30Aug

Brexit latest from the FCA – director speaks about regulator’s preparations

Nausicaa Delfas’ official job title at the Financial Conduct Authority (FCA) is Executive Director of International, however the financial services media often describe her as the FCA’s ‘head of Brexit’. In late July 2018, she addressed a Bloomberg/TheCityUK event and outlined the steps her organisation is taking to prepare for the UK’s exit from the European Union in March next year.

Ms Delfas began by saying that the FCA would not be taking a public position on the rights and wrongs of Brexit, but that it still had a duty to ensure that its three statutory objectives are still met, these are:

  • Secure an appropriate degree of protection for consumers
  • Protect and enhance the integrity of the UK financial system
  • Promote effective competition in the interests of consumers

She explained that the FCA’s starting assumption was that there will be a transition or implementation period, from March 2019 until the end of December 2020, allowing all parties the chance to adjust to life outside the EU.

However, she also acknowledged that the FCA has a duty to prepare for the possibility of a ‘no deal’ Brexit, a scenario that would mean there would be no transition period either. One of the key Brexit ministers, International Trade Secretary Liam Fox MP, recently put the chances of ‘no deal’ at 60%.

Ms Delfas explained that ‘no deal’ would expose the UK financial system to ‘cliff edge’ risks, whereby the UK would be a full member of the EU on one day, then would crash out of the Union the following day with no arrangements to manage the change. She suggested that a ‘cliff edge’ scenario could lead to insurers not being permitted to pay out claims on policies, and derivatives users not being able to manage the risks of their positions. These eventualities would be in conflict with FCA statutory objectives to preserve market integrity and to protect consumers.

Noting that Parliament has already passed the Withdrawal Act, which provides for the transfer of all existing EU law into UK law on Brexit day, Ms Delfas said that the FCA was already working on ways in which Statutory Instruments and the regulator’s own Handbook would need to be re-worded, for example where existing rules make reference to EU authorities.

Next, she confirmed that a Temporary Permissions Regime would be in place, whereby European firms that currently operate in the UK using the ‘passporting’ system could continue to do so for a limited time after Brexit, before they needed to apply for full FCA authorisation. Ms Delfas did acknowledge however that there is currently no reciprocal agreement for UK firms who operate in the EU. It is to be hoped the situation can be resolved, but at present it is the case that any UK firm that operates in European countries via the passporting system will lose their authorisation to do so on Brexit day (March 29).

Ms Delfas suggested that whatever the nature of any Brexit deal, there was no way that the UK and EU regulatory regimes would not be “highly integrated” in the future, as neither side wished to see significant divergence.

The FCA director commented:

“On day one, our regimes will be equivalent. Our markets will remain highly integrated whatever the outcome of Brexit.”

All regulated firms were directed to the FCA’s new ‘Preparing your firm for Brexit’ webpage. Firms should read this page carefully and consider what preparations they may need to make.

Ms Delfas summarised the work that lay ahead for her and the FCA by saying:

“The scale of the Brexit challenge is unprecedented, but we believe a good outcome is achievable. And from a regulatory perspective, we are working with the Government, the Bank of England and our counterparts across the world to secure just that.

“But we all know that time is tight and the path uncertain – so achieving that outcome, and a smooth transition avoiding cliff edges – requires energy and commitment from industry and regulators alike.”

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

29Aug

FCA finds issues with firms’ complaint handling

The Financial Conduct Authority (FCA) has published the results of a complaints handling review. Although the review looked specifically at how Non-deposit Taking Mortgage Lenders and Mortgage Third-Party Administrators were handling complaints, there is plenty in the review report that firms in other sectors would do well to take note of.

The three main aims of the review were:

  • To assess whether firms were treating their customers fairly
  • To gauge whether firms’ complaint handling arrangements were giving rise to potential consumer harm
  • To identify what firms could do to improve their complaints handling

The review report asks firms to consider customer outcomes at all times, and not just to “follow our rules with a tick-box compliance approach”. The example the regulator gives is of a firm who asked a vulnerable customer to contact their own bank to recall a direct debit, without considering whether it was appropriate to ask a vulnerable customer to resolve this type of problem themselves.

