How does the FCA supervise firms?

The FCA supervises firms primarily through ongoing monitoring, assessments, and compliance checks, which allows for a proactive approach in ensuring that firms adhere to regulatory standards. This method involves continuous oversight of firm operations, compliance with legislation, and overall risk management practices. The FCA utilizes various tools, such as data analytics, thematic reviews, and on-site inspections, to assess firms' adherence to regulations, market conduct, and the treatment of consumers.

This continuous supervision is crucial as it helps the FCA identify issues before they escalate into larger problems that could affect market integrity or consumer trust. By closely monitoring and engaging with firms, the FCA can provide guidance and impose requirements to mitigate risks effectively. This comprehensive approach also fosters a culture of compliance and accountability within the regulated firms.

Other approaches mentioned, such as random audits once a year, would not provide sufficient oversight or timely intervention to address emerging risks. Similarly, self-regulation would not guarantee compliance with regulatory standards as it relies heavily on the firm's discretion. Relying solely on public whistleblower reports would be reactive rather than the proactive stance the FCA endeavors to maintain through its supervision.