Regulation inspiration: Ian Adderley of the FCA on the rules for the co-op sector

‘Compliance and correct governance may seem daunting but it can have a real impact on people’s lives’

The Financial Conduct Authority (FCA) regulates the conduct of over 50,000 firms in the UK to ensure they comply with standards of business governance and stick to the letter of the law. 

Separately, the FCA is also the registering body for 10,000 mutuals; Ian Adderley heads up the FCA team as technical specialist offering these organisations expert advice and support. After studying law and being called to the Bar in 2010, Adderley worked for Social Enterprise Yorkshire and Humber and Co-operatives Yorkshire and Humber.

He has been at the FCA for 10 years and also has a number of roles in the co-op movement, serving as chair of the UK Society for Co-op Studies from 2015 to 2020 (he’s currently a trustee) and chair of the London Co-op Party.

“When we talk about mutual societies it can mean many different things,” he says. “Most retail consumer co-ops are registered with us, then there are building societies, credit unions, friendly societies, co-operative societies and community benefit societies. We have a dedicated mutuals team looking after all the work related to our registering authority role with them.

The FCA has recently reviewed its strategy and over the next three years will be focussing on maintaining trust in mutuals by operating a system of oversight to assess and drive compliance, supporting mutual society legal structures, and helping the public, societies, and members understand the nature of their role by focusing on data, digital platforms and engagement with stakeholders.

“Our main aim is to maintain public confidence in the different legal structures which societies use,” he explains. “There is a system in place to provide oversight to help us address compliance with mutuals regarding legislation. We want to support different mutuals and we also act if we see incidents of harm or wrongdoing. As well as ensuring they submit annual returns, we also look at things like rule amendments and any other applications like transfer of engagement and change of name.”

Sanctions for non-compliance include special meetings following applications from members. This has happened only once in 10 years (in relation to the Licensed Taxi Drivers’ Association). The FCA can also cancel the registration of societies – but, as Adderley points out, such incidents are rare in the great scheme of things. 

“What we generally see is societies wanting and achieving compliance around legislation. They run things on a day-to-day basis and every year they produce accounts, submit them to us and explain what they have been doing during the year and what they did with any surplus they made. What we don’t want to do is let a small number undermine things.” 

The Mutuals Public Register provides essential information for societies, their members and the public. As well as listing societies registered, it also holds documents for each society, such as annual returns, accounts and rule amendments and has now been digitised. The  Mutuals Society Portal provides a straightforward and efficient way for mutuals to submit annual returns and other information. 

Related: CFCFE conference looks at governance and regulation for credit unions

The FCA is particularly trying to raise its profile in the co-operative movement: “Our strategy is to help people understand the nature of our role. A society which is complying with us will currently not have much interaction. We have a few things on our website, however, there are different levels of engagement and this is one of the things we wanted to enhance.”

The FCA wants to improve its reach to a wider audience, and key players in this process are its sponsoring bodies. These are organisations that enable new societies, making the legal process much easier by sponsoring a set of FCA-accepted model rules for the benefit of any society considering using them to get started. 

The list is a long and diverse one and includes Co-operatives UK, Plunkett Foundation, Association of British Credit Unions and the Football Supporters’ Association as well as the National Farmers’ Union. 

Sponsoring bodies can also apply to the FCA to help get a co-op registered or make rule amendments and they have regular contact with the FCA. In February 2022 a virtual roundtable event was attended by 24 people from 16 sponsoring bodies. More are planned in 2023. 

Adderley heads up a 10-strong team with increased capacity at peak times, such as when annual returns are due. 

“We have always had a good relationship with mutuals, and recently we’ve added to my team to increase our capacity to help them. We are a lot more proactive and there is more regular contact than in the past. 

“We see new societies registered each week and there is a steady flow of activities from societies telling us about the work they have been doing.”

The legal arena of compliance and correct governance may seem daunting but it can have a real impact on people’s lives and how they cope with issues such as the current cost of living crisis. 

“A lot of mutual societies are particularly active at the moment, operating across so many different sectors, from allotments to retail co-ops and other kinds of community business enterprise. There is such a diverse range that we see from annual returns it’s difficult to draw general extrapolations. 

“However, to some extent, all the work FCA does has the potential to help. As an organisation, we responded quickly to [the cost of living crisis] as part of our three-year strategy warning insurers to protect consumers from unfair penalties and we also require financial services firms to put customers’ needs first.”

The FCA is also engaging more with retail societies and recently completed a consultation on member participation in which 12 of the larger retail societies participated.

“I spoke to Co-op Congress about a voluntary questionnaire we wanted to do with larger retail co-ops on democratic control and member participation. We were interested to learn about things like what sort of turnout they were getting, which elections are contested, who is bringing motions and how often. 

“What we are really pleased about is that conversations are happening about what good interaction with members looks like, so it’s up to societies to come up with conclusions and have their engagement on it. The survey concluded a few months ago, we looked at the results, did some analysis and have sent it back to Co-operatives UK to be considered as part of the annual update in May.”

As we move into 2023, Adderley hopes to build even stronger links between the FCA and mutuals after decades of support for co-operative values since his student days at Hull University.

“I first got involved in the co-op movement through my local society and democratic structures there and found it fascinating,” he recalls. “And as someone once said to me, once you get into this you can’t get out! We really are looking to continue and enhance our engagement with the movement so people understand that what we do have is an ongoing conversation that is really important for all of us.”

This article was amended on 10 January 2023. A previous version implied that the 10,000 mutuals registered with the FCA were included within the figure of 50,000 firms it regulates. They are in addition.