We provide information about the timeliness of our operating service metrics (formerly known as service standards) in a range of areas. For transparency we report on both internal and statutory metrics, as set by The Financial Services and Markets Act 2000 (FSMA).
We also report on requirements under other legislation, including the Freedom of Information Act, the Payment Services Regulations and Electronic Money Regulations. It covers 47 operating service metrics on activities including dealing with regulatory applications, telephone enquiries and other correspondence. We also provide enforcement data to show the enforcement action we took. This data focuses on our performance for the period 1 April 2021 to 31 March 2022. Our Annual Report[1] provides further information about our performance and what we achieved during 2021/22.
Our Strategy[2], Business Plan[3] and our outcomes and metrics[4] also set out how we will have a greater focus on measurement to drive accountability and improvements in our operational effectiveness. We will continue to review our operating service metrics as part of our transformation to ensure we continue to measure and report on the key areas of our service.
We describe our commitments in three sections:
- Open communication. We are committed to being as transparent as possible. It is important to provide appropriate information about our regulatory decisions and be open and accessible to the firms we regulate, as well as consumers. We reflect this by using metrics, like the timeliness of our responses to consumers, firms, MPs and others.
- Enabling business. Firms that apply for authorisation must meet our standards before they are authorised or regulated. We are rigorous with firms when they apply. If we do authorise them, we need to know what they are using their authorisation for. The metrics below capture how promptly we authorise firms and individuals.
- Regulating existing businesses. We respond to requests to vary the way firms work, for example, where appropriate, by varying regulatory permissions. Responding in this way ensures firms maintain high regulatory standards and allows us to deal with requests from firms and individuals efficiently. How we respond is reflected by metrics on this page for example how quickly we process requests for variation of permission.
Operating service metrics for the work of our Listing Transactions and data from our Enforcement activities are listed at the end of the page.
1. Key findings
This year we have made several changes to the metrics we report. This follows a review of our approach to performance reporting. Our intention in making these changes is to ensure we are providing meaningful measures on which we can be held to account.
We have incorporated Enforcement data within our operating service metrics for the first time. This data had previously been published as a separate related publication. We have also retired metrics that are no longer appropriate to report, these include removing all operating service metrics for passporting notifications following the UK’s withdrawal from the EU. We have reviewed metrics within the ‘Enabling business and preventing harm’ and 'Regulating existing business’ sections and have changed the green score in the Red/Amber/Green rating (RAG) rating for approximately half of these from 100% to ≥98% to allow a margin for outliers.
This report covers 47 metrics for the 2021/22 financial year. We have achieved our Service Level Agreements (SLA) targets on 51% of metrics this year, which is a slight reduction from 55% achieved last year. In 2020/21 we had 25% of our metrics reporting below our minimum targets, compared to 30% this year.
Improvements we have made compared to last year include:
- Replying to 66.4% of MPs letters within 15 days, up significantly from 28.4% in 2020/21. We also improved the number of MPs letters replied to within 20 days by 36 percentage points from last year (from 50.1% to 86.2%).
- Providing a response to consumer correspondence from email/web form/webchat within two working days 87.8% of the time, an increase from 80.4% last year.
- Closing 170% more complaints in 2021/22 than we did the previous year (820 closures in 2020/21 and 2,211 closures in 2021/22). This included complaints about our regulation of London Capital & Finance plc (LCF)) and acknowledging 93.7% of complaints within 5 working days of receipt, compared to 65.7% in 2020/21.
- Achieving our SLA target for processing complete applications for registration under the Payment Services Regulations within 3 months with 97.6% for the first time in three years.
- Enforcement has obtained a range of outcomes this year, protecting consumers, and market integrity. This includes imposing £313m in financial penalties on firms and individuals for breaching our rules, an increase from previous years. This figure excludes the £264.8m that Natwest was fined for failing to comply with the money laundering regulations 2007 as this was a criminal case and the financial penalty was therefore imposed by the court. We currently have 603 investigations open, looking at issues like market abuse and investment scams.
Areas where we need to improve include:
- Answering telephone calls to the Supervision Hub. We aim for no more than 5% of unanswered telephone calls from firms or consumers. Although we met this voluntary target for consumers, we missed it for firms for a second consecutive year. This was a result of significant spikes in firm call volumes because of activities including migration to new reporting and invoicing systems, firm attestations being required for Financial Services Register data and queries about COVID-related surveys.
- Responding to Freedom of Information Act (FOIA) requests within the statutory timeframe of 20 working days. We completed 67% against our target of 90%. We recognise this is below the standards we expect of ourselves. We continue to drive improvement, including assessing resources needed against volume, technological improvements and further process streamlining. We expect to meet our target operating service metrics during 2022/23.
- Achieving our timeframe for subject access requests for information made under General Data Protection Regulation (GDPR 2018). We operate to a target of 90% for Data Protection requests completed within the one- month timeframe but in 2021/22 we responded to 44% of requests within this period. The prolonged dispersed working combined with significant team absences has had a substantial impact on our performance and contributed to delays. We have invested in recruitment to bring the team back to full headcount and are looking at further technological improvements and process simplification. We expect to meet our target operating service metric during 2022/23.
- The time taken to process appointed representative notifications within five days of the request. We processed notifications within the five-day voluntary target 44.7% of the time, which is below the target and lower than last year’s 48.1%. Our performance was affected by staff pressure, which was driven by the significant number of solo-regulated firm related applications received following the introduction of the Senior Managers and Certification Regime (SM&CR) and the impact of the coronavirus (Covid-19) pandemic. We remain committed to improving our processing times and have recruited 95 additional colleagues to our Authorisations division. We continue to recruit more colleagues to ensure we maintain high standards while improving the pace of our decision-making. In addition to this, we have brought in additional temporary resource which has supported a reduction in our approved person queues and helped to ensure faster allocation of change in control notifications to case officers. Further improvements are expected in the current financial year.
- Meeting our target for commenting on subsequent proofs of documents submitted for pre-vetting by new applicants/unlisted issuers undertaking public offers and preparing prospectuses for the first time. There was a decline in adherence seen in previous years. This was due to a large increase in submission volumes. In 2020/21 we responded to 642 submissions for new applicants, whereas in 2021/22, the number was 1,108, a 73% increase.