Issues were also identified with whether firms were recording complaints correctly, and consequently whether accurate information was being provided on complaints returns to the FCA. All staff at all levels in every authorised firm need to know:

  • The FCA definition of a complaint, and how to identify a complaint should they receive one during their day-to-day work
  • How to respond to the complaint
  • How to escalate the complaint within their firm

Firms were also urged to review decisions made at the Financial Ombudsman Service (FOS) regarding their complaints and to use the rationale for these FOS decisions to consider whether changes are required to policies and procedures.

There was also considerable criticism of firms failing to carry out root cause analysis of complaints received, and it was also said that firms are failing to make adequate use of management information to help them in this respect.

Root cause analysis essentially involves identifying why complaints have occurred and seeking to prevent future complaints of a similar nature. When a complaint is received, firms need to consider whether they may be able to reduce the likelihood of a similar complaint at a later date. Examples of steps that may be appropriate to take in these circumstances include:

  • Giving additional training to one or more staff members, making it clear what they should have done when servicing the customer who complained
  • Amending policies and procedures
  • Amending IT systems
  • Carrying out additional compliance monitoring in certain areas

Senior management should be involved in considering the results of the root cause analysis a firm carries out.

The review concludes by suggesting that firms should read the root cause analysis case study that is available on the FCA website.

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

 

28Aug

FCA highlights scale of pension scam losses

The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have launched a joint TV advertising campaign, revealing that the average victim of a pension scam lost £91,000 in 2017. They add that they believe only a minority of victims ever report the matter to the authorities.

The campaign, known as ScamSmart, is principally targeted at individuals aged 45 to 65, as the regulators say that this age group are most at risk of falling victim to scammers. The regulators’ research shows that one-third (32%) of pension holders in this age group would not know how to check the legitimacy of a pensions adviser or provider.

The advertising campaign is designed to be hard-hitting and will contrast the devastating impact scams can have on their victims with the lavish lifestyles enjoyed by some of the scammers from the proceeds of their schemes.

The FCA and TPR suggest that the following could all be signs of a pension scam:

  • A promise of a ‘free pensions review’
  • Cold call contact via phone or another method
  • A promise of guaranteed high returns
  • Investment in specialist areas such as overseas property, woodland and energy schemes
  • High pressure sales tactics
  • Complicated arrangements involving several parties, all of whom want to deduct their fee from the pension investment

The FCA suggests consumers take four steps to ensure they don’t fall victim to pension scammers:

  • Step 1 – reject any offer where someone contacts them out of the blue about a pension opportunity
  • Step 2 – check that any company they deal with is authorised on the Financial Services Register, is registered with Companies House, is not listed as a clone firm on the FCA website and is not on the Warning List on the FCA website
  • Step 3 – take time to consider any pension offer, and don’t be rushed into saying Yes
  • Step 4 – before making any investment, seek impartial professional advice or guidance, i.e. not advice from the company that made contact about the pension opportunity

Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, said:

“The size of individual pension pots makes pensions savings an attractive target for fraudsters. That’s why we’re urging anyone who is thinking about transferring their pension to check who they are dealing with and only use firms authorised by the FCA. Pension scams can cause victims significant harm – both financially and mentally. If you are ever in doubt about a pension offer, visit the ScamSmart website.”

Nicola Parish, Executive Director, TPR, said:

“£91,000 is a huge amount of money for someone approaching their retirement to suddenly have ripped from their savings. If someone cold calls you about your pension, it’s probably an attempt to steal your savings. Our message is clear – hang up and report it.”

Guy Opperman MP, Minister for Pensions and Financial Inclusion, said:

“Pension scams are devastating for hardworking people and can rob them of the retirement they planned. I would urge savers to always exercise caution and seek independent guidance or advice before making important financial decisions.”

