 50 thousand pounds in case of bankruptcy or fraudulent companies. In addition, accounts of such structures are blocked instantly, and the whole bankruptcy process is under the control of the controller;
  • FCA operates on the principle of computer antivirus: continuous updating and improvement of the technological support that enables a successful proactive monitoring of financial sector companies;
  • being aware of all legislative changes and possible implications for fundamental factors, the FCA is working ahead of the curve, holding the control over companies with potential increases in risk due to changes.

Such a “total” control already helped to identify more than 3000 companies for three years, which could harm their clients. And let someone thinks these measures are rigorous and conservative, the British system of Finance is considered to be the most honest and transparent – FCA will react to even the most minimal violations. And the loss of license would mean the dissemination of information about the unreliability of the company.

The General procedure for obtaining FCA license:

  • the applicant submits details filled in the application form;
  • reveals the organizational structure of the company, provides financial statements over the past year;
  • business plan is submitted to FCA for estimating the potential of development of the company;
  • in case of a positive decision, entrance fee of 2.5 – 25 thousand pounds is paid.

Obtaining a license may last up to 8-12 months. However, in Russian market there are intermediaries providing assistance for rapid registration and filing of documents. The duration of the period of negotiation of documents is that the regulator carefully examines such factors as:

  • proof of experience and qualifications of the Executive Director of the company (the important fact of his constant presence in the UK);
  • verification of documents on compliance with the regulations in the field of combating money laundering;
  • the existence of actual offices in the UK, etc.

Official FSA website:

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