FCA Redress, Recordkeeping, and Crypto: Regulatory Shifts in Focus

Unknown Speaker

Hello and welcome back to the B-Compliant Podcast! I’m Vicky Pearce, and as always, I’m joined by Rachel MacRae. Rach, how are you doing today?

Rachel MacRae

Oh, I’m great, Vicky! I’m ready to dive into what’s been a pretty eventful week in compliance. There’s a lot to unpack, isn’t there?

Unknown Speaker

There is. And I think we have to start with the FCA’s announcement on the proposed redress scheme for motor finance. It’s a big one, not just for motor finance firms, but for the whole sector, really. The FCA’s looking at a wide-reaching scheme for customers who might’ve been treated unfairly—especially around commission arrangements that weren’t properly disclosed. It’s a bit of a shift, isn’t it?

Rachel MacRae

Yeah, it really is. I mean, even if you’re not in motor finance, you can’t ignore this. The FCA’s talking about moving away from that fragmented, complaints-driven approach to something much more regulator-led and, well, proactive. They want redress to be quicker, fairer, and less reliant on individual complaints. It’s a big change in tone.

Unknown Speaker

And the numbers are eye-watering. The FCA’s early estimates put the cost to industry at a minimum of £9 billion pounds, possibly up to 18 billion. Most individual compensation payments are expected to be under £950 pounds per agreement, but when you think about the sheer volume of agreements, it’s massive. It reminds me a bit of the PPI redress days, actually. I remember back then, the compensation payments gave a real boost to household spending. I wonder if we’ll see something similar this time, especially with the cost-of-living pressures people are facing now.

Rachel MacRae

That’s a good point. The economic impact could be significant, just like with PPI. But I think what’s really interesting is what this signals for the future. The FCA’s been saying for a while that the complaints and redress process is too fragmented and reactive. This scheme could be the first real sign of them putting their ambition for a more streamlined, regulator-led approach into practice. It does make you wonder where they’ll focus next, doesn’t it?

Unknown Speaker

Yeah, and for compliance teams, it raises a lot of questions. I mean, back in the PPI days, compliance teams were scrambling to interpret the rules and get processes in place. Now, with the FCA taking a more hands-on approach, firms will need to be ready for a different kind of scrutiny. It’s not just about handling complaints as they come in—it’s about being prepared for regulator-driven redress, possibly across other sectors too. I suppose the big question is: are your systems and records robust enough to stand up to that?

Rachel MacRae

Exactly. And with the consultation expected by October and payments likely starting in 2026, there’s not as much time as it sounds. Firms whom this might impact need to start thinking now about how they’d handle a regulator-led redress process, even if they’re not directly affected by this scheme. It’s a real shift in the landscape.

Rachel MacRae

So, moving on, the FCA’s also been busy with its review into off-channel communications. This is all about how firms are managing the risks when staff use channels outside the firm’s permitted and recorded ones—think WhatsApp, personal mobiles, even smart watches now. It’s especially relevant for MiFID investment firms under SYSC 10A, but honestly, the lessons apply much more widely.

Unknown Speaker

Yeah, and what stood out to me was that, even though all the firms in the review had made improvements, there were still 178 breaches of internal policy across just 8 of the 11 firms in a year. And a lot of those breaches were at director level or above. That’s a bit worrying, isn’t it?

Rachel MacRae

It is. And it shows that just having policies isn’t enough. The FCA made it clear: recordkeeping isn’t just a box-ticking exercise, it’s a key control for detecting misconduct and protecting clients. I actually saw this first-hand with a client recently. They had all the right policies on paper, but when we did some scenario-based training, it turned out staff weren’t always clear on what needed to be recorded. It was a real eye-opener for them.

Unknown Speaker

That’s such a good example. The FCA highlighted some good practices—like updating policies for new tech, using helplines, and enhancing surveillance tools with AI and natural language processing. Some firms are even issuing corporate devices to keep business and personal use separate, though that’s not a regulatory requirement. But the key thing is, you can’t outsource accountability. Even if you use third-party vendors for surveillance, you’ve got to keep a close eye on their performance. The FCA found issues with things like transcription errors and data delays, so firms need to stay on top of that.

Rachel MacRae

And management information—MI—was another big differentiator. Larger firms had really detailed MI, tracking trends and training completion, while smaller firms sometimes struggled. But the best examples, even in smaller firms, showed clear UK-specific reporting and proper analysis of breach trends. If your MI doesn’t explain why breaches are happening, your oversight committee can’t do much with it.

Unknown Speaker

And let’s not forget the cultural side. The FCA wants to see firms encouraging a ‘speak up’ culture and using scenario-based training, not just relying on formal sanctions. It’s about making sure everyone, from the top down, understands the importance of these obligations. I think that’s something we’ve talked about before, Rach—how compliance isn’t just about rules, it’s about culture.

Rachel MacRae

Yeah, absolutely. And if you’re listening and thinking, “Are my staff really clear on what needs to be recorded?” or “Is our surveillance model actually fit for purpose?”—now’s the time to take a closer look. The FCA’s message is pretty clear: communication surveillance is as much about culture as it is about controls.

Unknown Speaker

Right, let’s turn to crypto—because the FCA’s made another big move there. Retail clients will soon be able to access crypto exchange traded notes, or cETNs, on recognised investment exchanges. That’s a shift from their previous stance, isn’t it?

Rachel MacRae

It really is! The FCA’s decided the market’s matured enough for retail access, but with some important caveats. So, cETNs have to be traded on FCA-approved UK exchanges, and all the usual financial promotion rules apply—communications must be fair, clear, and not misleading. But, and this is a big but, advisers still can’t give advice on cryptoassets, including cETNs. That ban’s still in place because of the high risks involved.

Unknown Speaker

Yeah, and these products aren’t covered by the FSCS either, so if something goes wrong, investors are on their own. We talked about this back in a previous episode, actually—crypto’s always been a bit of a regulatory minefield.

Rachel MacRae

Definitely. And while we’re on the subject of accountability, the FCA’s also fined Neil Woodford and Woodford Investment Management nearly £46 million pounds for serious failings in fund management between July 2018 to June 2019. Mr Woodford’s been banned from senior roles, though both he and the firm are challenging the decision. The key issue was a lack of proper oversight and accountability, especially around liquidity management. It’s a stark reminder that senior managers have to fully understand and exercise their responsibilities, especially when there’s a risk of consumer harm.

Unknown Speaker

It really is. For advisory firms, this is a good moment to review your own oversight arrangements. Are your senior managers clear on their responsibilities? Are you learning from cases like Woodford’s? And when it comes to crypto, are you making sure clients understand the limits of your permissions? It’s all about robust governance and clear communication—two things we keep coming back to on this podcast.

Rachel MacRae

Exactly. And as the regulatory landscape keeps shifting, we’ll be here to help you stay on top of it. That’s all for this episode—Vicky, always a pleasure chatting compliance with you!

Unknown Speaker

Likewise, Rachel! Thanks to everyone for listening. We’ll be back soon with more updates and insights. Take care, Rach!

Rachel MacRae

You too, Vicky. Bye everyone!