What is the FCA?
The Financial Conduct Authority, FCA, is the UK’s financial services regulatory body. It is one of the most respected financial sector regulatory bodies worldwide and one of the strictest and most demanding.
The FCA was founded on April 1, 2013. This was because of a new regulatory framework in the United Kingdom. It assumed the powers of the previous agency, the FSA (Financial Services Authority). The organization’s main objectives are consumer and investor protection, protection and improvement of financial stability, maintenance of confidence in the financial system, surveillance, and the reduction of financial crimes.
Under FCA rules, companies must demonstrate that they always offer fair treatment to consumers. They must also show that senior management assumes responsibility for ensuring the company and its staff delivers consistent results. The FCA expects companies to:
- Demonstrate that senior management has instilled in the company culture of understanding what it means to treat customers fairly; Their staff behave following that culture at all times, and to promptly identify (a relatively low number of) errors, correct them and learn from them.
- Accurately and adequately assess their performance in all aspects of the fair treatment of customers that are relevant to their business; Act on the results of such assessments.
- Demonstrate through the measures taken that they offer appropriate treatment to their clients.
- Do not provoke dangerous failures. They are detected through management information or of which they are directly informed.
Why is the FCA Regulation Relevant?
In the world of investment in the stock market, the FCA is one of the regulators that guarantees greater transparency and professionalism by the online brokers subject to its surveillance and control.
Today there are many brokers on the market. And it is increasingly difficult to differentiate their offers to find a reliable and safe company. Some brokers operate without any regulation. Although there may be exceptions, it is usually a sign of poor transparency, poor security of depositors’ funds, and even practices that could be a scam. Some other brokers choose to submit to less demanding regulatory bodies that are easier to overcome. The British Financial Conduct Authority is on the other side of the coin.
The brokers regulated by FCA undergo numerous requirements and controls on factors that can directly affect the investor’s safety.
The Financial Condition of the Broker
The FCA imposes high minimum capital requirements to guarantee the sound financial health of the broker. The regulator performs monthly checks to verify that the minimum capital required continues to exist. If it does not, the license would be canceled.
The FCA controls transparent advertising and marketing of products by the broker. The broker must demonstrate that their clients are treated equally and fairly. Moreover, they must show that they act diligently to resolve any complaints.
The FCA has the power to visit the broker’s headquarters without prior notice and check its transaction records and client accounts, verifying compliance with all regulations. Besides, brokers must also undergo an external audit of an independent company that will report their results directly to the FCA.
This authority regulates the financial markets, but it is good to distinguish what specific products fall into this category. These are deposits, electronic money, rights in insurance contracts, actions, indebtedness, Sukuk, public securities and certificates that accredit them, instruments proving investments, collective investment schemes, rights in personal pension plans, futures, CFDs, rights derived from investment interests, rights related to personal pension plans, rights on contracts for funerals, mortgages, home purchase plans, etc.
Collaboration and communication with other international financial authorities are some of the common activities of the regulator. Thus, it is a member of the European Securities and Markets Authority (ESMA). The regulator participates in its working groups to develop the regulations that will later have to comply with the European Union. FCA also collaborates with the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). Outside Europe, the FCA cooperates with the International Organization of Securities Commissions, the International Association of Insurance Supervisors, and the International Financial Consumer Protection Organization (FinCoNet). It also collaborates in some working groups carried out by the OECD.
In short, a broker registered with the FCA has an obligation to comply with the strictest transparency and security requirements established by the United Kingdom’s own authority. Also, follow the conditions required by the European Union. Undoubtedly, it is a key institution for the security and prevention, and the identification of financial scams at the international level. The fact that a broker is registered with this authority is a good sign when it comes to company reliability. However, you must be careful and check that the company that claims to be registered with it is in fact true.