Dimitrios Tsivrikos, consumer and business psychologist, said:

“Scammers are intelligent, ambitious and deceiving. They mimic the sales patter used by salesmen, building trust, a rapport and a relationship to infiltrate our psyches and influence our behaviour. That’s why I want everyone to remember that if it sounds too good to be true, then it probably is. So, put the phone down to unsolicited calls regarding your pension and stop a scammer from stealing your retirement.”

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

27Aug

Claims Management regulation annual report published

Kevin Rousell, the head of the Claims Management Regulator at the Ministry of Justice (MoJ), opens his organisation’s Annual Report for the 12 months to March 2018 by saying:

“This was a year of positive regulatory action across all regulated claims management sectors, action aimed at safeguarding the interests of consumers, protecting the public and increasing the professionalism of CMCs. The proportionate statutory enforcement action we have taken, in particular financial penalties and cancellations, has been effective in tackling misconduct and has also stood the test of independent scrutiny with the First Tier Tribunal ruling in our favour in all eight statutory appeals made against our decisions.”

Mr Rousell’s foreword to the Report also highlights:

  • The effective action the Regulator has taken against misconduct amongst holiday sickness claims companies
  • The action taken in rooting out bad practices associated with the acquisition and handling of personal injury claims
  • The intervention by the regulator into increased advertising by payment protection insurance (PPI) claims companies ahead of the claims deadline for this product

He looks forward to 2018/19 and says one of the main priorities in this financial year will be assessing whether claims management companies (CMCs) are correctly applying the new restrictions on the fees that can be charged – these new rules include a complete ban on upfront fees for PPI claims.

In the period covered by the Report:

  • 45 CMCs had their licences cancelled for misconduct
  • One more company had conditions imposed on its authorisation
  • 252 more companies were issued with warnings by the MoJ
  • A total of £279,050 in fines was imposed on six different CMCs
  • Seven warrants to enter premises and seize evidence were executed
  • Three applications for authorisation were refused
  • 199 licences were surrendered by companies
  • 367 audits were carried out

41 investigations were ongoing as of March 21 3018.

Additionally, while details are not given for this specific financial year, the Report reveals that since March 2017, 13 directors of CMCs have been disqualified from acting as directors, for a collective total of 102 years.

On a more positive note, the number of complaints made to the information Commissioner’s Office about nuisance calls by CMCs has once again reduced, with the rate of decrease accelerating in the previous 12 months. Nevertheless, the Report says this area “remains a key priority” for the MoJ. Despite the decline in complaints, the number of companies having their licence cancelled over this issue was five in 2017/18, compared to three in 2016/17 and just one in 2015/16.

Inevitably the Report concludes by making reference to the transfer of claims regulation to the Financial Conduct Authority, which will take place on April 1 2019. Companies have been warned to expect a tougher regulatory regime, with an increased focus on holding senior managers accountable for their actions. The transfer of regulation will also mean that CMCs in Scotland will be regulated for the first time.

Otherwise, the MoJ’s priorities for the year ahead include:

Nuisance calls and texts

  • Identifying and tackling companies that fail to comply with existing legislation, and with the restrictions on cold calling detailed in the Financial Guidance and Claims Act
  • Ensuring CMCs conduct adequate due diligence to satisfy themselves that data obtained from other parties has been obtained legally

Financial claims

  • Ensuring CMCs are complying with the new fees restrictions and the requirement for itemised invoicing when cancellation fees are charged
  • Tackling misleading marketing and high-pressure selling

Personal injury

  • Ensuring the referral fee ban is correctly applied
  • Identifying misleading marketing and instances of pressure being put on clients to exaggerate injuries
  • Working with other agencies to tackle fraudulent claims

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

23Aug

Some hope for mortgage prisoners?

59 lenders who collectively represent 93% of the UK mortgage market have reached agreement on a joint strategy to assist borrowers who are currently paying the Standard Variable Rate on their mortgages, and who are unable to re-mortgage to a better deal with their existing lender as they would not meet the stricter affordability criteria introduced in recent years.

