Financial Conduct Authority
Financial services are subject to detailed and sophisticated regulation. Most businesses in the banking, insurance, brokerage and investment sphere must be authorised by the FCA in the United Kingdom. The FCA is the United Kingdom-wide body covering England and Wales, Scotland and Northern Ireland. The various types of business are each subject to detailed rules in relation to the manner in which they can conduct their business.
The following are some of the businesses which require FCA authorisation
- insurance companies
- Insurance broking
- financial and insurance advice
- managing investments
- safeguarding investment
- establishing managing running in a collective investment scheme
- managing pensions
- advising on pensions
- advising on and arranging residential mortgages
- advising on and arranging insurance
- advising on and arranging investments
A host of other activities and service providers in the financial services area are subject to detailed regulation.
European Union financial services legislation has been harmonised so that in many cases, it will be possible to provide services from Ireland, based on an equivalent authorisation from the Irish Financial Regulator. Where business is undertaken into the United Kingdom or a branch is established, it will be necessary to follow certain procedures in order to invoke the right.
It is necessary to make an application for authorisation. The FCA will assess the applicant against minimum standards. Different conditions apply to each type of business. In considering an application for authorisation, the Financial Conduct Authority will look at the underlying participants in the business and assess the overall capacity of the business.
Prudential requirements deal with the financial ability of the business to carry on business and manage the risk it takes. It is most relevant to banks, insurance companies, and intermediaries and advisors who handle client money. Prudential requirements specify required capital adequacy, financial reserves, and risk management obligations.
In an EU context, prudential regulation is undertaken in the state where the provider is established, notwithstanding that it may be conducting business in other EU states. In contrast, the cross service provider will generally have to follow the conduct and consumer protection rules of the state in which business is undertaken with customers.
Codes of Conduct
The FCA’s Handbook prescribes codes of conducts which financial service rule must adhere to. There are very detailed codes of conduct for business in various sectors of the financial services industry. The FCA Handbook is available online. See our separate guide in relation to financial services for a broad outline of the regulations this area.
FCA regulation is detailed and extends from verifying the suitability of most individuals at critical levels in the organisation to detailed rules in the relation to the way in which business is conducted.
A wide range of finance providers is subject to regulation under the Consumer Credit Act. A creditor who wishes to carry out a consumer credit or consumer hire business must obtain a licence from the Office of Fair Trading. An agreement made by an unlicensed trader is unenforceable without a validating court order.
The Office of Fair Trading will license a business only if it is satisfied that an office holder is a fit person. Information must be provided in relation to the those running the business. It is necessary to show that they possess the skills and knowledge and experience required to carry out the activities.
A consumer credit agreement is a personal agreement for credit, hire purchase or leasing. The Consumer Credit Act lays down detailed rights and obligations in relation to a credit agreements. There are specific rules on the following;
- credit advertising;
- off-premises canvassing
- the form of credit agreements
- Pre-contract information
- Cancellation rights
- Early settlement
- Debt collection
The OFT can revoke or suspend the licence for failures of compliance. It can impose restrictions and can take undertake prosecutions.
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