With the Financial Services Authority no more and a new regulator installed in its place, we explain the basics of the industry organisations you need to know about.
Financial Conduct Authority
The FCA is one of two bodies that have replaced the FSA and is concerned with protecting the consumer.
The organisation defines the areas of its work as regulating, protecting, championing and enforcing.
Regulating refers to the FCA’s role in supervising the work of some 26,000 financial firms through regular assessment and monitoring, and responding to any behaviour that may ‘threaten the integrity of the industry’.
Protecting concerns the FCA’s involvement with firms from a consumer perspective, ensuring that companies stick to rules and regulations and that customers do not get treated unfairly or fall victim to scams. Financial firms are encouraged to take measures to protect themselves against fraud and money laundering.
The FCA considers itself a champion of consumers and thinks well-trained staff, unbiased, appropriate advice and a healthy level of competition within the industry will all provide a better outcome for customers.
Finally the organisation looks to reduce financial crime and to take action when firms act ‘unethically or disregard consumer interests’. The FCA has wide-ranging powers in how it can use enforcement, from withdrawing a firm’s authorisation and administering fines, to applying for court injunctions or bringing criminal prosecutions against firms or individuals.
The FCA may be a body that is looking to protect the consumer but it is a trade organisation and not typically a point of contact for customers.
Prudential Regulation Authority
The PRA is the second of the two organisations that replaced the FSA and is concerned with the regulators of deposit-takers, insurers and investment firms. It is part of the Bank of England and regulates a total of around 1,700 firms.
It defines its role as promoting the safety and soundness of the firms it regulates and, in the case of insurers, securing protection for policyholders. The PRA says its focus is on the ‘harm firms can cause to the stability of the UK financial system’.
These objectives, says the PRA, are achieved through regulation and the implementation of standards and policies, and also through supervision, assessing the risk that firms pose and taking action to reduce this.
In terms of enforcing its objectives the PRA has a range of formal powers such as being able to impose financial penalties and publish public censures, as well as changing a firm’s permissions to perform regulated activities.
Financial Ombudsman Service
The Financial Ombudsman Service aims to resolve complains by consumers against financial firms. It was set up by parliament as an individual body and now answers around one million queries every year and deals with some 250,000 disputes.
Areas that the FOS deals with are varied but include banking, insurance and mortgages, pensions, credit cards and loans, financial advice and savings investments.
The amount of time taken to deal with complaints depends upon its complexity and can be anything from a few months to more than a year.
If you are thinking of complaining to the FOS you must make sure that you have first complained to the business that you are unhappy with and given them a chance to resolve the situation. Only when they fail to do so can you refer your case to the ombudsman.
The powers of the FOS include being able to order compensation to be paid to the complainant or imposing fines or penalties on the company at fault.
Financial Services Compensation Scheme
The FSCS is not so much an organisation as a scheme that protects the savings and deposits of consumers. The scheme is a ‘compensation fund of last resort for customers of authorised financial services firms’, meaning it only pays out when the firm is unable to.
The FSCS covers deposits, insurance policies and broking, investment business and home finance. It does not cover investments in funds or stocks and shares, as obviously these are susceptible to losses anyway and provide no guarantees on investors’ money.
Individuals are covered up to £85,000 per person, per firm for their deposits and will receive 100 per cent of their deposit up to that figure (note that from 1 January this limit falls to £75,000). That means if you have two accounts of £85,000 each (£75,000 from 1 January 2016) at two separate banking companies and they both went into default, you would receive the full £170,000 back in compensation. If you had £100,000 in one bank account, you would only receive an amount equal to the limit back through compensation - £75,000 from 1 January 2016.
Both investments and home finances, such as mortgage advice, are covered up to £50,000 per person per firm. Compulsory insurance receives a 100 per cent guarantee with no upper limit.
Financial Conduct Authority: 0800 111 6768 (8am-6pm Monday to Friday)
Financial Ombudsman Service: 0800 023 4567 or 0300 123 9123 (8am-8pm Monday to Friday, 9am-1pm Saturdays)
FSCS: 0800 678 1100 or 020 7741 4100 (8.30am-5.30pm Monday to Friday)
We make every effort to ensure our beginner's guides are kept up-to-date. However, in the constantly shifting environment of investment and financial services, occasions may arise where elements of a guide become out-of-date. Please double-check the facts before taking any important financial decisions.