Who Are They and What Do They Do?

Curious About How the FCA Oversees Financial Markets and Services in the UK? Learn How FCA Certification Works, How the FCA Regulates Equity Release, and More…
  • Last Updated: 07 Feb 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.


Francis Hui

Key Takeaways

  • The Financial Conduct Authority (FCA) is a regulatory body in the UK that oversees the financial markets to ensure their proper and ethical functioning.
  • It supervises and regulates financial firms providing services to consumers and maintains the integrity of the UK’s financial markets.
  • It regulates equity release by implementing guidelines and rules that providers must comply with to protect consumers and ensure fairness.
  • The FCA is crucial for investors over 65 as it safeguards their interests by setting standards for financial firms and products like equity release.
  • It protects your equity release investments by ensuring that financial firms follow specific regulations and standards, providing an added layer of security for your investment.

The Financial Conduct Authority (FCA), a crucial regulatory body in the UK financial industry, is often recognised but not always well understood in terms of its exact functions and operations.

When it comes to the intricacies of power, accountability, and the promise of fair finance, the inner workings of the FCA can be difficult to unravel.

In This Article, You Will Discover:

    In this article, the Every Investor team will delve into the Financial Conduct Authority's role and purpose, its involvement in the equity release market, "Are equity release mortgages regulated?", and the risks and concerns associated with equity release that have been highlighted by the FCA.

    This comprehensive guide to FCA is meant to educate and inform consumers and investors about its role and operations.

    At Every Investor, we're committed to maintaining the highest standards of accuracy and comprehensiveness. Our researchers have spent hundreds of hours analysing the FCA's latest official documentation, independent reports, and industry publications. 

    As we take a deep dive into this enigmatic authority, prepare to unlock a deeper understanding of the Financial Conduct Authority, that unsung guardian that defines our financial security.

    What Is the Role of the Financial Conduct Authority in Equity Release?

    The Financial Conduct Authority (FCA) plays a critical role in ensuring the integrity of equity release products.

    As regulators, they set standards and guidelines that firms offering equity release must adhere to, protecting consumers from potential financial harm.

    They assess each firm's compliance, ensuring transparency, fairness, and the promotion of competition. Additionally, the FCA plays an educational role, equipping consumers with knowledge about the risks and benefits of equity release.

    The FCA's unique 'Treating Customers Fairly' initiative is central to this, promoting customer-centric practices amongst firms. Their commitment to consumer protection makes the FCA a crucial player in the equity release sector.

    What’s the Financial Conduct Authority?

    The Financial Conduct Authority (FCA) is an independent, non-governmental regulatory body in the UK, charged with overseeing and regulating financial firms—everything from banks and insurance companies to credit unions and financial advisors.1 

    The FCA regulates 50,000 financial firms in the UK, and its primary purpose is to safeguard the integrity of the UK’s financial markets, promoting fair treatment and transparency for consumers, whilst ensuring the industry remains stable and competitive.2

    In simpler terms, the FCA’s like a watchful guardian making sure that financial companies play fair and keep the customer's interests in mind.

    The FCA's Role & Purpose

    The FCA’s role and purpose revolve around ensuring that the financial markets in the United Kingdom remain secure by protecting consumers, maintaining a stable sector, and encouraging a productive rivalry between financial service companies.3 

    The FCS oversees firms, including banks, insurance companies, investment firms, consumer credit firms and other financial services, to ensure they abide by standards that benefit consumers and the economy.4

    By imposing fines, revoking licenses, and even pursuing legal action, the FCA has the authority to look into and prosecute companies and people who violate its rules and standards. 5

    In terms of its operational focus, the FCA’s decided to prioritise four areas:

    • Future-proofing financial services.
    • Cutting down on and preventing financial crime.
    • Prioritising the needs of the consumer.
    • Improving the UK’s position in international wholesale markets.6

    How Does the FCA Operate?

    The FCA operates outside of the UK government and receives its funding from fees paid by members of the financial services sector. 

    It sets standards, investigates and enforces where these are not met, and provides services to protect consumers.7 

    The FCA focuses more on results than on the process, aiming for better outcomes for consumers and the market instead of just enforcing rules.8

    The FCA's approach to regulation is based on these three key principles: 

    • safeguarding consumers, 
    • encouraging competition, and
    • improving the integrity of the market.

    The FCA & Innovation

    When it comes to the FCA and innovation, the institution also promotes services through its Regulatory Sandbox. 

    This creative concept allows firms to experiment with novel goods and services in a controlled setting, with support and guidance from the FCA. 

    The aim is to encourage new and innovative ways of delivering financial services that benefit consumers and promote competition.

    The FCA’s Regulatory Sandbox has supported over 170 firms since its launch in 2016, and has helped to develop innovative financial products and services, such as digital identity verification and peer-to-peer lending platforms.9

    The FCA is also responsible for overseeing the UK's transition away from LIBOR, the lending benchmark that’s set to be phased out by September 2024 due to concerns about its reliability and accuracy.10 

    The FCA has launched several initiatives to help financial institutions transition to alternative benchmarks, such as SONIA (Sterling Overnight Index Average) and SOFR (Secured Overnight Financing Rate).11

    How’s the FCA Funded?

    The FCA’s funded by the firms it regulates, through annual fees and levies.12 

    These funds are used to cover operational costs, supervise firms, and enforce regulatory standards. 

    Did you know?

