Understanding the FCA and the importance of business compliance

Since April 1st, 2014, the Financial Conduct Authority (FCA) has been responsible for the regulation of consumer credit in the UK.

It has been more than four years since it took over this responsibility from The Office of Fair Trading, during which time it has issued a comprehensive guide and Consumer Credit Sourcebook outlining an array of conduct standards that must be adhered to.

Under its new guise, the FCA provides a full regulatory framework for companies that offer loans, insurance and investment products to their clients. These companies must comply fully with these guidelines, or run the risk of facing huge financial sanctions in the future.

But how should your business go about the process of ensuring compliance? Here’s a brief guide to achieving this objective.

  1. Do you need FCA authorisation?

Let’s start with the basics, as your first port of call should be to determine whether or not you need FCA authorisation in the first place.

While companies offering financial products or advice usually require some form of authorisation, there are exceptions to this rule. Take legal firms that specialise in consumer credit law and work with their own verified insurers, for example, as these entities do not need to be authorised on their own account.

The same principle applies to accountants, who may also have their own insurers who are already authorised by the FCA.

Councils, churches and non-profit organisations within the local authority are also exempt from FCA authorisation, so they’re not required to secure this when starting out.

  1. Do you have the right process in place?

Internal processes play a huge role in guaranteeing compliance, with the FCA placing a considerable emphasis on management and reporting.

Not only must you have clear sales and management processes in place, however, but it’s also crucial that you understand these in detail and follow them to the absolute letter.

The sales process is particularly important, as the FCA will want to be sure that you’re treating customers fairly while providing them with completely transparent information.

In terms of sharing management information, you’ll need to develop a viable reporting process that is subject to constant improvements. The accuracy of your data and the way in which you present this is paramount, and employees must demonstrate that they’re comfortable with this system.

  1. How do you manage ongoing competence?

When demonstrating competence to the regulator, you need to go beyond simply employing staff members with the appropriate qualifications.

In fact, you must also present a high standard of ethical behaviour and communication skills, along with superior knowledge of the products available to customers.

This can be achieved in several ways, with the FCA particularly keen to seen examples of your firm’s ethical behaviour through interactions with clients. Similarly, you can present examples of the ongoing training provided to employees, demonstrating the fact that they’ll continue to operate within the latest guidelines and regulations.

Remember, the FCA is particularly focused on the ethical and fair treatment of customers, so prioritising will stand you in good stead from a compliance perspective.