As we have commented previously, the FCA’s aim is to be a “data-led” regulator, and as such, they have been collecting a lot more data from firms. Now, we are beginning to see some output from the FCA on how the data is being used.
Principal firms, such as ITC, are required to report information to the FCA per individual Appointed Representative (AR), such as revenue from regulated activities, revenue from non-regulated financial services activities and revenue from non-financial activities and complaints data. Previously, we would have reported these as aggregated figures across ITC’s AR network.
The FCA recently published some industry data on the above.
For the consumer credit sector, the FCA said that ARs achieved £2.3 bn in regulated income compared with £8.4 bn for non-regulated financial services income. For the general insurance sector, the FCA said that ARs generated £3.6 bn in regulated income compared with £7.4 bn for non-regulated financial services income.
Whilst there may be teething errors in the data, definitions and classifications, these are big numbers.
You may ask why is the FCA interested in non-regulated income?
They are concerned that customers may be confused and in extreme circumstances, even being misled, into thinking that they have the regulatory protections (such as FCA rules, ability to go to FOS and the FSCS) because they see that the firm has an FCA “badge”. Customers then don’t distinguish what this FCA “badge” is actually for. The FCA calls this the “regulatory halo effect”.
Therefore, where you offer your customers non-regulated financial services products, you should make it very clear to them that these products do not have regulatory protections.
So, if we ask you questions about your activities for which ITC is not responsible for, we are not just being nosey, we are fulfilling our regulatory obligations as a compliant principal firm.