Reflections and Projections on FCA Enforcement

As we enter 2025, the UK’s Financial Conduct Authority (FCA) finds itself at a key juncture. Over the past year, it has made progress in refining its enforcement strategy, adopting a more proactive approach to interventions, and increasing the pace and focus of at least some of its investigations. These efforts reflect the FCA's ongoing commitment to improve efficiency and may give firms opportunities to negotiate terms to avoid enforcement, or to seek more favourable settlement. At the same time, the FCA has continued to focus on familiar themes: tackling financial crime, safeguarding consumer protection, and strengthening market integrity. These developments, however, come alongside broader calls for reform, including a recent parliamentary report that underscores the need for greater transparency and cultural change both across the financial sector and within the FCA itself. 

Looking ahead, key areas of attention will likely include continued emphasis on consumer redress and the introduction of new policies including those addressing non-financial misconduct. We explore these evolving themes below and offer insights into what we expect from the regulator in 2025. 

Enforcement reflections from 2024 

Over the past 12 months, the FCA’s enforcement strategy has continued to evolve, driven by both strategic shifts and recurring themes. The number of open investigations decreased from 224 to 188. This appears to reflect continuing effort by the FCA to close long-running investigations, and the opening of a relatively small number of new investigations, and reflects efforts to streamline the enforcement caseload under the new leadership in the Enforcement Division. Key factors contributing to the trend towards fewer enforcement investigations include the FCA’s claims to have “raised the bar” for opening investigations and strengthening its pre-investigative triage processes to prioritise cases “most likely to deliver industry wide deterrence”. The pace of some investigations has also improved, further contributing to the higher rate of closures. 

Another significant trend in 2024, that likely also contributed to streamlining the regulator’s enforcement caseload, was the FCA’s shift towards more proactive interventions. This was evident in the sharp rise in skilled person reviews, which nearly doubled. This greater use of intervention powers highlights the regulator’s stated preference for early remediation measures over formal enforcement action. A notable example of this strategy were the circumstances that gave rise to the £28.9 million fine imposed on Starling Bank in October 2024: the FCA gave the firm multiple opportunities to remediate before ultimately launching a formal enforcement investigation. 

At the same time, the frequency and size of financial penalties increased modestly in 2024, reaching approximately £176 million, a marked increase from the relatively low total of £53 million in 2023. Notably, large penalties were imposed on several firms for unfair customer treatment. Volkswagen Financial Services received a fine for failing to treat customers in arrears or financial difficulty fairly. Similarly, TSB Bank and HSBC were fined for shortcomings in their treatment of customers in arrears or financial distress. Forex TB was fined for pressuring customers to put their money at risk through “contract for differences” trading. Challenger banks also faced increased scrutiny for deficiencies in their financial crime controls, with institutions like Coinbase, Metro Bank, and Starling Bank receiving substantial penalties. However, the year’s highest fine of £40 million (for Barclays) related to listing rule breaches that occurred more than 15 years ago during the 2008 financial crisis.

Consumer redress in the spotlight 

Consumer redress also emerged as a central theme in 2024, shaped by significant regulatory actions, judicial decisions, and the FCA’s reform proposals. The FCA’s decisions last year against H2O and Link Fund Solutions highlighted a clear strategic shift toward prioritising compensation for harmed investors. In both cases, the regulator chose to prioritise securing substantial redress schemes from the firms’ limited resources rather than imposing financial penalties, signalling a commitment to restitution as a primary enforcement goal. 

Adding another dimension to the evolving landscape in 2024 was the Court of Appeal’s landmark ruling in FCA v BlueCrest Capital Management. In its ruling the Court of Appeal effectively broadened the scope of the FCA’s own initiative requirement (OIREQ) powers under the Financial Services and Markets Act 2000 (FSMA), allowing the FCA, in principle, to mandate a single firm redress scheme without needing to establish that there has been loss, breach of duty, or causation, as would be required in a multi-firm scheme. This interpretation of the relevant provisions in FSMA has sparked concern amongst industry participants, as subject to any appeal to the Supreme Court, the decision gives the FCA a wide, largely untrammelled power to impose redress requirements on single firms.

The FCA’s focus on consumer harm also extended to its ongoing review into motor finance commission arrangements, initiated in early 2024. This review examines whether certain types of commission arrangements, which were banned in 2021, caused harm to consumers prior to the ban. A particularly key development in this area came in the form of the Court of Appeal’s decision in Johnson and Wrench v FirstRand Bank and Hopcraft v Close Brothers, which found that car dealers could not receive commission without fully disclosing it to customers and obtaining informed consent. This judgment goes beyond the standards set by applicable regulatory rules and guidance and its appeal to the Supreme Court will likely shape the FCA’s future approach to its motor finance review.

At the same time, following a commitment from the Chancellor “to create a surer climate for investment”, the FCA and the Financial Ombudsman Service (FOS) launched a joint "Call for Input" to modernise the consumer redress framework. This initiative aims to address inefficiencies in managing large numbers of complaints about similar issues, which have surged in areas like motor finance and consumer credit affordability.

Taken together, these regulatory reforms, judicial decisions, and the FCA’s evolving priorities point to a potentially transformative period for consumer redress. These developments will undoubtedly shape the landscape into 2025 and beyond. 

What’s on the agenda for 2025?

The behaviour of business leaders remains under intense scrutiny, with high-profile resignations and investigations drawing attention to the personal conduct of senior figures. Reflecting this trend, the FCA is increasingly addressing workplace misconduct. A key development in this area is the FCA’s anticipated policy statement on diversity and inclusion (D&I), which will integrate non-financial misconduct (NFM) into the regulator’s conduct rules and fitness and propriety assessments. This move underscores a broader shift towards holding individuals and firms accountable for unethical leadership and workplace standards, extending beyond the traditional focus on financial misconduct. 

Another key policy change expected to be finalised in 2025 is the FCA’s proposals to publicly name firms under investigation. The original proposals generated a storm of criticism from stakeholders, prompting the regulator to reconsider and outline revised plans for further engagement. Under the revised proposals, firms will now receive 10 days’ notice of an announcement (up from one day), with an additional 48 hours’ notice if the FCA decides to proceed with a public disclosure. The FCA also proposes to explicitly consider the potential reputational impact on firms as part of the public interest test - an element that was absent from the original proposals. Despite these adjustments, the updated proposal may still pose increased reputational risks for firms under investigation. A final policy decision is expected in the first quarter of this year. 

New risks on the horizon

As we look ahead, firms in the regulated space face an increasingly complex risk landscape that could extend beyond FCA enforcement. A notable trend is the risk of section 90/90A FSMA claims in the wake of deferred prosecution agreements (DPA) or guilty pleas in relation to criminal investigations conducted by the Serious Fraud Office. In these cases, investors have sought redress for losses tied to allegedly misleading public statements or omissions in disclosures related to the conduct underlying the DPA or prosecution. This trend raises the prospect of similar securities claims arising from FCA enforcement actions, particularly in cases involving high-risk disclosures, such as ESG reporting or significant litigation updates. If this trajectory continues, listed firms may face a new wave of investor litigation linked to regulatory outcomes, adding to the associated risks of enforcement action and significantly lengthening the "tail" of consequential risks that can follow on from enforcement action.