Differences Between the FSA and FCA
On the 1st April 2013 the Financial Conduct Authority was launched to replace the previous regulator, the Financial Services Authority, which had become untrustworthy after the financial collapse, after it was revealed that major flaws in the organisation had led to lack of regulation including the mis-selling of Protection Payment Insurance.
The key difference between the organisations is in the name, - the FCA is a conduct authority, rather than a services authority. This means its primary function is to make sure that businesses are acting in the correct manner, rather than maintaining all sorts of financial services.
What this means overall is that the FCA is more customer focused than the FSA was – it just manages the interests of the customers where the FSA had to maintain the safety of risk in institutions as well as trying to look out for customer dissatisfaction. How this showed itself, during the financial crisis, was that the FSA could not effectively do both jobs because it was trying to manage the concerns of institutions and this meant that customers’ best interests were not being fully looked after.
Some of the FCA’s new powers include being able to ban products if they feel there is sufficient reason to do so, rather than having to have consultations about every different product, which used to eat up FSA time and resources. This will help to avoid the issues of businesses not following the set rules or adjusting to changes in time to positively benefit customers, which can only be a good thing.
Since its inception, the FCA has already taken a more proactive approach to this. It has continued with the controversial Section 166 reviews of the FSA. These give the FCA the power to request that businesses pay for a review into their own practices, if they receive a certain number of complaints.
It’s too early to see if the changes have been to perfect effect, but the change from FSA to FCA seems to have been positive in terms of the general reaction. Their supervisory approach and more focused aims seem to be working to help and assist businesses, and only time will tell whether this can help to avoid the problems of the past from occurring once again.