New data shows how the regulator has performed against 54 operational service metrics – which include targets for processing firms' applications for approved persons, appointed representatives, new authorisations and changes of control for M&A deals – during 2022/2023.
The data covers all financial services, not just insurance.
It shows an improvement in deciding on approved-person applications from last year, though initial response rates to these applications are still far short of the target.
There has been a slight deterioration in processing times for change-of-control cases and new authorisations, though processing times on appointed representative cases have improved.
In other findings, the figures indicate a more aggressive enforcement approach, showing that the FCA issued 24 financial penalties on firms and individuals for breaching rules – more than double the number in previous years.
The data has also been published at a time of accelerated pressure on the FCA's CEO Nikhil Rathi, not least due to recent staff unrest, but also because it follows criticism from City Minister Andrew Griffith over the new consumer duty, and measures under the just-passed Financial Services and Markets Bill, (more on that below), which will hold Rathi and other FCA executives more accountable for enabling the sector's competitiveness.
Crucially, the data shows how the FCA is still falling short on some metrics it has set for itself.
Appointments – response times
One of the FCA's voluntary targets is to respond within five days for controlled functions applications, and 10 days for senior manager appointments, on at least 85% of the cases received.
The data shows the regulator met these "approved person" response targets for only 34% of those applications during 2022/23, though this was an improvement on a woeful 10% the year prior.
Appointments – determinations
As well as a voluntary target on response times, the FCA also has a statutory target to decide upon approved-person applications within three months, unless they're attached to part 4A permissions to carry on regulated activities.
The regulator met this target for 87.5% of these approved person cases, an improvement on 85.9% for the prior year.
In publishing its data, the FCA said it remains "committed to improving performance around processing times," and has previously set out a strategic transformation programme to drive efficiencies in its internal processes.
Amid widespread market frustration over the FCA's responsiveness, the regulator has invested in 125 new full-time staff for the authorisation division to improve its approval times, and in the past year outsourced casework to DLA Piper and BDO. It has also been piloting new application forms to expedite the process.
A continual issue however for insurance firms and the wider financial sector has been a time lag for the FCA to acknowledge receipt of an application and for a case officer to be appointed. As was noted in a study by TheCityUK last year, this allowed the regulator to "game the system" because the statutory clock wasn't started until receipt of an application was confirmed.
There is still no transparency in the latest data around the times taken for case workers to be appointed, or for the regulator to acknowledge receipt of all types of applications.
In March, the FCA claimed that "enhanced triage processes" are reducing the time it takes to allocate a case to a case officer.
Change-of-control applications
During an active couple of years of M&A among insurance brokers, a common complaint has been delays in FCA approvals, with one firm recently having to wait nine months for the regulator's sign-off.
The watchdog has a statutory requirement to decide on change-of-control requests within 60 working days of acknowledging receipt of a "complete" application.
The FCA has delivered on this target in the large majority of cases. It received 1,510 pre-notifications this year and 1,412 met the operating service standard, resulting in 94.9% of decisions being made within 60 working days.
In its report on the operational metrics, the FCA said it received high volumes of these cases, "many of which were "increasingly complex".
This meant there were delays in the appointment of case officers on 98 change-of-control applications during 2022/23, though the numbers don’t depict how severe the delays were on these cases, or the types of firms affected.
In its report, the regulator said it took action to address these delays, noting: “By the end of March 2023, we were allocating change in control notifications to case officers within 24 hours."
New authorisations
The FCA has sought to emphasise in speeches during the past 18 months an enhanced focus on tightening up the process to authorise new entities.
The regulator has a statutory requirement to process a "complete" application within six months of receipt.
In its most recent data, the FCA said it missed its target on new authorisations on 117 out of 2,130 "complete" cases.
It added that the 117 outlier applications were "legally or technically complex and required significant engagement with the firms”.
Ultimately, the FCA met the authorisations target on 94.5% of cases received, compared with 97.8% the prior year, a reduction that could be related to more robust interrogations of applications from new entrants – which delayed the process.
Previously, via a freedom of information request, Insurance Insider sought to establish how long it takes for the FCA to confirm receipt of applications and how long it takes for the watchdog to process new authorisations once applications are confirmed as complete. In August last year, however, the FCA said it was "unable to separate applications that were deemed complete on first submission to those that are not”.
Appointed representative targets
Another industry complaint about the FCA is over how long it has taken to process appointed representative (AR) status requests. The watchdog has a voluntary target to process 95% of complete notifications within five days of the request.
The data shows it processed AR notifications within the five-day target 89.5% of the time, an increase from 44.7% last year.
Its report said: "Although this [89.5%] is below the target, it is a significant improvement over prior years — due to the deployment of additional resources."
Enabling competitiveness
In a hearing with MPs last week that coincided with the data being published, the FCA's CEO was asked whether the new competitiveness objective would be a "revolutionary or evolutionary" step for the FCA.
Rathi told the Treasury Select Committee: "We will tighten up our thinking around interventions and policy making to make sure we're weighing up the competitiveness impact. We are also thinking hard about the impact (of interventions) on economic growth in the medium term, the ability of the financial services industry to innovate and the overall cost-benefit of our activities."
He added that the competitiveness objective is a milestone which will be "halfway between evolutionary and revolutionary" for the regulator.
The CEO said the FCA recognised that firms need "speed, clarity and certainty" from the regulator, and that it needs to continue being open-minded to innovation.
When asked what the FCA will be doing differently under the competitiveness remit, Rathi said an example was the creation of a financial markets infrastructure sandbox, to enable more advanced digital technology to be piloted before it's rolled out to the mass market.
Rathi emphasised that the FCA's efficiency is an important part of enacting the competitiveness objective along with the "rigour of standards" applied by the regulator.
