The Financial Conduct Authority (FCA) is gearing up to implement regulations that will govern how regulated firms report their third-party partnerships. A consultation paper recently released indicates that these regulations could come into effect as early as 2026, directly impacting organizations like BAT and other software providers serving Independent Financial Advisors (IFAs). BAT has responded cautiously to the proposal, raising a crucial question: “What will they do with all this data?”
Under the new regulations, firms utilizing BAT will be required to disclose their partnership with the company to the FCA. This requirement extends to all third-party suppliers, including major players like Microsoft and even simpler applications used via web browsers. BAT has expressed concern over the potential implications of this data collection, particularly regarding client lists. The fear is that if any issues arise, the FCA might reach out to all regulated customers of the affected firm with probing inquiries. While some may argue that this could enhance accountability, it also raises concerns about the risk of data leaks.
The FCA’s focus will be on ensuring firms demonstrate proper Due Diligence. Firms will need to clearly outline their Due Diligence processes and identify BAT as a key third-party support. Any breaches or failures reported by BAT will be communicated to the FCA, which could trigger a cascade of inquiries directed at all users of BAT services. This brings up another concern: what happens in cases of false reporting?
Ultimately, the FCA could wield significant power over which service providers firms can use, simply by scrutinizing the information they receive. While it’s possible that the FCA may not employ this information in a punitive manner, the changes proposed in the consultation paper would equip them with the means to do so, representing a form of backdoor regulation.
On a broader scale, BAT acknowledges the potential for regulation to favour established players in the market by creating higher barriers for newcomers. If these rules take effect, we might witness a slowdown in innovation within the financial services sector, while existing firms could reap larger rewards.
BAT reassures its clients that it maintains the highest standards of operation and is on track to achieve ISO27001 certification this summer, reinforcing its commitment to data security and compliance.