Number of individuals banned by FCA rises

The number of people banned by the Financial Conduct Authority (FCA) from working in financial services roles rose to 27 in 2015, the first such rise in four years. Although the figure is way below the record high of 72 in 2010, the fact that the number of bans has risen when compared to 2014 suggests that the watchdog is placing more emphasis on individual accountability.

The data was compiled by law firm Reynolds Porter Chamberlain, and the firm’s partner Richard Burger suggested that taking action to ban individuals may be a more effective deterrent than fining the firm, something that in many cases has a big impact on a firm’s ordinary shareholders.

Mr Burger commented:

“Many at the FCA believe that it is prohibition orders, fines against individuals and prison sentences that act as the best deterrent. However, these are harder to come by than some expect.

“There is still enormous pressure from politicians and other commentators on the FCA to bring more enforcement cases.”

He added that in recent years the regulator’s enforcement division has had to devote considerable resources to its investigations of banks’ rigging of LIBOR and the foreign exchange markets. Now that the investigations into wrongdoing in this area appear to have finished, Mr Burger suggested that the FCA is now able to carry out a greater number of investigations.

“Now work in that area has been wound down, it has freed up enforcement staff to pursue other matters,” added Mr Burger.

These figures are consistent with data previously issued by another law firm, Clyde & Co. Its data showed that the FCA imposed £17 million of fines on individuals in the 2015/16 financial year, a massive increase from the equivalent figure of £7 million in 2014/15.

Clyde & Co partner John Whittaker said:

“Although it is difficult to draw firm conclusions from just three years of statistics, it does suggest that the regulator now appears to be turning its focus towards individuals. This is supported by recent regulatory changes which are aimed at holding individuals to account for any behaviour that strays outside of the regulator’s rule book.

“The senior managers’ regime has sent shockwaves throughout the financial services industry. In the past senior figures at financial services companies have largely managed to avoid punishment for their own and their team’s actions. That has now all changed.

“Companies will be hoping that the new rules help to ensure employees play by the book but are not put off from taking calculated risks in order to boost profits.”

The FCA introduced the Senior Managers & Certification Regime (SM&CR) – which Mr Whittaker referred to in his comments – in the banking sector in March 2016. It will apply to all authorised firms from 2018. However, the latest information on the enforcement action the FCA is taking shows that, even under the existing regime, the era of individual accountability has already arrived.

At present, all individuals carrying out ‘approved persons’ roles need to be individually ratified by the FCA before they commence their duties. Under the SM&CR, the firms themselves will need to carry out their own assessment on at least an annual basis.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA reports a fall in overall complaints, with PPI complaints remaining stable

The Financial Conduct Authority (FCA) has reported that complaints about the firms it regulates fell by 2.6% in the first half of 2016 when compared to the second half of 2015. Between January 1 and June 30 2016, some 2.05 million complaints were made to the UK’s financial institutions. The number of firms reporting at least one complaint was unchanged at 2,796.

A considerable number of complaints about packaged bank accounts have been made in recent months and years, but here total complaints about current accounts fell by as much as 10%, to 407,954.

Only two areas showed an increase in complaint volumes – home finance, where they were up by 2%; and general insurance and pure protection, where complaints increased by 6%. With some 927,631 complaints, the number of payment protection insurance (PPI) grievances was virtually unchanged from the period July to December 2015. PPI is still easily the most complained about product, and continues to account for almost half of all complaints.

If the FCA gets its way of course and is allowed to impose a deadline, then PPI complaints will all but cease from the middle of 2019.

The financial institutions with the greatest number of complaints received were:

• Barclays Bank Plc – 287,463
• Lloyds Bank PLC – 213,163
• Bank of Scotland plc – 173,646
• HSBC Bank Plc – 124,891
• National Westminster Bank Plc – 121,197

Complaints about Barclays and HSBC are up 3% on the previous period, whereas complaints to the other three banks in the top five have decreased.

Total redress paid to consumers during the first half of 2016 was £1.96 billion, a reduction of just 1% on the previous period. This is partially due to the fact that the proportion of complaints upheld rose from 54% to 57%. 93% of complaints were closed within eight weeks, up from 91% in the previous period, so firms are also getting better at completing their complaints investigations in a timely manner.

Christopher Woolard, Director of Strategy and Competition at the FCA, said:

“To see another six months of reduction in the total number complaints is encouraging.