2. Open communication
As a public body, transparency is critical to how we operate. We communicate with firms and consumers in a variety of ways, with audiences ranging from MPs and firms to consumers and the wider public.
Metrics
2.1. Supervision Hub
Our Supervision Hub[5] is our first point of interaction with firms and consumers. It includes dedicated consumer and firm helplines as well as providing email and online communication channels. We are committed to providing online and telephone support when it is needed. We regularly review the queries we receive and update our website to encourage and allow firms and consumers to self-serve where they can.
Over the last 12 months, as we have moved to a more stable hybrid working model, the Supervision Hub has remained open, operating to normal opening hours.
Contact volumes have remained in line with the previous year but contact spikes on the firm hub have made it challenging to consistently resource to demand. The experience for individuals trying to contact us was slightly longer wait times at some intervals through the day. Despite this customer satisfaction scores remain high.
Since April 2022 more competitive starting salaries have improved our recruitment pipeline which will give us greater flexibility to achieve operating service metrics across all channels.
We are also focusing on reducing the need for firms to contact us for more transactional matters. A key part of this work which will be delivered later this year is our Two-Factor Authentication (2FA) project. This will allow firms to reset their passwords without contacting us.
Letters, emails, web forms and webchat
We aim to provide prompt answers to questions received, set at two working days for emails, web forms and webchats and five working days for letters. These metrics apply to correspondence that:
- requires a response
- is addressed to our Supervision Hub
- is from a regulated firm or organisation (or from its professional adviser where the firm or entity name is given), or a consumer
These metrics do not include correspondence subject to statutory operating service metrics. For example, requests for information under the UK General Data Protection Regulation (UK GDPR), the Freedom of Information Act 2000 or the Environmental Information Regulations 2004.
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Graph 1 shows that we have provided a substantive response to firms’ email/web form/webchat correspondence within two working days 90.5% of the time. For letters, this has been within five working days 98.1% of the time. These are both above our voluntary target of 90%.
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Graph 2 shows how we have performed against our metric to provide a substantive response to consumer correspondence from email/web form/webchat within two working days and letters within five working days.
Significant staff shortages due to coronavirus related illness at the beginning of the period impacted our ability to achieve the email/webform/webchat operating service metric. This was despite us reaching 91.1% for the second half of the year.
For letters, this has been within five working days 96% of the time, above our voluntary target of 90%.
Telephone calls
We monitor the performance of our telephone service by the number of calls that are ended before they are answered. This happens if no advisers are available to answer a call promptly or the caller decides to end the call rather than wait. We minimise the number of unanswered calls by predicting when we will be busiest and making staff available. Our metrics measure how well we do this.
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We aim for no more than 5% of unanswered telephone calls for both firms and consumers. This is a voluntary target. We have achieved this target (as shown in graph 3) this year for consumers but have missed this target for firms.
Contact volumes for the firm hub over the course of the year were similar to the previous year [+2%], but calls often came in large spikes because of communications relating to:
- Our migration to new cloud-based systems for regulatory reporting and invoicing - 17,500 firms needing help accessing the new systems generating 33,000 calls.
- The introduction of the new Firm Data Attestation – which requires all firms to confirm the accuracy of their information displayed on the Financial Services Register annually. This resulted in 9,200 firms needing help across 13,400 calls.
- Coronavirus (Covid-19) Financial Resilience Survey: our resilience surveys resulted in 3,000 calls from a total of 2,380 firms.
- The end of forbearance on late/missing regulatory reporting and recommencement of fines for late/non-submission.
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We are frequently contacted by telephone so answering calls quickly is important. We have set a voluntary target to answer 80% of calls from consumers and firms within 20 seconds. Graph 4 shows that we achieved this target for consumers but have missed this target for firms due to reasons explained above.
Calls directed via the switchboard and direct calls to others in the organisation are not subject to the above metrics.
We offer callers a post-call survey to measure our performance. This survey gives consumers and firms an opportunity to rate the expertise of our associates, the overall service received and leave additional comments. Firms can also rate the overall ease of use of dealing with us and our systems and consumers can state how well they have understood their next steps based on our guidance. The metrics below reflect the last three years customer satisfaction scores. We have set a voluntary target of 80% satisfaction for both telephony and correspondence.
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Our satisfaction scores have stayed relatively consistent following our work to ensure that our written communications are free of jargon and easy to understand, with both metrics achieving the target for 2021/22.
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Graph 6 shows that we have achieved the target for firm telephony but missed it for correspondence.
The spikes in call volumes, which resulted in occasionally long wait times, and system-related challenges described above - including the need for security reasons to call to reset passwords - explain why we came slightly under our customer satisfaction target for correspondence.
2.2. MPs’ letters
As part of our accountability to Parliament, we respond to requests for information from MPs and peers through letters, parliamentary questions, and evidence to All Party Parliamentary Groups.
We must give a full and prompt reply to any letter addressed to us or any member of staff from Members of Parliament, Members of the House of Lords, Members of the Scottish Parliament, Welsh Assembly and Northern Ireland Assembly. These letters may be sent on behalf of a constituent or groups of constituents. As a public authority accountable to Parliament, it is important we provide a considered response to these letters, so we set ourselves target SLAs for responding.
Our SLAs are paused if we must seek more information externally, for example from a constituency office, a firm, or another organisation. The period it takes us to respond, therefore, can be longer than the reported SLA.
We have set a voluntary target of 80% to provide a substantive reply to letters from MPs within 15 working days and a voluntary target of 98% to respond within 20 days (previously 100%).
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While the volume of letters received in this reporting period was lower than last year’s (664 in 2021/22, compared to 768 in 2020/21), it was still higher than any pre-pandemic period.
Most responses that were not sent within our SLA were complex consumer cases with substantial associated correspondence and data. We contact MPs’ Offices to keep Members updated when we require additional time to review and consider the files that can accompany such queries.
The proportion of letters that are sent within our SLA increased throughout this reporting period, culminating in several months of 95-100% SLA rates. Given the challenges posed in 2020/21, efforts to reduce breaches produced more letters completed within the 15-20 day period. Our dedicated MPs’ Letters team have pursued an iterative process to optimise delivery across the organisation. The benefits of this process will be reflected in our 2022/23 figures, with an anticipated increase in letters sent in under 15 days. The MPs’ Letters team continues to work with colleagues at all seniority levels to reduce our average response time to MPs’ letters more broadly.
