FCA — definition for UK financial services

FCA (Financial Conduct Authority)

The Financial Conduct Authority (FCA) is the UK's conduct regulator for around 42,000 financial services firms and the prudential regulator for most of them. It operates under the Financial Services and Markets Act 2000 (FSMA), with a strategic objective of ensuring markets work well and three operational objectives: consumer protection, market integrity and effective competition.

The Financial Conduct Authority (FCA) is the UK’s financial services conduct regulator, established under the Financial Services Act 2012 and operating within the framework of the Financial Services and Markets Act 2000 (FSMA). It regulates the conduct of around 42,000 firms and acts as prudential regulator for the majority of them, those not supervised by the Prudential Regulation Authority (PRA). The FCA is operationally independent of government and funded by the firms it regulates.

The FCA’s statutory objectives

Section 1B of FSMA gives the FCA a single strategic objective: ensuring that the relevant markets function well. This is underpinned by three operational objectives: securing an appropriate degree of protection for consumers (section 1C), protecting and enhancing the integrity of the UK financial system (section 1D), and promoting effective competition in the interests of consumers (section 1E). The Financial Services and Markets Act 2023 introduced a secondary objective requiring the FCA to facilitate the international competitiveness and growth of the UK economy over the medium to long term.

The FCA’s powers

The FCA authorises firms and individuals, supervises them on a risk-based basis, and makes the rules contained in the FCA Handbook. Its enforcement toolkit includes financial penalties and public censure under section 206 of FSMA, prohibition orders against individuals under section 56, variation or cancellation of permissions, restitution orders, and criminal prosecution for offences including insider dealing under the Criminal Justice Act 1993 and unauthorised regulated activity under section 19 of FSMA. The FCA also approves and oversees senior managers under the Senior Managers and Certification Regime (SM&CR).

Who it affects

Every authorised UK firm and the individuals performing controlled or certified functions within them fall within the FCA’s remit, with the depth of supervision scaled to the firm’s size, complexity and potential to cause harm.

FCA Handbook, PRA and SM&CR.

Frequently asked questions

What are the FCA's statutory objectives?

Under section 1B of the Financial Services and Markets Act 2000 (FSMA), the FCA has a single strategic objective, ensuring relevant markets function well, supported by three operational objectives in sections 1C to 1E: the consumer protection objective, the integrity objective, and the competition objective. The Financial Services and Markets Act 2023 also added a secondary objective to facilitate the international competitiveness and growth of the UK economy.

What powers does the FCA have?

The FCA's powers derive from FSMA 2000. It can authorise and supervise firms, make binding rules through the FCA Handbook, approve senior managers under SM&CR, impose financial penalties and public censures under section 206, withdraw authorisation, prohibit individuals under section 56, secure restitution, and bring criminal prosecutions for offences such as insider dealing and unauthorised business.

What is the difference between the FCA and the PRA?

The FCA is the conduct regulator for all UK financial services firms and the sole prudential regulator for most of them. The Prudential Regulation Authority (PRA), part of the Bank of England, is the prudential regulator only for systemically important firms (banks, building societies, credit unions, insurers and major investment firms), which are therefore 'dual-regulated' by both bodies.