The FCA has written to the House of Commons Treasury Select Committee about its areas of concern relating to the regulatory perimeter.

Recently, it published its perimeter report, which sets out what it does and does not regulate.  It describes the report as a refreshed opportunity for the FCA to discuss with both HM Treasury and the Treasury Committee some of the current strategic gaps in the overall UK legislative framework.

The FCA has identified the following gaps:

• Whether investment consultants should be within the perimeter, especially since the liability driven investment (LDI) episode in September 2022, when UK financial assets saw severe repricing which had a particular impact on LDI.
• Reform of the Consumer Credit Act 1974 (CCA).  In particular, the FCA wants to clarify and resolve the issue of SME lending, which was recently highlighted by the Federation of Small Businesses super-complaint against the FCA.
• Continued risks of harm where principals do not adequately oversee the activities of their appointed representatives. The FCA says that it is ready to engage further with HM Treasury on reforms to this regime.
• Where the perimeter should lie in relation to sports and non-financial spread betting. The FCA considers financial spread betting to sit within its perimeter, but that an alternative framework for sports spread betting could be more tailored to the risks of sports gambling.

The FCA has identified the following issues in relation to insurance:

• Expanding the scope of insurance (which is not completely defined in the Regulated Activities Order)
  • Contracts where a provider claims to have absolute discretion not to pay out may involve circumstances where the discretion has no real content or is an unfair term – the FCA considers these should properly be categorised as insurance.
  • Warranties that claim to be mainly service contracts carrying out repair services with a minor indemnity element that pays benefits if the product is lost or damaged may really be contracts of insurance – where the repair services are artificially described.
• Unregulated firms carrying on regulated activities without permission
  • Some commercial entities provide the benefit of insurance cover for liabilities their clients may suffer. However, these unregulated firms are the sole policyholder who then sell to their clients an interest in the policy to share in proceeds of any claim.  The contractual position is often ambiguous about whether consumers actually obtain rights under the insurance policy.  If they do, the unregulated commercial entity may be carrying on a regulated activity without permission.

The FCA also mentions the smart data powers in the new Data (Use and Access) Bill which it says will help it to encourage innovative firms to scale up and accelerate thinking in use cases for Open Finance.

As well as the issue relating to SME lending, it also says that the CCA needs to be updated as it has not kept pace with how people communicate and use credit products.

The FCA published an updated version of its perimeter report on 9 December 2024.