“Firms still need to continue to ensure they are doing all they can to reduce consumer dissatisfaction, but the figures show firms are taking our feedback seriously”.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


Cases of financial fraud soar

Worrying data from Financial Fraud Action (FFA) has revealed that there were 53% more cases of financial fraud during the first six months of 2016 than for the equivalent period in 2015. Between January and June 2016 there were 1,007,094 reported cases, compared to 12 months earlier.

FFA has now highlighted five key things for consumers to be aware of, and financial advisers could have an important role to play in educating their clients. The key points of the FFA ‘Take Five’ campaign are:

• Never disclose security details, such as your PIN or full password – it’s never right to reveal these details
• Don’t assume an email request or caller is genuine – people aren’t always who they say they are
• Don’t be rushed – a bank or genuine organisation won’t mind waiting to give you time to stop and think
• Listen to your instincts – if something feels wrong then it is usually right to pause and question it
• Stay in control – have the confidence to refuse unusual requests for information

Other recent research by agency Censuswide revealed that 26% of consumers would reveal personal information to someone claiming to be from their bank, even if they were not totally sure that the caller was genuine. Fraudulent attempts at collecting personal details can of course be made by telephone, email or any other method.

Katy Worobec, director of FFA UK, said:

“Banks and other financial service providers work hard to protect their customers, using highly sophisticated security systems. Last year, banks stopped £7 in £10 of attempted fraud from happening. But as the banks’ systems get more advanced, fraudsters turn their attention elsewhere and sadly this often means tricking people out of their personal details and money.

“Alongside the banks, people can also play an important part in helping us to stop financial fraud and protect themselves. We are asking people to take five – to take that moment – to pause and think before they respond to any financial requests and share any personal or financial details.”

Home Office Security Minister, Ben Wallace MP, said:

“The impact of financial fraud can be devastating on victims, with fraudsters using increasingly cunning and convincing tactics. They prey on people who are trying to get on with their lives but in a moment where they are busy or distracted become vulnerable. The message of the Take Five campaign is don’t be hurried or hustled, take a moment before you give out any personal information. At the same time, the Government is working closely with law enforcement and the banking sector through the Joint Fraud Taskforce to take action to stop the organised criminals behind financial fraud.”

Ian Dyson, commissioner at City of London Police, said:

“Fraud and cyber-crime account for nearly half of all crime according to the British crime survey and this campaign is aimed at giving people the confidence to think before they act.

“Pausing for that short moment and asking ourselves, ‘is this the safe thing to do’, will go a long way to thwarting the fraudsters that prey on people’s trusting nature. This campaign is one element of the Joint Fraud Taskforce bringing together law enforcement, Government and business to tackle the increase in crime that blights every community across the country.”

As well as educating their clients, financial firms need to be aware of ways in which scammers may target them directly. There have been many cases of advisers receiving email requests which appear to come from their clients, but which are in fact from fraudsters, asking them to facilitate a transfer of funds.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


Citizens Advice reports fall in payday loan debt problems but a rise in issues regarding other debt types

National advice charity Citizens Advice (CitA) has reported a significant increase in the numbers of people contacting it with debt problems relating to guarantor loans, logbook loans and rent-to-own credit.

CitA dealt with 2,272 people seeking assistance with these products in the period from April to June 2016, which represents a 16% increase when compared to the equivalent figure of 1,962 for the same period in 2015. The numbers seeking assistance with guarantor loans have risen by 45%, and given that CitA is twice as likely to be contacted by the guarantor rather than the actual borrower, the charity is concerned that firms are failing to clearly inform guarantors of their obligations under this type of loan.

Separate figures show that in the last 12 months CitA has been contacted by 7,500 people seeking help with rent to own debt issues, 1,100 people with guarantor loan problems and 460 with issues regarding logbook loans.

The press release gave examples of how people with all three types of debt could end up paying more in repayments than the amount of their loan.

Under legislation introduced in January 2015, no payday loan borrower can ever be asked to repay more in interest and charges than the amount they have borrowed. In light of the numbers contacting the charity, CitA has repeated its call for the Government to impose a similar charge cap on other forms of high-cost credit.

The organisation has reported, however, that payday loan debt problems have fallen. Since the introduction of the charge caps, the number of people contacting CitA with issues regarding payday loan debts has fallen by 53%.

Gillian Guy, Chief Executive of CitA, said:

“High cost credit problems are growing in other parts of the market [other than payday lending].

“People are struggling with debt problems from logbook loans, guarantor loans and rent to own. But is not just the rates of interest and charges that are causing difficulties. Poor business practices – like signing people up as guarantors without explaining what this means or charging a much higher price for rent to own goods – are adding further misery.