2.3. Freedom of Information Act (FOIA) requests
FOIA provides a general right of access to all information held by a public authority, subject to relevant exemptions and other conditions.
The high volume of FOIA requests received continued in the period 2021/22, with 926 requests received.
Performance for April 2021 to March 2022 was at 67% with 560 of the 839 requests completed within the statutory timeframe of within 20 working days. Our target is 90%. We recognise this is below the standards we expect of ourselves. We continue to drive improvement, through assessing resources needed against volume, technological improvements and further process streamlining. We expect to meet our target operating service metric during 2022/23.
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2.4. Data Protection requests
Under the UK General Data Protection Regulation (GDPR) and Data Protection Act 2018, individuals have a right to request access to any of their personal data which we hold, known as a subject access request.
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The UK GDPR sets a timeframe of one month for responding to subject access requests, which can be extended to two months for more complex requests. The Information Commissioner, however, has accepted that public bodies, including us, may not be able to meet the statutory requirements in every case. We operate to a target of 90% for Data Protection requests completed within this timeframe.
In 2021/22 we responded to 44% of requests within the target timeframe. Prolonged dispersed working and significant team absences have had a large impact on our performance and contributed to delays. We have invested in recruitment to bring the team back to full headcount and are looking at further technological improvements and process simplification. We expect to meet our target operating service metric during 2022/23.
2.5. Complaints
Under the Financial Services Act 2012, we are required to maintain a Complaints Scheme for the investigation of complaints arising in connection with the exercise of, or failure to exercise any of our relevant functions. The statutory requirements include that the Complaints Scheme must be designed so that complaints are investigated as quickly as possible.
Our operating service metrics for responding to complaints are:
- Acknowledgement: acknowledge a complaint within five business days of receipt. Our voluntary target is that 95% of complainants should receive an acknowledgement within five business days of receipt.
- Completion (complaints dealt with by the local business area): complete an investigation and send a decision to the complainant within 10 working days. Our voluntary target is that 95% of complainants should receive a decision within 10 working days of receipt. The response to the complainant should also inform them of their right to ask for a Stage 1 investigation (meaning handled by the independent internal Complaints Departments).
- Completion (complaints dealt with by the central Complaints Department, known as Stage 1 complaints): complete an investigation or provide the complainant with a reasonable timescale to investigate the complaint within 20 working days of receipt. Our voluntary target is that we should achieve this for 95% of Stage 1 complaints.
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During 2021/22 we received a lower number of complaints (1,212 in 2021/22, compared to 1,596 in 2020/21). This is because in 2020/21 we received a large number of complaints (498) regarding our regulation of London Capital & Finance (LCF), but we received fewer of these complaints (142) in 2021/22.
In 2021/22 we successfully targeted our oldest cases to drive down our backlog, whilst also improving our processes. This led to some impact on operating service metric performance, particularly in the first half of the reporting year. However, performance has significantly improved since then.
We have continued to demonstrate improvements on last year, such as improving our acknowledgements response in 2021/22 by 28 percentage points compared to the previous year, narrowly missing our target of 95%.
Having cleared our backlog of cases, in the second half of 2021/22 we were able to improve our performance for:
- local area complaint completion (Metric 1) to 82% (Nov ’21 – March ’22) and
- Stage 1 completion (Metric 3) to 87% (Oct ’21 – March ’22)
We expect the trajectory of improvement against the metrics to continue in 2022/23 and whilst there has been progress we recognise that we have more to do. The continued transformation of the Complaints Department, including increased resources and improvements to our systems and data, has helped deliver improvements which we will continue to build on in 2022/23 to further demonstrate improved performance against the operating service metrics.
2.6. Payment of suppliers
We have revised this metric to process payment from the supplier's invoice date rather than the date we receive the invoice. The new metric now aims to pay all valid invoices received in line with industry best practice and we have set a voluntary target to pay a minimum of 80% of all invoices within our standard payment terms of 30 days. The data in Graph 12a replaces the data in Graph 12b from 2021/22.
Graph 12a shows the new RAG ratings of >80% for green, between 75% and 79% for amber and <75% for red for payment within 30 days. For invoices paid between 31-60 days, we set RAG ratings of <15% for green, between 16-20% for amber and >20% for red. For invoices paid over 60 days, our target for green is <10%, 11-15% for amber and >15% for red.
Graph 12b shows the data from the previous two years’, which was based on payment from the invoice receipt date.
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2.7. FCA systems
We have set voluntary metrics to ensure that we are monitoring the availability of our external facing Information Services (IS) systems.
Operating service metric: Ensure availability of external facing IS systems – 98.5% within the times below
The systems are:
The Financial Services Register
A public record of financial services firms, individuals and other bodies under our regulatory jurisdiction, as defined in FSMA.
Operating service metric: Ensure availability of the FS register system – Mon-Fri, 7am-8pm
FCA website
Our website is our main digital channel for our consumer and firm audiences.
Operating service metric: Ensure availability of the FCA website – 24 hours x 365 days
Fee calculator
This enables firms to estimate their FCA fees, Financial Services Compensation Scheme (FSCS) levy and Financial Ombudsman Service (FOS) general levy for different financial periods and scenarios (either the consulted rates or the final rates for that period).
Operating service metric : Ensure availability of the fee calculator – Mon-Fri, 7am-8pm
RegData (Regulatory Data) submission system
RegData has replaced GABRIEL and is our system for collecting, validating and storing regulatory data.
Operating service metric: Ensure availability of the RegData system – Mon-Fri, 7am-10pm, and Sat-Sun, 7am-5pm
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Graph 13 shows we achieved our target again this year.
RegData: In September 2021, we experienced a problem with the network services on which RegData depends - resulting in the system being unavailable for a little over five and a half of the scheduled service hours.
An investigation was carried out to understand the root cause of the issue, and actions implemented to reduce the likelihood of recurrence.
During the year, in response to coronavirus restrictions at the time, our IT department and 3rd party suppliers have maintained operating service metrics by continuing hybrid/remote working. Our remote working facilities have enabled us to continue to protect consumers, ensure that financial markets work well and to ensure our systems were highly available for firms and consumers to access.
