The Financial Conduct Authority began its work in April 2013 with a post-crisis mandate to take pre-emptive action against firms. When problems occur, the FCA increasingly takes disciplinary action against individual senior managers as well as against the firm. Most of these cases are tragedies – if the individuals concerned understood the likely outcome they would have behaved differently. This book sets out the psychology of the FCA and covers the ‘hot spots’ that senior management and their compliance officers need to get right.
The key to the FCA approach is ‘conduct risk’. This deliberately undefined term includes anything that might cause a problem to the FCA in the achievement of its regulatory mission. The FCA sees the world through the lens of risk; everything, including firms themselves, are assessed on how likely they are to cause the FCA to fail in its role of securing appropriate protection for consumers, enhancing the integrity of the UK financial system and promoting effective competition in the interests of consumers.
Conduct risk is about behaviour and the FCA is keen to understand the drivers of human behaviour and how they can use them to bring about the outcomes they wish to see. Firms’ culture is also under the microscope, all the more so since the recent trading incidents where groups of traders colluded across firms to manipulate LIBOR and the foreign exchange markets. A chapter on Culture examines how firms can start work to prepare for the FCA’s increasing engagement on culture. The starting point of course is to understand what culture is.