FCA Supervision of Firms

The FCA state they want to supervise what matters. In their eyes good conduct is essential to how firms are run.

This means looking at far more than systems and controls and compliance with the rulebooks. In the new model, they want to know how your business is really run, rather than just how you control your risks, to find where problems flow from and address them at the source. They are interested in your financial health and how you aim to make money, both now and in the future, and how your culture and strategies ensure better outcomes for consumers. They will examine the risks your business poses to our objectives in these areas, and how you respond to these risks.


And for the first time the FCA is publishing information on their approach to supervision in one place, tailored for each category of firm.

For many C4 firms the FCA approach has not changed. You’ll still get a four-yearly assessment by phone or in person but they are now looking at the culture of firms to ensure you consider consumers and market integrity in everything you do.

To access the guide, if you have not already received it, please use the following link:



Having reviewed the guide ourselves two important areas come out that we have reproduced here for reference:

The Ten Supervision Principles of the FCA

1.  Ensuring fair outcomes for consumers and markets. This is the dual consideration that runs through all our work; we will assess issues according to their impact on both consumers and market integrity.

2.     Being forward-looking and pre-emptive, identifying potential risks and taking action before they have a serious impact.

3.   Being focused on the big issues and causes of problems. We will concentrate our resources on issues that have a significant impact on our objectives.

4.     Taking a judgement-based approach, with the emphasis on achieving the right outcomes.

5.     Ensuring firms act in the right spirit, which means they consider the impact of their actions on consumers and markets rather than just complying with the letter of the law.

6.     Examining business models and culture, and the impact they have on consumer and market outcomes. We are interested in how a firm makes its money, as this can drive many potential risks.

7.   An emphasis on individual accountability, ensuring senior management understand that they are personally responsible for their actions – and that we will hold them to account when things go wrong.

8.     Being robust when things go wrong, making sure that problems are fixed, consumers are protected and compensated, and poor behaviour is rectified along with its root causes.

 9.     Communicating openly with industry, firms and consumers to gain a deeper understanding of the issues they face.

10.   Having a joined-up approach, making sure firms get consistent messages from the FCA. We will also engage with the Prudential Regulation Authority to ensure effective independent supervision of dual-regulated firms, and work with other regulatory and advisory bodies including the Financial Ombudsman Service, Financial Services Compensation Scheme, Money Advice Service and international regulators.

Secondly there is an explanation of the Three-pillar Supervision Model

The FCA supervision work is based around three pillars of activity, which draw on our ongoing analysis of each industry sector and the risks within them. Their issues and products work and their response to specific events feed in to their proactive work with you, and every piece of work adds to and enhances the FCA view of a sector and the firms within it. This cumulative approach allows the FCA to design their supervision strategies to the best effect.

Pillar 1 – Proactive firm supervision

We will engage with you to assess whether you have the interests of your customers and the integrity of the market at the heart of your business. We take a forward-looking approach and use our judgement to address issues that could lead to damage to consumers or markets, with clear personal accountability for your senior management.

Pillar 2 – Event-driven, reactive supervision

When we become aware of significant risks to consumers or markets, or when damage has already been done, we will respond swiftly and robustly. We will ensure you mitigate risks, prevent further damage and address the root causes of problems. If necessary, we will use our formal powers to hold the firm and individuals to account and gain redress for those who have been treated unfairly.

Pillar 3 – Issues and products supervision

We look at each sector as a whole to analyse current events and investigate potential drivers of poor outcomes for consumers and markets. We do this on an ongoing basis, so we can address risks common to more than one firm or sector before they can cause widespread damage. These could be issues like a trend for a particular business practice, or a problem with a certain product.

 (Source: FCA)

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