3. Enabling business & preventing harm
FSMA states that no individual or firm can legally carry on FSMA-regulated activities in the UK unless they are authorised by us to do so or exempt. This is the so-called ‘general prohibition’ in section 19 of the Act. An individual or firm must apply to us for a ‘Part 4A permission’ to carry on those activities.
We use authorisation to prevent harm. We do this by ensuring that all authorised firms meet common sets of minimum standards at the start. We refer to these standards as the Threshold Conditions (the conditions).
We will only authorise firms where they meet the conditions and continue to do so. If they do not, we will not allow them to enter the relevant financial market.
We remain committed to improving our performance to enable business and prevent harm. In some areas it has been necessary to allow additional time for scrutiny of applications to ensure firms and individuals meet the high standards we expect of them. Where we have experienced a high number of applications, we have recruited additional resources to help us respond within the required timeframes. We also continue to improve our processes to make applications more straightforward.
This year we reviewed the RAG status for the operating service metrics that required 100% compliance to achieve a green RAG rating as this allowed no margin for outliers, such as cases where additional engagement and scrutiny was required for us to effectively perform our objectives. For 2021/22, approximately half of these metrics have been amended to a ≥98% green RAG rating.
Metrics
3.1. Authorisation applications
A firm supplying the information we request on the application form will not necessarily be enough for the application to be regarded as ‘complete’. An application is regarded as complete only when we have received all the required information and evidence for us to be able to determine the application.
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In most cases, we have a statutory requirement of 100% to process a complete application for Part 4A permission within six months of receipt of a complete application (s55V(1) FSMA 1) or within 12 months of receipt of an incomplete application (s55V(2) FSMA). Whilst we are committed to achieving this where possible, it is expected that over the course of a year, a small number of cases may need additional time for greater scrutiny or engagement for good reasons, for example where required to meet our objectives effectively. To allow for such outliers we have amended this metric to a ≥98% green RAG rating. Graph 14 shows this year we achieved 97.8%. 18 of the 803 cases missed the metric. These applications were legally or technically complex and required significant engagement with the firms.
3.2. Approved persons status
A firm applying to carry on regulated activities must also apply under Part V of FSMA for approval of one or more individuals to perform the controlled functions on its behalf once authorised (its ‘approved persons’). We must be satisfied that approved persons are fit and proper. This means that they have the honesty, integrity, reputation, competence and capability and financial ability to perform their role and comply with the code of conduct in the Handbook.
Processing an application for ‘approved person’ status
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Our statutory requirement is to determine approved person applications within three months unless it is attached to an application for part 4A permission. Graph 15 shows a slight improvement in this metric compared to the previous year, from 85.7% to 85.9%
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We also have a voluntary target of 85% to respond in five days for controlled functions applications and 10 days for SIF applications. As of 9 December 2019, and the commencement of the SM&CR for solo-regulated firms, these functions now only apply to Appointed Representatives (ARs) and pure Benchmark Administrators. Graph 16 shows a deterioration in this metric from 19% to 10%.
We received a total of 12,299 applications during 2021/22. We assessed 10,559 within the three-month statutory timeframe (graph 15) and 1,259 within the voluntary metric (shown in graph 16).
Performance against the operating service metrics in 2021/22 (and the previous year) has been impacted due to the high volumes of applications received since the extension of the SM&CR for solo-regulated firms. Additionally, several applications have required significant interaction with sponsoring firms, which led to delays in reaching decisions.
We remain committed to improving our performance around processing times. Additional resources (both permanent and temporary) have now been recruited, which should contribute to an increase in the volume of applications responded to within these timeframes. We are also looking at ways in which we can improve the application process and make this more straightforward and drive efficiencies in our own internal processes.
3.3. Money laundering registrations
Provisions relating to the assessment period for registration of ‘Annex 1 financial institutions’ under the Money Laundering, Terrorist Financing and Transfer of Funds (Information of the Payer) Regulations 2017 (MLRs) broadly sets out that, within 45 days of either (1) the date on which we receive an application for registration from an Annex 1 financial institution, or (2) where the application is incomplete, the date on which we receive any further information, we must give the applicant notice:
- of our decision to register the applicant, or
- that we are minded not to register them, the reason for this and the right to make representations to us within a specified period (which may not be less than 28 days)
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We have a statutory requirement of 100% to process registration applications for firms who want to carry on business in the UK as an Annex 1 financial institution. We are required to do so within 45 calendar days of receiving an application or any further required information (Reg59(3) MLRs). Graph 17 shows that we have not met the 100% target. However, we have re-organised the way the team processes these applications and just two applications of 130 processed in H2 2021/22 breached operating service metrics.
3.4. Authorised unit trusts (AUT), open-ended investment companies (OEIC) and authorised contractual schemes (ACS)
This covers all applications for us to authorise all types of UK-based collective investment schemes.
We have a statutory target of 100% to process applications for the authorisation of new schemes under section 242 FSMA for AUTs, regulation 12 of the OEIC Regulations 2001 and 261C FSMA for ACS within six months of receiving a complete application or within 12 months of receiving an incomplete application. If these involve an Undertaking for Collective Investments in Transferable Securities (UCITS) we are required to process these within two months.
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Graph 18 shows that we have achieved 100% for the last three years.
We also aim to process complete applications to authorise Non-UCITS Retail Schemes (NURS) within two months and within one month for Qualified Investor Schemes (QIS). These are voluntary metrics.
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Graph 19 shows that we achieved 92% in 2019/20; 96.2% in 2020/21 and 89.7% in 2021/22. We missed the deadline in two out of the 29 cases as we were not satisfied these schemes met the requirements of the rules within the voluntary timescales.
3.5. Mutual Society registrations
A mutual society is an organisation owned by its members and run for their benefit or for the benefit of the community. They include building societies, friendly societies, credit unions and registered societies. Registered societies include co-operative and community benefit societies, formerly known as ‘industrial and provident societies’.
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We have a voluntary target to process a complete registration application from a mutual society within 15 working days of receipt. Graph 20 shows that we achieved 74.8% a slight decrease compared to the previous year. We determined 3,012 applications during the year. This represents an increase of 22% in determinations on the previous year.