UK Finance, the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA), all trade associations that represent major mortgage lenders, jointly announced the initiative at the end of July 2018.

The affected customers do not need to take any action and are under no obligation to switch if that option is offered. Their lenders will write to them prior to the end of 2018 to explain their options.

In order to qualify for the scheme, borrowers must meet all of the following criteria:

  • They must be owner occupiers
  • They must have a first charge mortgage on their residential property
  • They must currently be paying the reversion rate (the rate to which the mortgage reverts after any fixed or discounted offer period)
  • They must be completely up-to-date with their repayments
  • Their mortgage must have at least two years to run
  • Their outstanding mortgage must be at least £10,000
  • They must be able to benefit from switching their mortgage deal

It is thought that around 10,000 borrowers could benefit. However, it should be noted that these customers will only have access to deals offered by their current lender, and not those available across the market, and also that not all major mortgage lenders have signed up to the scheme. The announcement also does nothing to help the estimated 20,000 people whose mortgage is held with a lender that is not currently active in the marketplace, or the 120,000 who had mortgages with non-regulated firms, such as some former customers of Northern Rock and Bradford & Bingley.

The Financial Conduct Authority (FCA) says it “will work closely with industry to discuss the detail of this arrangement and monitor the impact” of this initiative. It was the FCA who challenged lenders to come up with a solution to the issues faced by ‘mortgage prisoners’ when it published its Mortgages Market Study Interim Report in May 2018.

Jackie Bennett, Director of Mortgages, UK Finance said:

“Lenders have responded to the FCA’s challenge and made a voluntary commitment to help these longstanding borrowers, offering them the ability to switch to an alternative product if they meet the agreed standard criteria – a potential solution that covers 93 per cent of the residential mortgage market.  We expect more lenders to participate in the coming months. Furthermore, we will be working closely with the FCA and active lenders to see what might be possible for customers of inactive and unregulated lenders. Participating lenders will be contacting qualifying homeowners so for now, customers don’t need to do anything but wait to hear from their mortgage provider.”

Paul Broadhead, Head of Mortgage and Housing Policy at the Building Societies Association (BSA) said:

“It is pleasing that the FCA recognises that the mortgage market works well for the vast majority of borrowers.  By signing up to this voluntary agreement lenders will ensure that existing borrowers are not disadvantaged by the changes to mortgage regulation since the financial crisis.  The agreement formalises the actions that many societies have been taking and provides clarity and confidence for all affected borrowers.”

Kate Davies, Executive Director of the Intermediary Mortgage Lenders Association (IMLA) said:

“The FCA’s Interim Report on its Mortgage Market Study acknowledged that the mortgage market is generally working well for the majority of borrowers.  It noted that some improvements could be made for the minority groups who find themselves unable to switch products, as a result of regulatory changes brought into effect since they took out their loans.  This initiative will help a number of those borrowers, and further work is planned to address the needs of others.”

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

22Aug

Last MAS annual report published

In its final Annual Report before it is replaced by the new Single Financial Guidance Body (SFGB) later this year, the Money Advice Service (MAS) claims to have helped some 10.5 million people with their finances during the financial year 2017/18.

3.8 million of these people are said to be from “the financially squeezed and struggling segments” of society, and continuing the theme of assisting vulnerable consumers, the Service says it provided free debt advice to 487,000 people.

Three to six months after receiving debt advice via the MAS, half of funded clients with debt arrears are either repaying their debts or have repaid in full. The Service’s Standard Financial Statement, aimed at ensuring consistency of debt advice, has been adopted by some 1,000 debt advice organisations.

In conjunction with 90 experts, the MAS says it generated 240 new ideas to assist people facing financial challenges across the UK.

The press release announcing the release of the Annual Report also points out that the parties who pay the MAS levy – largely firms authorised by the Financial Conduct Authority – were invoiced £7.9 million less than was originally predicted in the Service’s expenditure budget.

