Navigating FCA Updates and AI Risks

Unknown Speaker

Hello and welcome back to the B-Compliant Podcast. It’s Vicky Pearce here, director at B-Compliant, and I’m joined as always by the wonderful Rachel MacRae. We’re excited to dig into today’s updates, starting with some positive news around FCA authorisation. Rachel, I know you’ve been tracking the latest FCA speech—what stood out to you?

Rachel MacRae

Hi, Vicky, always good to kick off with a bit of optimism! So, Sheree Howard from the FCA basically came out and said they’re serious about making authorisations quicker and more transparent, but still keeping their standards high. She used an airport security analogy; yes you need a strong gatekeeper, but it shouldn’t feel like you’re stuck in a queue forever - although I wonder if she's ever flown from Terminal Three at Manchester Airport during school holidays! In the past, it does feel like applications are just stuck waiting... like trying to board a Ryanair flight when the gate agent insists on measuring everyone's bags!

Unknown Speaker

Yes! I mean, we’ve all had clients biting their nails, waiting for an update. But the data is actually pretty striking—over 99% of authorisation applications were resolved within the deadlines last quarter, and half of them were sorted in under four months. For Senior Manager Regime applications, the median turnaround’s now down to 28 days, where it used to be 39. That’s a real change.

Rachel MacRae

Yeah, and they’ve been clear about their “stop the clock” policy. They’ll only pause things for Senior Managers, Approved Persons, and Change in Control stuff. The times they publish now are based on actual days passed, not some best-case scenario. It helps you plan—and stop losing sleep over how long things are going to drag on. Well, in theory, right?

Unknown Speaker

Exactly. But I think one of the most useful things was the push for early engagement. The Pre-Application Support Service—PASS—has been expanded again, and I just love that it’s free and informal. You get to chat with the person who’ll end up assessing your application. I mean, that’s so different from the old days where it felt like sending your forms into a black hole!

Rachel MacRae

Honestly, we’re seeing that already. We are hoping that applications that go through PASS are much smoother, and cut down the time firms spend trying to predict what the FCA might want or focus on...this will really help to spot any issues earlier, like governance issues or financial promotions that might not quite hit the mark—Anything that stops you getting stuck at the last minute, has to be a win, right?

Unknown Speaker

Absolutely. And let’s not forget the FCA’s investment in digitisation and even their use of AI to help process those big stacks of documents. But—and this is important—they’re adamant that decisions are still made by humans. AI’s just for sorting out the info, not actually choosing whether you pass or fail.

Rachel MacRae

That’s a key point. Even when they’re using technology, they pause the clock if they’ve got concerns about consumer outcomes or governance. It puts the onus straight back on us, the advisers, to make sure everything’s clear, accurate and transparent. No shortcuts! Still, it’s great to see those published times dropping, even if, in the real world, firms can still hit delays at allocation. So, you do have to factor that in if you’re planning big moves or onboarding new managers.

Unknown Speaker

Yeah, and it all feeds into this bigger shift towards a digital, end-to-end process. Less uploading forms, more direct input in Connect—it should be easier, once teething issues are out of the way. I’m curious if it’ll mean things stay fast and predictable, or if we’ll see speed wobbles again. But for now, there’s definitely movement in the right direction!

Rachel MacRae

And speaking of AI, it’s a neat segue into something a bit less rosy... The Treasury Committee’s been on the FCA’s case, along with the Bank of England and HM Treasury, for not really taking the risks of AI seriously enough yet. I mean, three-quarters of UK financial firms are using AI now. That’s huge! But the regulators have got a bit of a “let’s wait and see what happens” vibe, which is risky, right?

Unknown Speaker

Definitely risky. And it’s not like there isn’t loads of guidance and rules already, but the Handbook doesn’t really spell out what you do if your robo-advice system spits out something odd, or your decisioning is AI-driven. The Committee’s basically saying, look, don’t leave it to firms to figure it all out themselves—tell them how the current rules apply to AI activities.

