What Are the 11 FCA Principles?
The Financial Conduct Authority’s 11 Principles of Business are guiding fundamentals a business must adhere to whilst regulated by the FCA. These principles communicate how a business must conduct itself and the standards the FCA will hold it to.
It is important to familiarise yourself with the 11 FCA principles of business if you operate within FCA regulated markets.
1. Integrity
“A firm must conduct its business with integrity.” A business will operate to high ethical standards to produce valuable and honest work.
2. Skill, Care and Diligence
"A firm must conduct its business with due skill, care and diligence.” A business must act attentively in order to avoid mistakes which could potentially have large impacts for the firm or customer.
3. Management and Control
“A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.” This principle determines prevention of risk for the firm, customer, and environment is top priority.
4. Financial Prudence
“A firm must maintain adequate financial resources.” A business should responsibly manage and invest their finances, based on informed financial decisions.
5. Market Conduct
“A firm must observe proper standards of market conduct.” Principle 5 highlights the actions and strategies of a business must be in line with standard market behaviour.
6. Customers’ Interests
“A firm must pay due regard to the interests of its customers and treat them fairly.” This principle refers to the fair treatment of customers in regulated markets (FCA TCF), meaning you work for the mutual benefit of your business and customers.
7. Communications With Clients
“A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair, and not misleading.” Maintaining clear communication with clients with information they’re entitled to, and ensuring they aren’t misled or misunderstand concepts.
8. Conflicts of Interest.
“A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.” Conflicts of interest occurring internally or externally should be managed appropriately.
9. Customers: Relationships of Trust
“A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.” This principle is another extension of treating customers fairly – ensuring any advice given or decisions made are in the best interest of the customer, rather than made for personal financial gain.
10. Client's Assets
“A firm must arrange adequate protection for clients’ assets when it is responsible for them.” The tenth principle may apply to automotive dealerships when they are responsible for customers’ cars, for example.
11. Relations with Regulators
“A firm must deal with its regulators in an open and cooperative way, and must disclose to the FCA appropriately anything relating to the firm of which that regulator would reasonably expect notice.” The final principle refers to the business’ open and transparent relationship with a regulator such as the FCA.
Why Is It Important That Firms Adhere to the 11 FCA Principles of Business?
FCA compliance is essential to FCA regulation, therefore firms must adhere to the standards set by the FCA, or could risk facing enforcement action.
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