The Financial Conduct Authority (FCA) released a document this Wednesday outlining the limits of its responsibilities towards consumers.
Aimed at the average Joe, who may be unsure as to why the FCA has not done more to protect them, the first annual Perimeter Report illustrates the problems that the regulator faces when trying to handle certain incidents.
As a slightly over-the-top example, the financial watchdog described the case of a vet that provides pet insurance. Those insurance services will be governed by FCA rules, but the regulator cannot do anything if a vet is providing poor care to cats and dogs.
The point the FCA was trying to make is that, in many instances, a company engages in some activities that are under its authority. But it might also do different things outside of the FCA’s regulatory umbrella. And if it behaves poorly when doing those things, there isn’t much the regulator can do about it.
ISPs and binary options under the cosh
More interestingly, at least for our readers, will be the comments the British regulator made regarding financial technology companies and retail trading products.
The FCA said, for instance, that it was considering increasing the level of control it has over internet service providers (ISPs) to remove fraudulent material.
“Internet or social media adverts reach millions of people in an instant, challenging our ability to detect and act against misleading adverts,” wrote the regulator.
“Historically, we asked traditional media to voluntarily remove adverts we believed to be fraudulent. This is harder to achieve with internet service providers.”
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Along with additional controls over ISPs, the financial authority also said that it was developing a set of automated tools that can identify fraudulent adverts or marketing materials for products that could require regulatory supervision.
Aside from internet service providers, the FCA’s report addresses retail products – notably binary options – being sold by offshore brokers.
As our readers will know, the British regulator updates its warning list on an almost daily basis to address the dangers posed by firms that do this.
Stopping it, as the FCA said in its report, is not easy. The regulator noted that it is “closely involved with initiatives to better align international approaches to common policy and regulatory issues.”
That fits with the sentiment expressed by Jude Bahnan, a non-executive director at Swissquote, who said at the recent iFX Expo in Cyprus that British regulators are speaking to their Australian counterparts about brokers offering high leverage to traders via their ASIC-regulated entities.
Current regulations not fit for cryptocurrency
Lastly, the regulator discussed some of the problems it faces when dealing with cryptocurrencies.
The financial watchdog wrote in its report that the often intangible, multi-functional nature of digital assets makes them much harder to regulate and that the FCA’s existing powers may not be suited to the nascent asset class.
“[There are] challenges in identifying whether the existing perimeter is fit for purpose to manage the potential harm cryptoassets pose,” said the regulator. “The Treasury will consult this year on cryptoassets currently outside the perimeter.”