Determination times vary depending on factors including the volume of submissions, quality of information provided in the application, the complexity of the submission, and the issues and concerns identified during our registration assessment. As well as determining applications, the Mutuals function also responds to queries from public facing inboxes, provides a public records function, processes annual returns and accounts, and takes action to tackle non-compliance – including the use of powers. During peak periods of demand more applications were processed beyond the SLA.
Additional resources are being recruited which should contribute to an increase in the volume of applications determined within the voluntary timeframes. In the longer term, as part of our transformation, we are looking at how we can make decisions faster. This includes making sure we receive complete applications on submission and through greater use of the Mutuals Society Portal. We expect to be meeting this target within the current financial year 2022/23.
3.6. Payment Services Regulations and Electronic Money Regulations
UK firms providing payment services must apply to become either an ‘authorised’ payment institution or ‘registered’ as a small payment institution. This does not apply if it is already another type of payment service provider or is exempt. This is a requirement of the Payment Services Regulations 2017 (the PSRs).
UK firms that intend to issue electronic money (as defined in the Electronic Money Regulations (EMR) 2011) by way of business in the UK, must apply to become either:
- an ‘authorised’ electronic money institution
- ‘registered’ as a small electronic money institution
Find out more about electronic money and payment institutions[7].
We have multiple metrics for Payment Services for PSRs and EMRs, and they each have their own statutory requirements as follows:
PSR and EMR authorisation applications
To process a complete application for authorisation under PSRs and EMRs - target is 100% within three months of the received date of a complete application or within 12 months of the received date of an incomplete application.
PSR and EMR registration applications
To process a complete application for registration under PSRs and EMRs - target is 100% within three months of the received date of a complete application or within 12 months of the received date of an incomplete application.
PSR and EMR variations of registration
To process a complete application for a variation of registration under PSRs and EMRs - target is 100% within three months of the received date of a complete application or within 12 months of the received date of an incomplete application.
PSR and EMR variations of authorisation
To process a complete application for a variation of authorisation under PSRs and EMRs - target is 100% within three months of the received date of a complete application or within 12 months of the received date of an incomplete application.
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Graph 21 shows we did not meet the deadline for the registration or authorisation of firms under the EMRs and PSRs. This was due to a combination of reasons, including significantly increased volumes of applications leading to cases waiting a long time to be allocated to a case officer. This delay in starting the application meant that many were not concluded ahead of the statutory deadline.
Unfortunately, the quality of application received is typically poor, leading to longer assessment times when they are allocated. We are also seeing fewer successful applications. Across the year we approved 130 of 352 applications (37%), with just 11 of 91 (12%) approved in Q4.
We have recruited heavily throughout the year, and this is now having an impact on case allocation times and our overall work in progress. In Q4 2021/22, we saw work in progress reduce by c.10% and we expect this reduction to accelerate. As this happens, we will see fewer breaches of the statutory deadline.
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Graph 22 shows we missed one target. This was due to a case that was delayed following supervisory interest in the applicant. No other applications missed the target during the year.
PSD2
PSD2 introduced a statutory requirement of two months for processing 100% of notifications for UK agents of payment services firms. The graph below shows our reporting against that metric.
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We have achieved the target again this year as shown by Graph 23.
4. Regulating existing businesses
The decision to authorise a firm or individual is not a one-off. Firms and individuals may contact us to request changes to activities they are permitted to do. Our response to these requests should create public value by preventing harm. Metrics in this section reflect how quickly we have considered and responded to notifications and requests to vary permissions.
We remain committed to improving our performance against metrics for regulating existing businesses. In some areas it has been necessary to allow additional time for scrutiny of requests to ensure firms and individuals continue to meet the high standards we expect of them. Where we have experienced a higher-than-normal number of requests, we have recruited additional resources to help us respond within the required timeframes. We continue to focus on improving our processes.
This year we reviewed the RAG status for operating service metrics that required 100% compliance to achieve a green RAG rating as this allowed no margin for outliers, such as cases where additional engagement and scrutiny was required for us to effectively perform our objectives. For 2021/22, approximately half of these metrics have been amended to a ≥98% green RAG rating.
Metrics
We must be informed in writing of any proposed changes to a trust, its trustee, or its manager (under s. 251 of FSMA). We need to be satisfied that any changes will not adversely affect a trust’s compliance with our requirements.
4.1. Alterations to a collective investment scheme (CIS)
We need to be satisfied, and informed in writing, that any proposed changes to certain features of an authorised OEIC (under regulation 21 of the Open-Ended Investment Companies Regulations 2001) will not adversely affect the OEIC's compliance with our requirements.
We must be informed in writing of any proposed changes to certain features of an authorised contractual scheme (under section 261Q of FSMA). We need to be satisfied that following any changes, the scheme will continue to comply with our requirements.
Overseas collective investment schemes which are not UCITS may be recognised as individual schemes if the individual schemes satisfy the requirements set out in section 272 of FSMA. So, firms must inform us in writing of any proposed changes to an individually recognised overseas scheme (under s. 277 of FSMA).
Our standard practice is to acknowledge and give written approval wherever feasible. However, if we do not, then the proposal (under s. 251, 261Q and 277 of FSMA and regulation 21 of the OEIC regulations) gets automatic approval one month from the date we received notice.
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We have a statutory requirement to consider notice of proposed alterations to a CIS, and if appropriate, issue a warning notice. Graph 24 shows we have achieved the 100% target for the last three years.
4.2. Variation of permission
Firms may change the nature of their business and apply to add, vary, or remove any regulated activities, investment or customer types. They may also apply to add or vary a requirement or limitation to, or remove a requirement or limitation from, the scope of their Part 4A permission.
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In most cases we have a statutory requirement of 100% to process a complete application from an authorised firm for a variation of permission within six months (s55V(1) of FSMA) or 12 months of receiving an incomplete application (s55V(2) of FSMA). Graph 25 shows that we met the metric in 99.8% of cases. Three out of 1,254 cases missed the metric. These applications were legally or technically complex and required significant engagement with the firms. Whilst we are committed to meeting the metric where possible, a small number of cases may need additional time for greater scrutiny or engagement for good reasons, for example where required to meet our objectives effectively. To allow for such outliers we have amended this metric to a ≥98% green RAG rating.
