2022 – what kind of year will it be?

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While every day should be an opportunity to think about how we are progressing towards the things that are important to us, it seems particularly pertinent as we start a new year to take time to reflect on what we have achieved so far and what we hope to accomplish in the future.

The FCA is no different. Towards the end of 2021 it announced some changes in its decision-making process. The press release stated: “As part of its transformation to a more innovative and assertive regulator, more decisions will be taken by the FCA’s senior managers rather than by the Regulatory Decisions Committee. The new process will ensure decisions to prevent or stop consumer harm are taken more quickly.”

It has also announced plans for ‘nudges’ on pensions, the outcome of its review on ‘mortgage prisoners’ and plans to protect funeral plan customers among a long list that can be seen in the news section of their website. A wide-ranging brief, as it tries to achieve its statutory objective of providing protection for consumers. At the end of November, the FCA set out their fee proposals, so we have an idea of how we’re going to be funding them. Of note is the £120 million they’re going to ‘invest’ over the next three years to strengthen their ability to identify firms and individuals of concern.

Of note is the £120 million they’re going to ‘invest’ over the next three years to strengthen their ability to identify firms and individuals of concern.

It is widely acknowledged that the FCA has some distance to travel before it can be described as innovative or assertive – a person imprisoned for conspiracy to defraud in April 2019 wasn’t prohibited from regulated activity until September this year. One of the changes mentioned earlier is that the FCA’s senior managers can now take decisions on a firm’s authorisation or an individual’s approval. It is to be hoped that the additional budget will enable them to respond more quickly.

The FCA have often said that they rely on intelligence from regulated firms in this process of identifying potential harms. Whistleblowing has a part to play in each of our businesses as we all benefit from any improvement that can be made in the trust that the public has in the financial services sector. In several of my previous articles I have referred to culture as being a key indicator and to my mind creating an environment in our firms where people feel able to speak up is an essential part of that culture.

As T&C professionals, part of our role is to help businesses and individuals to identify areas for improvement. 2022 will be no different in that respect. The SM&CR will continue to provide a framework within which to focus our attention on key issues that need to be addressed so that our businesses can thrive or at least survive the uncertainty that surrounds us. A focus on effective decision making, such as the FCA’s example of preventing or stopping consumer harm could be a useful step.

I recently came across this quote: “Majority decisions tend to be made without engaging the systematic thought and critical thinking skills of the individuals in the group. Given the force of the group’s normative power to shape the opinions of the followers who conform without thinking things through, they are often taken at face value. The persistent minority forces the others to process the relevant information more mindfully. Research shows that the decisions of a group as a whole are more thoughtful and creative when there is minority dissent than when it is absent.”
― Philip G. Zimbardo, The Lucifer Effect: Understanding How Good People Turn Evil.

The FCA will carry out a 6-month post-implementation review of the change to their decision-making process to assess the effectiveness of the reforms. Given the time it currently takes for action or decisions at the FCA I doubt that this will be long enough to gauge their impact. However, as we enter a new year it is positive that they are looking to improve, and it will be interesting to see whether there is any evidence of the impact of minority dissent. It may be beneficial for us to plan a similar mid-year review to track how our plans for 2022 are being realised and to identify where training can assist in making the desired progress.

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Compliance Cubed Financial services is constantly changing - my passion is helping firms function effectively and in compliance with FCA regulation

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