“The cap has been effective in reducing the number of debt problems caused by payday loans – so it is worth considering if it should be extended to cover other types of high cost credit.

“It is important that loans are only offered to people who can afford to repay them. The FCA currently issues guidance to lenders saying they should perform rigorous financial checks on potential borrowers to make sure they can afford to pay back their loans, but the FCA should now consider making this into a compulsory rule for all lenders of high-cost credit.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA director speaks about ‘balancing regulatory objectives in the dynamic consumer credit market’

The burgeoning consumer credit sector was described as ‘dynamic’ in a recent speech by a Financial Conduct Authority (FCA) director. However, Jonathan Davidson, Director of Supervision – retail and authorisations, also spoke of the need to protect consumers, and the need to maintain the integrity of the peer-to-peer (P2P) lending market.

Addressing the Future of Lending Conference in September 2016, he began by praising credit firms for the way they have engaged with the FCA since it became consumer credit regulator two and half years ago.

Mr Davidson said that the 39,000 applications the FCA had received from firms seeking credit authorisation was “a lot more than we had anticipated.” He suggested many more firms would seek authorisation in the near future because of issues such as lenders seeking to take advantage of the current high margin, low interest rate landscape; and the advent of new platforms and technologies.

Regarding technology, he invited firms to make use of the FCA’s Regulatory Sandbox scheme, where they can apply for permission to test new business models, and where the regulator may relax some of its usual requirements if it is satisfied that customers will still be protected.

Protection of customers was also the main topic of the middle section of Mr Davidson’s speech. He said that the FCA remains concerned about firms’ assessment of affordability, and the way borrowers in financial difficulty are treated.

Two uncompromising statements about the expectations the regulator has of firms, and how it will respond to firms failing to meet their obligations, came next. Firstly, Mr Davidson said:

“Please be aware that we do not see authorisation as a one-off focus on performance, equivalent to cramming for an exam and then forgetting everything you’ve learnt. We will continue to expect you to understand our rules – and take on board their spirit – long after you’ve gained authorisation.”

Then he commented:

“Where we do identify issues with firms, we will not hesitate to take action. You will have seen last week in the media the action we have taken with CFO Lending, who’ve entered into an agreement with us to provide over £34 million redress, to more than 97,000 customers, for issues including failing to assess affordability and failing to treat customers in financial difficulties fairly.”

Mr Davidson also referred to the forthcoming publication of the FCA’s thematic review into staff remuneration, and suggested that having inappropriate remuneration systems could lead staff both to offer unsuitable products, and to act inappropriately when dealing with customers in arrears.

Next he spoke of the growth in the P2P market, as while only 12 firms currently hold full permission in this area, another 85 applications are waiting to be determined, including 39 from firms currently operating under limited permission. He expressed the hope that the P2P sector would not respond to increasing demand by lowering their underwriting criteria, which he said would lead to “affordability issues for borrowers and credit risk for lenders.”

There were also more uncompromising remarks from Mr Davidson in concluding his speech, when he said:

“I … hope I have made it abundantly clear that we see our role as integral to making sure your industry is focused on promoting good customer outcomes. We will continue to pay close attention to personal lenders, and we will certainly not relax our standards. We want to see firms following our rules, but also the spirit of what we are trying to achieve. Ultimately, we all want a landscape where the general public has confidence in you. And we all want a market in which you have confidence that your market is working well – with principled firms protected from unprincipled ones.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA publishes third MiFID II consultation paper – advisory firms should prepare to record client phone calls

At the end of September 2016, the Financial Conduct Authority (FCA) published its third consultation paper on its plans for implementing the European Union’s Markets in Financial Instruments Directive (MiFID II).

Perhaps the most eye-catching part of the consultation paper is a proposal to require firms to record telephone conversations with clients. This requirement could extend to most advisory firms, although the FCA says it will consider alternative approaches that could be used by the very smallest firms. Previous suggestions that the Directive would require firms to record face-to-face client meetings have proved to be unfounded.

The consultation paper reads:

“We think taping conversations between firms and their clients is likely to be an effective way of advancing our consumer protection objective.”

For example, although it has been widely reported that the rationale for recording calls was to combat market abuse, and market abuse is not one of the biggest issues with financial advisory firms, the records of these calls could have an important role to play when the firm and/or the Financial Ombudsman Service consider client complaints.

Firms should expect to have to record calls that relate to “the reception, transmission and execution of orders, or dealing on own account,” and to maintain these recordings for five years.