Rachel MacRae

Exactly. And they want to see things like AI-specific stress tests, rather than just hoping normal systems controls pick up any dodgy algorithms. Plus, there’s this whole thing about Critical Third Parties—think big cloud and AI providers—being designated under the new regime, but apparently the Treasury’s not been moving that along quickly enough. It’s a bit like everyone agrees we shouldn’t let the fox run the henhouse, but nobody’s built the fence yet!

Unknown Speaker

I might be wrong, but it feels a bit similar to what we talked about in an earlier episode—when we discussed the FCA testing AI tools for advice triage and complaints handling? We said then the tech is promising, but, you know, you need proper controls and oversight to avoid nasty surprises for consumers. The FCA’s starting to open up AI Live Testing to get tailored feedback for firms looking to launch AI, which is a step forward, but the overall regulatory framework is still in flux.

Rachel MacRae

Yeah, spot on. With applications for that second cohort of Live Testing now open, they’re giving firms a way to work through practical challenges with FCA input—but you’ve got to be well on with your AI before you qualify. So, it’s great if you’re advanced, but we’re still waiting on those clear rules for everyone else... for the rest of us, governance, risk management, and oversight have to be front and centre... the expectations aren’t going away, they’re just getting sharper.

Unknown Speaker

And until we get firmer guidance in the Handbook, it’s really down to firms to show proactive risk management and not just hope the regulator turns a blind eye. The pace of AI uptake in finance isn’t slowing, and the FCA’s going to keep a close eye even before the rulebook catches up, so work with what you’ve got, be transparent, and don’t assume the old rules don’t apply just because you’ve got a shiny new AI tool.

Unknown Speaker

Probably time for a bit of a cautionary tale to round us off today—let’s talk about that FCA ban and fine for pension misconduct. This is one where the stakes couldn’t really be higher. We’re talking about Darren Antony Reynolds, banned from the financial services industry and fined over two million pounds.

Rachel MacRae

Yeah, this case is pretty shocking. He advised people—especially British Steel Pension Scheme members—out of good defined benefit schemes, knowing the advice was rubbish, and into high-risk stuff with nasty exit fees. He even hid the charges and fiddled his paperwork! Over 470 people have been badly affected, with massive amounts of compensation paid out to customers—over 17 million pounds and counting. This is just a total breakdown in trust.

Unknown Speaker

And that’s not even all of it—he let unapproved staff give pension advice, lied when the regulator came calling, hid and destroyed evidence, even tried to dodge his liabilities by transferring his family home into a trust. The Tribunal called it dreadful misconduct and said he lacked integrity, which is, you know, the bottom line for us in this business. You lose that, you lose everything.

Rachel MacRae

Exactly. It’s one of those headlines nobody wants to see in our profession. For advisers, it’s the clearest reminder going—honesty isn’t optional. Even if advice is really complex, or someone’s worried about commercial risk, you’ve still got to put clarity and transparency first. If you mislead, hide information, or fudge your records, the FCA will catch up with you eventually.

Unknown Speaker

And what really stands out is that personal accountability sits at the heart of it all. The FCA’s hammering home that you can’t excuse dodgy behaviour, not ever—whether it’s your own or someone in your team. Integrity’s the red line. This follows all those themes we’ve been covering in the podcast recently: strong governance, transparency, and making sure your culture matches your paperwork.

Rachel MacRae

Absolutely. I mean, the industry only works if people trust us and the regulator holds the line. If you ever think about cutting corners—or someone tells you to—remember this case. The consequences are far too serious. And, Vicky, I reckon that’s a good note to finish on for today.

Unknown Speaker

Couldn’t agree more. That’s all from us at B-Compliant this week. We’ll be back soon, keeping you up to date with the ever-changing compliance world. Thanks for joining me, Rachel—it’s always lively with you around! Take care, everyone.

Rachel MacRae

Thanks Vicky! Cheers everyone, and catch you next time on the B-Compliant Podcast. Bye for now!