To build on this, earlier this year, we conducted a review of how effectively we source and receive, assess and prioritise, task and take action in response to intelligence across the organisation.
As a result, we are establishing a new, more empowered function to manage intelligence coming into the FCA. In the first phase, the team will integrate the way we prioritise and manage key and potential harms across the organisation, bringing together a number of local teams doing this task.
We know we have more to do.
In the autumn, we will see the results of a number of reviews into potential failures of the regulatory system. I have no doubt there will be painful lessons and the FCA will need to learn from them.
The context we operate in is we handle 204,000 calls a year from consumers and firms, and through our online system we receive half a million data submissions from firms. We receive and monitor 38 million markets transactions a day.
I have 4,000 colleagues willing to make judgements. They are good people. Some routinely put themselves in the way of harm for the public they serve. We deal with individuals who you would not like to meet – some are dishonest, some corrupt, some dangerous. We seek to help millions of ordinary people – and we have during this pandemic. But the nature of the work we do means the odds are there will be times where we cannot stop failure or where we call a finely balanced judgement wrongly or miss something.
And yet, understandably, there is an expectation from the public that we will not do so. This expectation gap manifests itself in a number of ways:
The first, and most obvious, what is the degree of protection that people have.
In a highly regulated market, which finance is, should consumers enjoy no risk? Are all failures and losses within the sector, at least in part, regulatory in nature?
The second is what regulation covers. The perimeter, in regulatory speak. What is in, and what is not. And how does this accord with the public’s expectation? This is an area that is arguably too complex, but also lacks simple answers.
Third, what regulatory tools we should use and how fast results can be seen. Every person who has been wronged wants swift justice, everyone who believes themselves innocent wants a fair trial.
Let’s say that the FCA suspects an FCA-authorised firm has been involved in serious misconduct. Whether we can bring a case is not a question of what we think has happened, but what we can prove has happened. As a public authority, we need to carry out an investigation that looks at all reasonable lines of inquiry, including those that may be consistent with innocence.
In the context of white collar or regulatory misconduct, this means a sea of documents (many investigations involve hundreds of thousands of documents) and competing versions of the truth.
Once we think we can prove a case, litigation can take longer than the investigation.
A regulatory case proceeds through our internal processes, established by law, there to ensure we are using our powers judiciously, before it may come before the Upper Tribunal. A criminal case can also take just as long, if not longer. A recent insider dealing trial led to a hung jury which meant the case had to be retried before a new jury, and only then were convictions ultimately secured.
We’ve proven in the last few weeks that where we can use the Courts to resolve uncertainty swiftly, we will as we have done the Business Interruption insurance case. But when it comes to criminal cases, they are very different matters – there are no short cuts to good cases.
The question then for us – and for wider civil society – is what sort of regulation do we want? What tools do we have available and when will we use them? And how clear is the public we serve about what the system can deliver, the protections they enjoy and the risks they run?
None of these challenges, however, should lessen our commitment to change for the better when we get things wrong.
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