FCA’s 2023/24 Business Plan: Commitment to Removing Non-Compliant Firms from Regulated Market

On 05 April 2023, the Financial Conduct Authority (FCA) released its business plan for 2023/24, in which it stated its intention to continue identifying and cancelling firms that do not meet Threshold Conditions quickly and at scale, removing them from the regulated market. This commitment has particular relevance to Contract for Difference (CFD) firms, which have been a focus of the FCA’s regulatory efforts in recent years.

CFD firms provide a type of financial derivative product that allows investors to speculate on the price movements of underlying assets, such as shares, currencies, or commodities, without actually owning them. These products are complex, high-risk, and often marketed to retail investors who may not fully understand their nature or the potential for significant losses.

In recent years, the FCA has taken a more proactive approach in regulating CFD firms, in order to protect consumers from harm and maintain market integrity. This has included introducing stricter rules on leverage, mandatory risk warnings, and enhanced supervision and enforcement.

However, some CFD firms have continued to operate in ways that may not meet the FCA’s Threshold Conditions, which are a set of minimum regulatory standards that firms must meet to obtain and retain their authorisation to operate in the UK. These conditions include requirements for financial resources, systems and controls, conduct of business, and governance.

If the FCA identifies a CFD firm that is not meeting the Threshold Conditions, it may take action to cancel its authorisation, which would effectively remove it from the regulated market. This could involve imposing sanctions, such as fines or restrictions on activities, or using its enforcement powers to prosecute individuals or firms for misconduct.

Overall, the FCA’s commitment to identifying and cancelling firms that do not meet Threshold Conditions quickly and at scale is an important step in maintaining a healthy and sustainable financial services industry in the UK. For CFD firms, it reinforces the need for them to operate in a responsible and compliant manner, and to be mindful of the risks and consequences of non-compliance.