Regulatory Shake-Ups and What They Mean for You

Unknown Speaker

Hello and welcome back to the B-Compliant AI podcast. This week the FCA released Consultation Paper CP25/13, which is a pretty big deal for complaints reporting. It’s the FCA’s most significant review since 2015, and they’re basically proposing to consolidate five separate reporting returns into one streamlined process. This includes things like DISP 1, Consumer Credit, and others—all rolled into one.

Rachel MacRae

Oh, that sounds like a relief for firms. Juggling all those different returns must've been a nightmare. But why now?

Unknown Speaker

Well the FCA’s trying to cut down on administrative burden. For example, firms won’t have to deal with overlapping submissions anymore. Instead, they’ll just do one return twice a year—once for June 30th and another for December 31st. And this applies to all firms equally, so it's kinda levelling the playing field.

Rachel MacRae

Twice a year? That seems manageable. But, wait—does this mean everything’s gonna get published in the same way?

Unknown Speaker

Not quite the same. The FCA’s keeping the threshold for firm-level reporting at 500 complaints over six months. But what’s changing is they’re doing away with group-level reporting—so the data will be more focused on individual entities rather than big corporate groups. It should make the information more useful and transparent.

Unknown Speaker

The FCA wants to improve how consumer outcomes are measured, so the new framework will include more data on what happens after a complaint is made.

Rachel MacRae

That sounds like a positive. It's not just the volume of complaints anymore, but how they’re actually resolved. Sounds like progress to me.

Unknown Speaker

I think so too, but change takes time. The consultation ends July 2025, and firms have a whole year after the policy statement to adapt. So, you know, there’s breathing room.

Rachel MacRae

As long as no one’s slacking during that breathing room! I mean, December 2026 will creep up fast.

Unknown Speaker

Absolutely. And it’s a shift that firms need to prepare for—simplifying doesn’t mean it’s easier to ignore the details.

Unknown Speaker

And that brings us to why compliance is such a crucial focus for the FCA. Take Strowz Limited, for example—a case that highlights what happens when compliance goes horribly wrong. The FCA found the firm was mishandling client funds, mixing them with its own, and even allowing third-party access to client accounts. That’s... huge.

Rachel MacRae

Wait, what? How does that even happen? Third parties accessing client accounts? That feels dodgy straight away.

Unknown Speaker

It’s beyond dodgy and raises major questions about governance and control. The firm was operating outside its regulatory permissions, and to top it off, they transferred almost £1 million pounds from a client account straight into their operational account. Then, most of that ended up with a third party linked to “Company A.” That’s not good governance, to say the least.

Rachel MacRae

Not good? That’s, like, every compliance horror story rolled into one. Mixing funds, dodgy transfers... you name it.

Unknown Speaker

Exactly. Proper systems and controls are, the backbone of protecting clients and ensuring regulatory compliance. At Strowz, they were found to be inadequate—or, just non-existent in some areas. This left the FCA no choice but to bar them from regulated activities altogether.

Rachel MacRae

I mean, it’s kinda hard to believe that a wealth management firm was running like this. What do firms need to do to avoid ending up here?

Unknown Speaker

Well, it all starts with governance—strong governance. That means clear accountability, rigorous controls over client funds, and ensuring all operations align with regulatory permissions. Firms also need to regularly review their systems to identify and close any gaps. And let’s not forget training; staff need to understand the rules and the risks.

Rachel MacRae

Yeah, because if they don’t, well, Strowz is, like, the example of what happens. It's a cautionary tale for sure and highlights the importance of having an external compliance support provider (like B-Compliant) come in and give your firm the once over every so often.

Unknown Speaker

It really is. And the thing is, even small lapses can spiral into bigger issues. Look at Strowz—what probably started as weak controls led to, what, nearly a million pounds mishandled and, ultimately, the collapse of trust in their business.

Rachel MacRae

Oh, it snowballed all right. And now they’re barred, and their reputation is in tatters... I guess it’s a brutal yet necessary lesson for the industry.

Unknown Speaker

Absolutely. It’s a clear message from the FCA: governance isn’t optional, and poor practices won’t be tolerated.

Unknown Speaker

Rachel, speaking of the industry's lessons and recoveries, the FSCS outlook for 2025/26 actually brings some encouraging news. They’ve reduced their levy forecast from £394 million to £356 million—which is quite a drop. This change is mainly thanks to stronger-than-expected recoveries in the last 12 months, as well as decreases in claims in specific areas like Life Distribution and Investment Intermediation. It’s a sign that, with improved governance and controls, we’re seeing positive shifts.

Rachel MacRae

Oh, that’s a nice change for once. I mean, usually we’re talking about levies going up, not down. Do we know what’s behind these stronger recoveries?

Unknown Speaker

It’s largely about efficiency. The FSCS has been refining its recovery processes and using technology like data analytics and, get this, machine learning. They’re employing these tools to better predict claims patterns and identify recovery opportunities that might’ve been missed otherwise.

Rachel MacRae

Machine learning? Okay, I love that. So, they’re kinda getting smarter at figuring out who owes what and how to recover it? That’s really clever.

Unknown Speaker

Exactly. And it’s not just about recoveries. They’re using these technologies to improve compensation strategies too, especially in areas like advice claims, which are often highly complex. The FSCS even acknowledges that over two-thirds of those claims fall into that “very complex” category.

Rachel MacRae

Wow, two-thirds? That’s a lot. But using tech to manage complexity—it just makes sense. Like, if the system’s more efficient, it’s gotta be better for... well, the claimants and the industry, right?

Unknown Speaker

Definitely. Efficiency reduces both time and cost, which translates to more focused support for claimants and, ideally, fewer surprises for firms footing the levies. The FSCS also said it’s developing a five-year strategy to align operations with longer-term goals. This includes improving customer outcomes and enhancing its partnerships with the broader financial sector.

Rachel MacRae

I love the sound of their proposed five-year strategy? It's very forward thinking. That’s gotta build more trust in the system overall.

Unknown Speaker

That’s the idea. Trust is the backbone of consumer protection, and initiatives like this should reinforce faith in how the FSCS operates. They’ve had some solid wins recently, but there’s definitely more work ahead.

Rachel MacRae

For sure, but it’s good to hear some genuine progress, you know? I mean, it’s not every day you hear about reduced levies and smarter systems.

Unknown Speaker

True. It’s a step in the right direction, and it’s a reminder that even complex systems can evolve to be more effective over time.

Rachel MacRae

Absolutely. And on that note—what a great way to end the episode, don’t you think?

Unknown Speaker

I agree. Well, thanks for joining us today, everyone. If you found this helpful, don’t forget to tune in next time. Take care and bye for now!

Rachel MacRae

Bye everyone!