To ask the Chancellor of the Exchequer, whether his Department is taking steps to help ensure that the Financial Conduct Authority has a (a) robust complaints process and (b) appropriate compensation scheme for cases of regulatory failure.
23 September 2022
The Financial Conduct Authority (FCA) is an operationally independent non-governmental body responsible for regulating and supervising the financial services industry. The FCA has statutory immunity from claims for damages under the Financial Services and Markets Act 2000. The Government believes this is important in allowing the FCA to take a robust approach to regulation and to focus its resources on pursuing its objectives without the distraction of claims that may frustrate these efforts, or the risk that firms can delay supervisory interventions through vexatious litigation. The FCA’s ability to act robustly is important to millions of consumers across the country.
Given this statutory immunity, it is vital that those directly affected by the FCA’s actions have an avenue to have matters put right where the FCA has failed in carrying out its role. The Financial Services Act 2012 requires that the FCA establishes a complaints scheme and appoints, with the Treasury’s approval, an independent person (the Complaints Commissioner) who can investigate complaints.
The complaints scheme is an informal mechanism for investigating complaints and ensuring that there is transparency around the way the FCA operates whilst not undermining the principle of the FCA’s statutory immunity. The activities of the Complaints Commissioner are governed by the framework set out in legislation and in the regulators’ Complaints Scheme. The Complaints Commissioner has powers to recommend the payment of compensation by the FCA and to require the FCA to publish its response to any recommendation that the Complaints Commissioner makes. The Complaints Commissioner does not have powers to compel the FCA to pay compensation. It is not a court, nor is there a right of appeal for the FCA if the investigator makes an adverse finding against it. The FCA remains solely accountable for the decisions it makes over how to use its funds.
The FCA is a self-financing organisation funded via a levy on financial services firms, which is set by the FCA to cover its funding requirement each year following consultation. The Government has no role in the FCA’s budgeting or the setting of the levy. The FCA, like other public authorities, has the ability to make compensation payments on a voluntary (‘ex gratia’) basis. The FCA publishes their approach to these payments as part of the information on their complaints scheme.