FCA under scrutiny: APPG’s Supplementary Report fuels call for reform 

A new Supplementary Report, published on 3 February 2025 report published by the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services has intensified scrutiny of the Financial Conduct Authority's (FCA). This report builds upon the APPG’s initial findings from 26 November 2024, which raised serious concerns about the FCA’s effectiveness, leadership, and approach.  

The original APPG report, based on testimonials from 175 individuals, presented evidence of systemic issues within the regulator. While it acknowledged that most FCA employees are not at fault, the report highlighted weaknesses in recruitment, training, leadership, and governance that have created conflicts of interest and cultural problems within the organisation: 

The APPG wishes to emphasise that whilst the overall impression of the FCA that the evidence generates is troubling, suggesting that the FCA is not fit for purpose, this does not reflect on the calibre, quality and mindset of most of the FCA’s employees; it is clear that the issue is not with them, but with the way they are being recruited, deployed, trained and managed - most of the issues are rooted in the way the organisation is being led, conflicts of interest and the culture that the successive Leadership Teams have created.

(APPG Report, page 264) 

Key findings of the APPG report 

The report identifies several areas for improvement: 

• Consumer protection deficiencies: Concerns over fraud detection and regulatory responses, particularly affecting vulnerable consumers. 

• Whistleblower treatment: Reports of challenges in handling intelligence and protecting whistleblowers. 

• Cultural issues: Concerns over accountability and openness to feedback. 

• Transformation programme limitations: Perceived failures in the FCA’s ongoing Transformation Programme which has not fully addressed fundamental regulatory weaknesses. 

Proposed reforms 

The APPG recommends significant reforms to reshape the FCA’s regulatory approach, including: 

• A more consumer-centric mission statement. 

• Aligning reward systems with regulatory objectives. 

• Improving recruitment and training to ensure competence and integrity. 

• Enforcing stronger integrity policies within the FCA. 

• Establishing a dedicated department for scam victims. 

In addition, legislative changes recommended for the Government include: 

• Establishing of Financial Regulators' Supervisory Council. 

• FCA's civil liability immunity for consumer claims. 

• Imposing restrictions on regulator-to-firm career transitions 

• Introducing a Duty of Care for financial regulators. 

• Implementing leadership and governance reforms 

FCA's response and the Supplementary Report 

Following the initial report's publication, the FCA has responded, stating that it does not recognise the portrayal of its organisation in the report and asserting that it does not reflect the day-to-day experiences within the regulator. However, the FCA reiterated its commitment to working with the government and parliament to address concerns. 

This response prompted the APPG to publish the Supplementary Report on 3 February 2025, which presents further evidence and perspectives on the FCA’s engagement with Parliament and stakeholders. The new report underscores the importance of proactive engagement between the FCA and parliamentarians, particularly in addressing consumer protection and regulatory oversight concerns. 

Key points from the Supplementary Report  

The Supplementary Report highlights: 

• The need for greater engagement between the FCA and Parliament. 

• Concerns over the accuracy of FCA-reported stakeholder satisfaction levels. 

• Further discussions on consumer protection policies and regulatory effectiveness. 

• Calls for potential structural reforms to ensure regulatory objectives are met effectively. 

With Parliamentary debates ongoing,  APPG Vice Chair Sarah Bool MP reiterated the view in a press statement that additional oversight may be needed: 

There is no doubt the FCA has a difficult job to do. This we understand. However, it does raise the question as to whether the FCA just has simply too much to do. Even if the FCA’s sole role was just to deliver on consumer protection alone, that would be a big exercise—especially given how large and complex the UK’s financial sector is.

Implications for the regulatory landscape 

These reports and ongoing discussions could signal major changes in UK financial services regulation. Firms should prepare for: 

• Stronger consumer protection measures. 

• Enhanced whistleblower protection frameworks. 

• Potential refinements in regulatory oversight structures. 

• Increased accountability mechanisms for firm-regulator interactions. 

As specialists in financial services regulation in the UK, we remain committed to helping you navigate these evolving challenges as they apply to you while meeting your compliance obligations. Our team continues to monitor these developments closely and will provide updates as reforms are implemented.