4.3. Cancellation of Part 4A permission
An authorised person with permission to carry on regulated activities (Part 4A permission) can apply to us to cancel their permission. Changes to individual regulated activities involve a variation of permission, whereas the cancellation of all permissions means that the firm would no longer be permitted to carry on any FSMA-regulated activities in the UK.
We may refuse an application for cancellation if it may cause harm to consumers or potential consumers. This may be the case, for example, if a firm has outstanding customer complaints.
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We have a statutory requirement of 100% to determine a complete application for cancellation of Part 4A permission within six months (s55V(1) of FSMA) or 12 months of receipt of an incomplete application (s55V(2) of FSMA). Graph 26 shows we have achieved this target for the last three years.
4.4. Appointed representatives
An appointed representative is a company or individual that an authorised person (a principal) has contracted to carry on regulated activities on its behalf. The principal is responsible for the appointed representative complying with our rules.
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Graph 27 shows how we have performed against our voluntary target of processing 95% of complete notifications for appointed representative status within five working days of the request. We processed the notifications within the five-day voluntary target 44.7% of the time, which is below the target and lower than last year’s 48.1%. The introduction of the SM&CR for solo-regulated firms and the subsequent impact of the coronavirus have driven sustained staff pressure across the teams in high-volume areas such as approved persons and appointed representatives. This has impacted on the time taken to process appointed representative notifications. As we have brought in additional resource, both permanent and temporary, we started to see a reduction in our queues and anticipate an improvement in our processing times in FY2021/22. We remain committed to improving our performance around processing times. Additional resource (both permanent and temporary) has been recruited, which should contribute to an increase in the volume of applications responded to within the voluntary target. We are also looking at ways in which we can improve the application process and make this more straightforward and drive efficiencies in our own internal processes.
4.5. Post-event notification to change our static data on a regulated firm
‘Static data’ is basic information on firms that is essential to effective regulation. Static data must be kept up to date because it is used by us, the Financial Ombudsman Service, the Financial Services Compensation Scheme and Financial Services Register users.
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When we process a complete ‘post-event’ notification to change the details on a regulated firm we have set ourselves the voluntary target to process 95% of notifications within five working days of receipt. Graph 28 shows we have maintained our response rate of 99.98% this year, as we did for the previous two years. 11 out of 60,977 cases missed the target.
4.6. Pre-event notification to change our static data on a regulated firm
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As with ‘post-event’ notification we have also set ourselves the same target for ‘pre-event’ notifications. For the last three years we have achieved 100% for this metric, as shown by Graph 29.
4.7. Notification of a proposed change in control
Controllers and firms must notify us before acquiring or increasing control (in line with part 12 of FSMA). A ‘controller’ refers broadly to a person who holds shares in or is entitled to exercise or control the exercise of voting power or significant influence in a UK-authorised firm or a parent of a UK-authorised firm. The legislation allows us to object to the acquisition of or increase in control, or to approve with conditions. More information on control thresholds or bands[8] and change in control requirements[9].
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We have a statutory requirement to make a decision after receiving a ‘complete’ notification of a proposed change in control. Our target is to do this 100% of the time within 60 working days of acknowledgement of receipt (s189(1) of FSMA). Of the 1,137 pre-notifications closed this year, 12 missed the operating service metric and volumes remained high.
5. Listing Transactions
The Listing Transactions (LT) Department encompasses our transaction review functions and the management of the Official List through our Listing Applications team.
Metrics
An issuer must make a prospectus approved by us available to the public before certain securities are offered to the public or admitted to trading on a regulated market in the UK. Where an application for approval is made to us, we must notify the applicant of our decision within the deadlines specified in the Prospectus Regulation. Unless we require further information, we must determine an application from a new issuer within 20 working days, and all other applications within 10 working days. We have put in place a system of voluntary targets for us to provide comments on submissions in advance of the statutory deadlines. For new issuers, we aim to provide comments on the initial submissions within 10 working days if the document is submitted in complete form.
We have set a voluntary target to comment on the initial proof of a document submitted for pre-vetting by a new applicant, or an unlisted issuer, undertaking a public offer and preparing a prospectus for the first time. Our aim is to comment on submission within 10 working days 95% of the time. We have achieved this target this year as shown in Graph 31 but with a marked decrease compared to 2020/21.
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Graph 32 shows our voluntary metric to comment on the initial proof of a document submitted for pre-vetting by a listed issuer, or by an unlisted issuer, undertaking a public offer that has previously produced a prospectus. Our target is to comment on submissions within five working days 95% of the time. This also covers documents submitted to us for approval that do not fall under the new issuer standard, (principally prospectuses and circulars issued by already listed companies). We aim to comment within five working days if the document is submitted in complete form. We achieved our target with a small decline compared to 2020/21.
All documents requiring our approval before publication must be submitted in substantially complete form. We often review several proofs of these documents before approval. As well as commenting on the initial proofs, we also aim to comment on subsequent proofs within three or five working days, depending on the document.
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As mentioned above we have set voluntary metrics to comment on subsequent proofs of submissions. The metric for new issuers is within five working days from receipt for comments on subsequent proofs of document submitted for pre-vetting by a new applicant, or by an unlisted issuer, undertaking a public offer and preparing a prospectus for the first time.
The metric for existing issuers is within three working days from the day of receipt for comments on subsequent proofs of document submitted for pre-vetting by a listed issuer, or by an unlisted issuer, undertaking a public offer and that has previously produced a prospectus.
Graph 33 shows we were ’amber‘ for the target for new issuers, and although we achieved our target for existing issuers, this was a decline on the adherence seen in previous years.
There are several reasons for this decline in our adherence to response times for comments. The most significant declines were in submissions for new issuers and reflects a large increase in submission volumes. In 2020/21 we responded to 642 submissions for new applicants, compared to 1,108 in 2021/22, a 73% increase.
This increase was primarily attributable to increased Initial Public Offering (IPO) activity (following a period of lower applications due to factors such as Brexit and the coronavirus). Additionally, we have seen a higher proportion of new applications from smaller companies. Vetting documentation from these applicants is typically more time consuming and a greater number of submissions are often required to address our feedback.
During 2021 we consulted on increasing the minimum market capitalisation for equity listings. These new rules were adopted in December, but it is likely that market anticipation of new requirements also prompted an increase in applications. We would expect that the increased minimum market capitalisation of £30m will lead to improvements in our compliance with SLAs by the latter part of 2022/23.