The Report also contains some fairly sobering statistics about the financial health of the UK population, and firms in the consumer credit sector in particular would do well to note that:

  • 50% of UK adults (25.9 million people) describe paying their bills and credit commitments as a “burden”
  • In the last six months, 11% (5.7 million) have missed payments for credit commitments or domestic bills for a period of at least three months
  • 23% (11.9 million) would have no option but to borrow money when faced with an urgent and unexpected bill for £300
  • 44% of working age adults (17.3 million) have less than £100 in a savings account
  • 9% of adults (8.3 million) are in some way “over indebted”

Andy Briscoe, Chairman of the Money Advice Service said:

“All of this progress could not have been delivered without our partners and our staff, and their commitment to improving financial capability across the UK. Together we have helped millions of people to take control of their money, and so to lead happier lives. It is wonderful that this important work will be continued and developed by the SFGB.

“All those involved with these achievements deserve to feel proud of their contribution. However, I know they also appreciate that there is still so much to be done. The need for our services has never been greater, which is why we are delighted that the SFGB will be taking forward our vital work.”

Charles Counsell, Chief Executive of the Money Advice service said:

“This may be the last year for the Money Advice Service, but this report shows we are certainly not slowing down as we reach the finish line. A key achievement this year is helping almost half a million people receive high-quality debt advice: a transformation, not just in people’s finances, but in their health, their state of mind and their quality of life.

“Our focus for the coming year is to maintain momentum and to continue to deliver high-quality services for members of the public while working on a smooth and successful transition to the new SFGB. I believe the work the Money Advice Service has done has built strong foundations for the new body to provide free and impartial guidance, from pocket money to pensions, and to continue to transform financial capability across the UK.”

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

21Aug

Bank censured again for not sending PPI reminders

For the second time, a major high street bank has been censured by the competition watchdog for failing to send annual reminders to customers who had payment protection insurance (PPI) policies on their credit cards.

Back in 2015, the bank admitted to the Competition and Markets Authority (CMA) that it had not sent these annual reminders to around 10,000 customers. Now it has been identified that the same bank failed to send reminders to 2,265 credit card PPI customers between October 2016 and October 2017. The bank has been issued with “legal directions” under which it must put in place systems and controls to ensure that a similar breach does not occur in the future.

The requirement to send annual reminders was introduced in 2011 – these notices must clearly set out the cost of the PPI and must provide details of the customer’s right to cancel their insurance.

Adam Land, the CMA’s senior director of remedies, business and financial analysis, said:

“The annual reminder is an important measure so customers know they still have a PPI policy and how much it is costing them each year, as well as their right to cancel or switch.

“This is [the bank’s] second breach of the PPI order. As a result, we are issuing legal directions which can be enforced by a court, to ensure they comply with the order.

“We now require assurances from [the bank] they have now put adequate systems in place to prevent a similar breach from occurring again.”

A spokesperson for the bank, which incurred £400 million worth of PPI charges in the first half of 2018, blamed the problem on a technical issue. The spokesperson said:

“Between October 2016 and October 2017 a small number of PPI customers were not sent the Annual Review statements which they were entitled to receive. This issue has now been resolved and all customers have received their missing statements.

“We have written to all affected customers to apologise unreservedly and to outline how we will recompense them where they would have otherwise cancelled their policy.

“We take this matter extremely seriously and have conducted an internal investigation to ensure all stringent controls and policies continue to be upheld.”

Although a deadline for making a PPI claim is little more than a year away, the total amount of redress paid by the UK’s financial institutions in June 2018 was actually lower than in any of the previous three months. Data from the Financial Conduct Authority (FCA) shows that £389.6 million was paid out in compensation in March, followed by £398.3 million in April, £403.4 million in May and £383 million in June. The total compensation paid to date by financial firms stands at £31.9 billion.

