How the UK regulates its financial markets — the FCA, PRA, and the rules that govern the City.
Following the 2008 financial crisis, the UK replaced the Financial Services Authority (FSA) with a twin-peak model. The Financial Conduct Authority (FCA) regulates conduct across the financial services industry — how firms treat customers and maintain market integrity. The Prudential Regulation Authority (PRA), a subsidiary of the Bank of England, supervises the safety and soundness of banks, insurers, and major investment firms. This division means a single bank might answer to both regulators: the PRA for its capital adequacy and the FCA for its sales practices. The overarching legislative framework is the Financial Services and Markets Act 2000 (FSMA), as substantially amended by the Financial Services Act 2012 and subsequent legislation.
Any firm wishing to carry on a regulated activity in the UK — such as accepting deposits, managing investments, or arranging insurance — must obtain authorisation from the FCA (or PRA, for dual-regulated firms) under Part 4A of FSMA. Operating without authorisation is a criminal offence. The Regulated Activities Order (RAO) defines the precise scope of activities that trigger this requirement. Lawyers advise clients on whether their business model falls within the regulatory perimeter — a question that has become increasingly complex as fintech, crypto, and platform-based models blur traditional boundaries. The authorisation process itself involves demonstrating adequate resources, competent management, and appropriate systems and controls.
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