This increase in workload has not been accompanied by corresponding increases in qualified case officers. Like many employers we have faced an increased level of staff turnover following a relatively stable period during the coronavirus related lockdowns. This turnover has coincided with a challenging recruitment market and as a result we were particularly short-staffed over the peak summer holiday season.
We sometimes give guidance on applying our rules. We respond to reasonable requests for guidance and other queries made by, or on behalf of, the named party required to comply with the applicable rule. Our final metric is also voluntary, and we aim to provide either a substantive reply or a request for further substantive information within five working days with a target of 95%. We achieved this target again this year with a slight improvement compared to 2020/21, as shown in Graph 34.
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6. Enforcement data 2021/22
We have taken a more holistic approach and expanded the set of data that we share compared to previous years. We want to demonstrate a fuller range of the activities that our Enforcement division (Enforcement) carries out and outcome types that it pursues and obtains. The data below highlights the different types of action that we take, depending on what we consider appropriate, acting assertively by using all of the tools available to us to address and mitigate consumer harm effectively through enforcement action.
Please note that yearly data represents the financial year, 1 April 2021 to 31 March 2022, and figures relating to cases currently open represent the position at 1 April 2022.
6.1. Early action
Receiving information and initial enquiries
Our Enforcement Whistleblowing team receives and captures all whistleblowing disclosures, referring all cases to relevant areas for assessment and further action if required. The intelligence that is received informs our work and, in many cases, allows us to take action that prevents harm before it occurs or before a firm becomes non-compliant or in breach. Find out more about our work and data related to whistleblowing[10].
We also issue warnings and alerts to consumers and firms, in relation to firms that appear to be carrying out regulated activities without our authorisation. Our work includes issuing specific alerts that are published on our Scamsmart Warning List[11]. We also refer potential cases to other agencies, including the police.
6.2. Interventions action
Enforcement opens Interventions cases when our Supervision, Policy and Competition division (SPC) raises concerns about a firm causing or presenting a risk of ongoing harm to consumers. We can take a range of actions, including imposing requirements on the firm to do – or refrain from doing – something, as fast as possible.
We achieve this through voluntary requirements, or by using our own initiative powers. Enforcement and SPC work together to achieve this.
Voluntary requirements and steps
We have 44 open Interventions cases in the early engagement stage with SPC relating to voluntary steps, with an average case duration of 140 days.
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During the 2021/22 financial year, we closed 157 cases of this type, with an average case duration of 163 days. During this time, Enforcement also supported the securing of 64 Voluntary Requirements; 2 Directions under the Money Laundering Regulations 2017; and 3 Undertakings from various firms.
FCA own initiative requirements and steps
In these cases, Enforcement engages in preparing and making applications to exercise the use of our own initiative powers through instruments such as Own Initiative Requirements (OIREQ)s and Own Initiative Variation of Permissions (OIVOP).
19 cases are currently open with an average case duration of 110 days.
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During 2021/22, we closed 23 cases of this type, with an average case duration of 142 days. We also supported the issuing of 22 OIREQs and 7 OIVOPs. Many of these flow from First Supervisory Notices, so are still the subject of appeal or representations from the subject firms.
6.3. Threshold conditions cases
Firms and individuals must always meet certain minimum standards (the Threshold Conditions for firms, and the Fit and Proper test for individuals) to continue to be authorised by us.
Enforcement acts against firms and individuals where these criteria are not met, because meeting these basic standards is an important part of maintaining a regulated environment that consumers, markets, and the industry can trust.
Of the Threshold Conditions cases that we closed during 2021/22, 14% (24) resulted in us issuing a Final Notice, which we issue when we revoke a firm’s permissions entirely or when we prohibit an individual. In other cases, the firm may voluntarily cancel, or engage to meet the standards required.
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Table 1: Cases opened during 2021/22 financial year: by subject type
| Cases opened | |
|---|---|
|
Firm |
122 |
|
Individual |
15 |
Table 2: Cases opened during 2021/22 financial
|
Criminal |
Fee |
Low Volume |
Returns |
Other |
|
|---|---|---|---|---|---|
|
2019-20 |
1 |
165 |
40 |
450 |
|
|
2020-21 |
189 |
90 |
355 |
1 |
|
|
2021-22 |
7 |
128 |
1 |
1 |
Low volume cases are more complex and tend to relate to wider threshold conditions breaches and action against individuals. Fee cases typically relate to the non-payment of required fees and levies. ‘Return’ cases reduced following the forbearance shown to Firms during periods of Covid-related disruption. The volume of ‘Returns’ cases is anticipated to rise towards the end of the current year, and still further in coming years.
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‘Use it or lose it’
Incorrect or outdated permissions on the Financial Services Register (FSR)[12] can mislead consumers about the level of protection offered by a firm and give a false sense of credibility to a firm’s unregulated activities. Firms are required to confirm annually that information about them on the FSR is accurate.
This is a key part of the work that Enforcement does, helping to ensure that the FSR is up to date for consumers to be able to use confidently. During 2021/22, we closed 739 cases under our ‘use it or lose it’ initiative. Of these, in 231 cases firms applied to cancel their permissions following engagement with Enforcement colleagues and 41 firms varied their permissions. At the end of the financial year 342 cases were open under the ‘use it or lose it’ initiative. In these cases, we will continue to engage with firms, and where appropriate, take further action.
6.4. Enforcement Investigations: Retail, Wholesale and Unauthorised Business
Once a formal Enforcement investigation has been opened under the Financial Services and Markets Act 2000 (FSMA), we appoint investigators under Pt XI of FSMA. Below, we provide a breakdown of our investigation and litigation portfolio, to highlight the varied nature of investigations that we run and the range of issues that we investigate. The number here reflects the number of persons, either firms or individuals, placed under investigation (which we refer to as either ‘subjects’ or ‘cases’) and not the number of investigations. An individual investigation will usually have a number of cases because we open one ‘case’ per subject. This means we have more cases open than investigations. In 2021/22 we opened 194 Enforcement cases. At the end of the 2021/22 financial year, we had 603 cases open in relation to 230 investigations.
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The age of a case in the investigation phase pre-dates the opening of an Enforcement investigation under FSMA and includes the period from the date when a decision was made to investigate. The age of a case in the litigation phase includes the investigation phase. The time it takes to conclude cases in the litigation phase is dependent on several factors, including the actions of the subjects and timetable set by the court or decision-making body.