At least one of the other major high street banking groups is reported to be considering increasing its PPI compensation provision, in expectation of a rush of claims ahead of the deadline.

The Daily Telegraph has recently reported that some firms are refusing to pay out on store card PPI claims that date back to before April 6 2007. The FCA apparently allows firms to do this as store cards are a type of “restricted credit”, and the Financial Ombudsman Service did not handle restricted credit complaints until 2007.

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

20Aug

MOJ issues quarterly claims management enforcement round-up

The Claims Management Regulator at the Ministry of Justice (MoJ) will cease to exist in less than eight months’ time, when the Financial Conduct Authority takes over as the regulator of the sector. However, the MoJ continues to take enforcement action against claims management companies (CMCs), and its latest quarterly enforcement bulletin shows that 13 companies had their licences cancelled between April 1 and June 30 2018.

MoJ staff visited 112 CMCs during the quarter, conducted 81 formal audits, issued 39 warnings and started one new investigation.

Although the August 2019 deadline for payment protection insurance (PPI) claims is fast approaching, the bulletin says it is still “the most active claims area in the financial claims sector with around £400m paid out each month in redress.” The bulletin also notes that some financial CMCs are assisting with claims regarding Packaged Bank Accounts, payday and other short-term loans, investments, pensions and mortgages.

The bulletin highlights that the MoJ is monitoring companies’ compliance with the interim fee cap in the Financial Guidance and Claims Act 2018. CMCs can no longer:

  • Charge a client a fee prior to the conclusion of a PPI complaint
  • Charge a fee where the client either did not have PPI, or was never a client of the lender in question
  • Charge fees for PPI complaints that are more than 20% plus VAT of the value of the claim

CMCs must also issue an itemised bill, explaining the work they have done, before imposing any cancellation fee.

In the financial claims section of the bulletin, the MoJ also highlights what CMCs can expect from an MoJ audit. These audits are likely to include inspection of client acquisition and sales, client paperwork, claim processing, complaints handling and other business processes.

In the personal injury, holiday sickness and housing disrepair sector, the MoJ says it continues to monitor compliance with the referral fee ban, and with its rules on marketing. It also says it has identified CMCs in this sector who are involved in suspected fraudulent and other criminal activity.

The next section of the bulletin describes nuisance calls and texts as being both “a concern to the UK public” and “a key compliance priority.” The MoJ says it is investigating 15 companies over suspected non-compliance in this area.

In the fight against unauthorised trading, the Regulator says it has made 80 unannounced visits in the last quarter to the premises of companies suspected of continuing to operate despite no longer being authorised. During the three-month period it also received “over 127 reports” of companies conducting claims management activity without authorisation.

Finally, the bulletin draws companies’ attention to the Regulator’s Annual Report, published on July 5 2018. Head of the MoJ regulatory unit Kevin Rousell introduces the report by saying:

“This was a year of positive regulatory action across all regulated claims management sectors, action aimed at safeguarding the interests of consumers, protecting the public and increasing the professionalism of CMCs. The proportionate statutory enforcement action we have taken, in particular financial penalties and cancellations, has been effective in tackling misconduct and has also stood the test of independent scrutiny with the First Tier Tribunal ruling in our favour in all eight statutory appeals made against our decisions.”

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

15Aug

ICO annual report highlights increased public awareness of data issues

As it published its Annual Report for the year 2017-18, the UK’s data protection regulator spoke of how the public were now much more aware of data-related issues.

The press release from the Information Commissioner’s Office (ICO) says that:

“New laws and high-profile investigations have helped put data protection and privacy at the centre of the UK public’s consciousness like never before.”

Information Commissioner Elizabeth Denham said:

“This is an important time for privacy rights, with a new legal framework and increased public interest.

“Transparency and accountability must be paramount, otherwise it will be impossible to build trust in the way that personal information is obtained, used and shared online.”

