Approach to, and key drivers of wholesale and retail conduct risk
Produced in partnership with Anne Mainwaring of Ashursts
Approach to, and key drivers of wholesale and retail conduct risk

The following Financial Services guidance note Produced in partnership with Anne Mainwaring of Ashursts provides comprehensive and up to date legal information covering:

  • Approach to, and key drivers of wholesale and retail conduct risk
  • Background
  • What is conduct risk?
  • How should firms approach conduct risk?
  • Drivers of conduct risk
  • Connections between cyber and conduct risk

Background

On 1 April 2013, the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all firms authorised under the Financial Services and Markets Act 2000 (FSMA 2000). The FCA's regulatory approach is underpinned by the concept of conduct risk, which is central to its overarching strategic objective of ensuring that the relevant markets function well. To support this overarching strategic objective the FCA has the following three operational objectives:

  1. to secure an appropriate degree of protection for consumers

  2. to protect and enhance the integrity of the UK financial system; and

  3. to promote effective competition in the interests of consumers

The link between these objectives and the FCA's conduct risk approach was outlined in a speech on Financial services regulation and enforcement: recent developments and emerging issues by Tracey McDermott (then FCA director of enforcement and financial crime) in October 2013 (six months into the new regulatory regime), in which the FCA made it clear that the central focus of its conduct risk agenda is to create a culture of good conduct at every level of the industry; to make markets work well and to produce a fair deal for consumers.

Understanding conduct risk is, therefore, central to understanding the FCA's operational objectives and its approach to supervision.

For more information about the FCA’s regulatory approach, see Practice Note: FCA