Table 3: Open cases: by type, and age of investigation and litigation phases
|
Age |
Regulatory Investigation Phase |
Regulatory Litigation Phase |
Dual Track Investigation Phase |
Civil Investigation Phase |
Civil Litigation Phase |
Criminal Investigation Phase |
Criminal Litigation Phase |
|---|---|---|---|---|---|---|---|
|
0-200 days |
30 |
4 |
44 |
5 |
19 |
36 |
4 |
|
201-400 days |
25 |
3 |
24 |
4 |
|||
|
401-800 days |
46 |
7 |
23 |
1 |
7 |
20 |
3 |
|
800 days + |
79 |
76 |
27 |
9 |
11 |
55 |
41 |
|
Total |
180 |
90 |
118 |
15 |
37 |
115 |
48 |
Cases open at end of 2021/22 financial year by case type
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Table 4: Open cases at end of financial year 2021/22: by type, and primary issue being investigated
|
Primary issue being investigated |
Civil |
Criminal |
Dual Track |
Regulatory |
|---|---|---|---|---|
|
Unauthorised Business |
48 |
105 |
57 |
|
|
Misleading Statements |
1 |
14 |
6 |
7 |
|
Listing/Prospectus Rules/Disclosure Transparency Rules (DTR) Breaches |
4 |
|||
|
Market Manipulation |
13 |
|||
|
Insider Dealing |
35 |
33 |
3 |
|
|
Wholesale Conduct |
3 |
2 |
48 |
|
|
Financial Crime |
3 |
6 |
38 |
|
|
Retail Lending |
0 |
1 |
4 |
|
|
Investment Scam |
8 |
|||
|
Pension Scam |
9 |
13 |
||
|
Advice - Pensions |
59 |
|||
|
Retail Conduct |
3 |
3 |
4 |
73 |
|
Total |
52 |
163 |
118 |
270 |
Opened Enforcement cases: 194 during 2021/22 financial year
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Table 5: Cases opened during 2021/22 financial year
|
Subject |
Civil |
Criminal |
Dual Track |
Regulatory |
Total |
|---|---|---|---|---|---|
|
Firm |
16 |
17 |
27 |
26 |
86 |
|
Individual |
8 |
30 |
36 |
34 |
108 |
|
Total |
24 |
47 |
63 |
60 |
194 |
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Table 6: Cases opened during 2021/22 financial year: by type, and primary issue being investigated
|
Primary issue being investigated |
Civil |
Criminal |
Dual Track |
Regulatory |
Total |
|---|---|---|---|---|---|
|
Unauthorised Business |
24 |
32 |
39 |
95 |
|
|
Misleading Statements |
2 |
1 |
3 |
||
|
Listing/Prospectus Rules/DTR Breaches |
1 |
1 |
|||
|
Market Manipulation |
|
|
|
5 |
5 |
|
Insider Dealing |
|
7 |
18 |
|
25 |
|
Wholesale Conduct |
|
|
|
12 |
12 |
|
Financial Crime |
|
3 |
4 |
3 |
10 |
|
Retail Lending |
|
|
|
2 |
2 |
|
Investment Scam |
|
|
|
4 |
4 |
|
Pension Scam |
|
|
|
|
0 |
|
Advice - Pensions |
|
|
|
14 |
14 |
|
Retail Conduct |
|
3 |
2 |
18 |
23 |
|
Total |
24 |
47 |
63 |
60 |
194 |
Closed Enforcement Cases: 160 during 2021/22
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6.5. Penalties
2021/22 saw an increase in the value of financial penalties imposed by us compared to recent years.
The largest single penalty was £147m imposed on Credit Suisse for failures in relation to obligations to establish, implement and maintain adequate systems and controls to counter the risk of the firm being used to facilitate financial crime. Further large penalties imposed include Lloyds Banking Group (£90m) and GAM International (£9m).
NatWest was fined £264.8m following three convictions of failing to comply with the Money Laundering Regulations 2007. As this was a criminal case, the financial penalty was imposed by the court, not us. Therefore, it has not been included in the table below, which covers regulatory financial penalties imposed by us only.
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Table 7: Financial penalties imposed by the FCA annually: overall and by subject type
|
2019/20 |
2020/21 |
2021/22 |
|
|---|---|---|---|
|
Total number imposed |
15 |
10 |
12 |
|
Value |
£224.4m |
£189.8m |
£331m |
|
Number imposed upon firms |
12 |
8 |
9 |
|
Value |
£224.1m |
£189.6m |
£330.6m |
|
Number imposed upon individuals |
3 |
2 |
3 |
|
Value |
£0.3m |
£0.2m |
£0.4m |
6.6. Redress
Separate to any financial penalty imposed by us, some firms who we investigated voluntarily decided to make payments to consumers to cover losses suffered through the misconduct that we investigated. Firms made over £23.5m in this kind of payment during 2021/22. US$200m worth of debt relief was also agreed.
6.7. Proceeds of crime
Confiscation orders
A confiscation order is made after conviction to deprive a defendant of the benefit they have obtained from crime. In the graph below, ‘value’ represents total value of benefit at the time of the confiscation order. This figure is the amount that the court decides that the defendant has benefitted from as a result of or in connection with their criminal conduct, known as ‘the benefit amount’. It is not the amount that they are necessarily ordered to repay. The court will determine the amount that the defendant has available to repay the benefit amount, known as ‘the available amount’. If the available amount is more than the benefit amount, the defendant will be ordered to repay the benefit amount. If the defendant shows that the available amount is less than the benefit amount, then the defendant will be ordered to repay the available amount.
The amount that the defendant is ordered to repay is referred to as the ‘assessed recoverable amount’ in the graph below.
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Confiscated funds: compensation and Home Office payments
Where appropriate, the court may order compensation to victims, following a confiscation order, to be paid out of the confiscated funds. Any residual funds confiscated are paid to the Home Office. Of the funds that are paid to the Home Office, a percentage is returned to the FCA under the Asset Recovery Incentivisation Scheme (the Scheme), to be used to promote criminal investigation and asset recovery work. The percentage is determined by the Home Office in line with the yearly parameters of the Scheme.