The FCA annual report and reflections on enforcement

In its annual report for the financial year 2023/24, the Financial Conduct Authority (FCA) summarises its wide ranging activities in pursuit of its statutory objectives. It focuses on past activity, but there are also ongoing activities and references to future plans that are of interest.

The main FCA achievements for 2023/24

Highlights in regard to the FCA’s work include:

• Introducing the Consumer Duty for most financial products in July 2023 and subsequent monitoring of its implementation;
• Incorporating the FCA’s new secondary competitiveness and growth objective into its priorities and ongoing work;
• Reforming the UK’s equity capital markets, including launching the new listing regime; and
• Improving the authorisation process, so that 98% of applications are handled within the statutory time limit.

A changing approach to enforcement

The FCA’s enforcement data published with the annual report, although not completely up to date, includes some interesting commentary and statistics.

The introduction repeats the intention to use enforcement to create ‘impactful deterrence’:

‘It is important to hold firms and individuals to account when they cause significant harm to consumers or markets. It is also important to prevent wider misconduct. When taking enforcement action, we focus on achieving impactful deterrence aligned to our strategic priorities. We particularly focus on putting consumers’ needs first, delivering assertive action on market abuse and reducing and preventing financial crime.’

The FCA opened 25 and closed 60 investigations (many investigations involve multiple subjects) compared with 34 opened and 38 closed in the previous financial year. This is consistent with its intention to reduce the number of open investigations and be more selective in opening new investigations – and this trend may continue.

The focus remains on financial crime. Of the 25 new investigations opened, 13 were in that area. The FCA charged 21 individuals with criminal offences during the year, which is the highest number of charges brought in any year to date. And in addition to the £6.4m fine against ADM Investor Services for serious financial crime control failings, the FCA obtained nine successful convictions against fraudsters, nine freezing orders and restrained £21.1m of assets.

The data shows a fall in enforcement final notices from 29 to 21, a fall in the number of financial penalties from 24 to 12 and a decrease in the total value of penalties from £199m to £42.5m. This implies a drop off in enforcement activity. Despite the drop in the number of notices and penalties against individuals, the value of penalties against individuals almost tripled from £1.5m to £4.3m, and the number of partial or full prohibitions equalled that in the previous year.