The 12 months to 31 March 2018 saw a 14.5% annual increase in the number of data protection complaints received by the ICO – the total volume rose from 18,354 to 21,019. This should serve as a warning to all firms across all business sectors – the UK public are much more aware of how their data should be handled and are much more willing to complain to the authorities when they believe that a firm has failed to handle their data correctly.

Self-reported breaches were up 29% compared to 2016-17, from 2,565 to 3,311, and the last financial year also saw the ICO take more enforcement action than ever before.

Regarding nuisance calls and spam texts and emails, both the number of fines issued (26) and the total of the fines (£3,280,000) were the highest on record for a 12-month period. This is despite a significant decrease in the number of consumers contacting the ICO over issues related to firms’ compliance the relevant legislation – the Privacy and Electronic Communications Regulations.

Another 11 fines totalling £1,290,000 were issued for what the regulator describes as “serious security failures under the Data Protection Act 1998.”

In the ‘nuisance calls’ category, a record fine of £400,000 was imposed on Keurboom Communications, who made over 100 million nuisance calls; and in the ‘serious security failures’ category a similar penalty was imposed on Carphone Warehouse, whose customer and employee data was compromised following a severe cyber-attack.

19 criminal prosecutions were launched by the ICO during the year, resulting in 18 convictions.

2017-18 was also of course the year the General Data Protection Regulation (GDPR) came into force, together with the Data Protection Act 2018 that enshrines the GDPR provisions into UK law after Brexit. Amongst other requirements, firms now need to be totally transparent as to what their legal basis for processing data is. The ICO aims to show that it is willing to help firms comply with their obligations, and the Annual Report says that the organisation has published “guidance to help SMEs understand their new data protection obligations under GDPR.”

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

14Aug

Tribunal confirms ban on SIPP firm director

The Financial Conduct Authority (FCA) has announced that the Upper Tribunal has upheld an original FCA decision to prohibit a director of a financial advisory firm. The firm in question gave advice on Self-Invested Personal Pensions (SIPPs), and the director has been banned from holding any significant influence or management functions within financial services. He has also been fined £60,000.

The FCA acted after finding evidence that the firm had given “wholly unsuitable advice to transfer pension benefits into a SIPP which was to be invested in either a single, or a very small number of, inherently risky overseas property investments.”

The actions of the banned individual also included failing to disclose his financial interest to clients. He co-owned and co-directed an unregulated introducer, which referred clients to the advisory firm. Once the advice had been given, the introducer firm received significant amounts of commission from the provider of the SIPP investment.

In summary, the FCA believes that the individual failed to comply with Statement of Principle 7, which requires senior management to ensure that firms meet their obligations under the regulatory regime. The regulator adds that it has significant concerns over his competence and capability.

Although the firm did carry out an assessment of clients’ financial circumstances, and assessed their attitude to risk, they still ended up recommending a transfer to a SIPP in almost all cases that the FCA reviewed. This runs contrary to 19.1.6 of the FCA’s Conduct of Business Rules, which states that:

“When advising a retail client who is … a member of a defined benefits occupational pension scheme, or other scheme with safeguarded benefits, whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable. A firm should only then consider a transfer, conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client’s best interests.”

Many clients were still recommended to transfer to a SIPP even though they were not assessed as having a high attitude to risk.

Over a three-year period, 1,661 clients of the firm invested a total of £112,420,985 in SIPPs. 923 of these clients invested in overseas property developments. 517 were advised to transfer funds out of a final salary scheme.

SIPPs continue to have high uphold rates in complaints data published by the Financial Ombudsman Service, and the FCA has real concerns about the suitability of the advice being given by firms offering this product. The regulator continues to urge firms to consider that they are also responsible for the suitability of the underlying investments, and not just the suitability of the SIPP itself.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“[Name of director] failed to ensure that [name of firm] managed its conflicts of interest, benefiting financially from his role as shareholder and director at an unregulated introducer alongside his regulated role, to the detriment of his customers. Our action sends a strong message that failing to manage conflicts of interest fairly and disclose them clearly is completely unacceptable.”

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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