Published: 28th September 2015

Currently firms are supervised in accordance with their conduct categorisation which ranges from C1 to C4 with the latter firms being subject to a much lighter regulatory touch (firms will have received a letter from the Regulator confirming their classification). Supervision work is divided into three ‘Pillars’:

  • Pillar 1 involves proactive firm supervision
  • Pillar 2 is event-driven reactive supervision
  • Pillar 3 is based upon issues and product supervision

See Regulatory Roundups 44 & 54 for further details.

Last December the FCA published ‘Our Strategy‘ which set out the outcomes from its strategic review which had been approved by the Board in the previous month – see Regulatory Roundup 61.

As part of its ‘sharper focus’ was the proposed removal of the distinction between C3 and C4 firms and supervising firms on a more risk-based model.

The latest FCA Regulation round-up advises that the FCA is making further changes to its supervisory model which will include a move away from the C1 – C4 conduct categories.  Instead firms will be categorised as either ‘fixed portfolio‘ or ‘flexible portfolio‘.

Fixed portfolio firms will continue to be subject to firm or group-specific supervision (Pillar 1) while flexible portfolios will be subject to Pillar 2 and Pillar 3 only as in “flexible portfolio firms will be proactively supervised through a combination of market-based thematic work, as well as communication, engagement and education activity aligned to the key risks we have identified for the sector”.

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