Under the proposals firms should also expect tougher rules on inducements, but may also see the introduction of a less onerous definition of independent advice.

Some of the other significant proposals involve changes to the authorisation process. For example:

• The FCA will require details of an individual’s 10-year employment history, as opposed to the current five years
• Persons who have committed a criminal offence may need to provide an official certificate of conviction
• Applicants will be asked to provide information regarding the length of time they will devote to the performance of their function

The consultation closes on January 4 2017 and MiFID II will come into force on January 3 2018. The FCA expects to publish a fourth consultation paper on the subject later this year.

Firms should expect the MiFID II implementation process to continue at full speed, in spite of the Brexit vote. The FCA was actually one of the main drivers in formulating this Directive, so clearly believes that these measures need to be implemented in the UK and elsewhere.

FCA chief executive Andrew Bailey said:

“The changes to the rules we are proposing today reflect key themes that we have worked on in both retail and wholesale markets over recent years to promote competition and market integrity.

“As we said in our statement following the EU referendum result, firms must continue to abide by their obligations under UK law including those derived from EU law. They must continue with implementation plans for legislation that is still to come into effect, of which MiFID II is one such example.”

Specifically regarding the requirement to record calls, FCA policy, strategy and competition director David Geale said:

“We believe that the taping of telephone calls need not be onerous or expensive. Technology exists to enable advisers to record and store calls easily and affordably, we therefore believe it is proportionate to require firms to tape calls.

“Some industry respondents to earlier discussions raised concerns about the cost and practical implications for small Article 3 financial adviser firms. Our implementing approach for these firms remains open and we welcome alternative proposals that meet an analogous outcome to taping.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


Finance broker fined over spam texts

Manchester-based finance broker Intelligent Lending, better known under its trading name of Ocean Finance, has been hit with a £130,000 fine by the Information Commissioner’s Office (ICO).

The data protection regulator has also issued a Stop Now notice to the firm after it was found to have sent 7.7 million marketing texts regarding a new credit card being offered by a major lender. The recipients of these messages had not given consent in the correct manner and almost 2,000 consumers duly complained to the ICO or to the 7726 spam text reporting service.

Examples of the complaints received included:

“Very worried that my personal information is being handed around…I feel this is very stressful and am wondering who knows what about me.”

“I do not like to think of random companies that I have nothing to do with storing my details to intrude upon my life, offering me things I have no interest in. It makes me angry to think that they are obtaining or using my number illegally.”

The fine will be reduced to £104,000 if the firm does not appeal and pays the sum due by October 27, although it is in fact considering whether to appeal.

Under section 22 of the European Union’s Privacy and Electronic Communications Regulations, marketing texts can only be sent to people who have actively consented in advance to receiving such communications. Including an option to opt out of future texts within the message is not sufficient.

Unlike some of the more serious cases of spam texts the ICO has dealt with, Intelligent Lending had at least attempted to obtain written consent in advance. However, the watchdog believes that the wording used was “not clear and specific enough”.

Under the terms of the Stop Now notice, the firm could face prosecution if it sends more illegal marketing texts in the future.

Steve Eckersley, ICO head of enforcement, said:

“Company bosses everywhere should sit up and take note of this fine and check their practices are compliant with the law before embarking on marketing campaigns.

“It’s your responsibility to make rigorous checks to ensure personal data has been obtained fairly and lawfully. It’s not enough to rely on the word of a third party.”

He added:

“We have made it easier for people to report organisations responsible for unlawful marketing practices and they have in their thousands.”

A spokesperson for Intelligent Lending chose to concentrate on the relatively low numbers of people who complained, although of course the number of people annoyed by receiving the communication could have been much higher than the number who complained. The spokesperson for the firm said:

“We are sorry that a very small minority of consumers found our SMS marketing for the Ocean Credit Card last year unwelcome. The number of complaints made to the ICO represented 0.04 per cent of the recipients of these marketing messages.

“0.04% of 4,500,000 is 1,800. According to the ICO, more than 1,900 complaints were actually made regarding the mass-mailing.

“Our marketing campaign used data that we had purchased from a well-known provider of marketing data.

“We conducted extensive and thorough initial and ongoing due diligence with the provider before proceeding and we received written and contractual assurances that the data we purchased had the valid consent in line with applicable laws and regulations.

“We believe that we took all reasonable steps to ensure that the data we used was compliant with all the applicable laws and regulations – which is why we are considering appealing the ICO’s decision.

“We remain determined to operate at all times within both the spirit and the letter of the law and regulations.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

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