    Any fines collected from non-compliant firms (minus enforcement costs) go directly to the UK Treasury, not the FCA.13

    The FCA’s Achievements

    The FCA’s achievements include securing customer refunds worth £30m from unauthorised companies and cancelling the authorisation of 201 firms for standards violations in 202214, and banning over 10,000 deceptive social media ads in 2022 and 2023.15

    In 2022, the FCA also worked to ensure that steelworkers affected by the British Steel Pension Scheme scandal will receive on average £45,000 in compensation for unsuitable advice.16

    The FCA’s Challenges

    The FCA’s challenges include improving its digital capabilities, developing the necessary frameworks and skills to regulate financial promotions associated with particular crypto-assets, and securing increased operational funding.17 

    Now that we’ve taken a closer look at how the FCA works, let's explore its role in the equity release sector.

    Does the Financial Conduct Authority Regulate the Equity Release Market?

    The Financial Conduct Authority regulates the equity release market in the UK, setting the rules and guidelines that all providers must adhere to.18 

    This includes ensuring financial advice given to consumers is appropriate, clear, and not misleading19, as well as regulating product standards. 

    The FCA’s Involvement in the Equity Release Market

    The FCA's involvement in the equity release market includes setting standards for equity release providers and advisors, monitoring their compliance with these standards, and taking enforcement action against those that breach its rules and regulations.20 

    The FCA also provides guidance on managing the risks associated with equity release21 and allows consumers to check the registration of equity release providers and advisors.22

    Legal Requirements for Equity Release Providers

    The legal requirements for equity release providers include ensuring that the borrower has their own solicitor to represent and advise them on the equity release process.23

    Equity release providers are legally required by the FCA to provide clear, fair, and not misleading information, ensure their services meet the needs of their customers, and treat customers fairly if they fall into arrears.24

    FCA Regulation of Equity Release Advisors

    FCA regulation of equity release advisors includes ensuring they meet certain standards of conduct and competence.25

    Equity release advisors must be authorised by the FCA.26 

    They're also required to give advice that’s suitable and in the best interests of the client, fully considering their needs, circumstances, and aspirations.27 

    Advisors must also be open about the fees they charge and any possible conflicts of interest they may have.

    3 Benefits of Using FCA-Regulated Equity Release Services

    The three benefits of using FCA-regulated equity release services are all focused on consumer protection through stringent regulation adherence. 

    Let’s take a quick look at these three benefits:

    • Customers receive clear and unbiased advice, tailored to their needs. If a consumer feels that they have been treated unfairly by an FCA-regulated equity release provider or advisor, they can make a complaint to the firm and, if necessary, to the Financial Ombudsman Service (FOS).29
    • Providers must treat customers fairly, ensuring transparent terms and conditions. For example, they must ensure that their communications with consumers are accurate and can be clearly understood. 
    • FCA-regulated firms are required to have robust complaints-handling procedures in place and provide consumers with access to a free complaints service. If a provider fails to meet their obligations, customers have recourse to the Financial Ombudsman Service or the Financial Services Compensation Scheme. 

    Does Equity Release Carry Risks & Concerns?

    Yes, equity release carries risks and concerns, which must be addressed by FCA-regulated equity release providers and advisors with clear and transparent information.

    Some of these risks include:

    • Debt accumulation, as the interest on an equity release loan can compound over time, potentially exceeding the property's value. 
    • Equity release may affect eligibility for state benefits and reduce the value of your estate. 
    • You may face Early Repayment Charges, should your circumstances change and you decide to repay your loan early.
    • If you take out a home reversion plan, you will not be given your home's full market value in return.
    • There’s a limit on how much equity you can access, and there’s the possibility that you may use your available equity too early.
    • Taking out equity release will reduce the inheritance you’re able to leave behind.

    FCA Guidance on Managing the Risks Associated with Equity Release

    FCA guidance on managing the risk associated with equity release emphasises the importance of professional advice. 

    The FCA insists providers ensure potential customers understand all implications, including how equity release could affect tax status, benefit eligibility, and inheritance. 

    The FCA also promotes comparison and exploration of other possibilities in order to make the most appropriate decision for your individual circumstances.

    How to Check FCA Registration

    To check FCA registration, visit the FCA's Financial Services Register online and enter the equity release provider or advisory firm's name. 

    The register will show if the firm’s FCA-registered and what activities it’s authorised to undertake.

    The Financial Services Register also provides information on regulated firms and individuals, including details of their permissions, contact details, and disciplinary history.

    Importance of Choosing an FCA-Regulated Equity Release Provider

    The importance of choosing an FCA-regulated provider comes down to the fact that it gives consumers access to protections not otherwise available. 

    These protections include impartial advice, fair treatment, and the right to complain to the Financial Ombudsman Service if things go wrong.

    Common Questions

    What’s the FCA’s Role in the Equity Release Market?

    How Does a Financial Institution Get an FCA Certification?

    What’s the Financial Conduct Authority’s Complaints Process for FCA-Regulated Equity Release Providers?

    Do I Need to Worry About FCA Scams?

    What’s Consumer Duty and What Does It Mean for Equity Release?

    What’s the Financial Services Register?

    What’s the FCA Handbook?

    Where Can I Find the FCA Warning List?

    Can I Do an FCA Company Search?

    Who is the Financial Conduct Authority in the UK?

    What Does the Financial Conduct Authority Do?

    How Does the Financial Conduct Authority Regulate Equity Release?

    Why is the Financial Conduct Authority Important for Investors Over 65?

    Does the Financial Conduct Authority Protect My Equity Release Investments?

    In Conclusion

    While equity release can provide financial benefits, it also carries significant risks and potential pitfalls.

    It's therefore vital to seek professional, FCA-regulated advice, understand all implications, compare alternatives, and take advantage of the protections offered by FCA regulation. 

    Taking these steps can enhance the safe and effective use of equity release, so be sure to check that your equity release provider and advisor are authorised and regulated by the Financial Conduct Authority.

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