FCA gives ‘last chance’ or ‘final warning’ to P2P firms

The Financial Conduct Authority (FCA) has written a letter to the chief executive, or equivalent, of 65 firms who are active in the peer-to-peer (P2P) market. The letter runs to seven pages, suggesting that the regulator is genuinely concerned by some of the practices it sees when supervising firms in this sector.

The letter has been reported in the national press as being a ‘last warning’ for firms, and the document goes on to say there will be a “strong and rapid” response by the FCA if it does not see significant improvements.

Perhaps the FCA’s biggest concern relates to firms failing to make investors aware of the risks involved with P2P arrangements. Many firms still promise high returns in their promotional materials.

The letter then goes on to mention P2P firms who have carried out “significant changes to their business models without notifying us.” The FCA may consider firms who have failed to make a notification of this as having breached Principle 11 which refers to firms’ relationships with regulators and requires them to disclose anything that the regulator is likely to want to be aware of.

The regulator is also concerned about:

  • Poor standards when disclosing information to clients
  • Confusing charging structures
  • Inadequate record keeping
  • Firms who do not maintain sufficient financial resources, to the extent that there are fears some P2P platforms will be unable to survive if their equity investment backers were to withdraw their support

The letter suggests that the FCA is most concerned about firms who are active in the property market, but all P2P firms should consider the issues raised in the regulator’s letter and consider whether they need to make changes to their policies and practices.

Unlike previous Dear CEO letters, the FCA has not published the letter on its website, as of September 29. However, a number of reputable media outlets have reported in some detail the issues covered in the letter.

Noline Matemara, a partner and financial services regulation expert at law firm TLT LLP, said:

“The threat of a ‘strong and rapid’ crackdown marks quite a significant change in tone and approach, and there can be no doubt that those market operators continuing to demonstrate poor practice and expose investors to risk are firmly in the sights of the regulator.

“Those choosing not to address concerns over client information disclosure, charging structures and data management will now be under greater scrutiny than ever before.”

The P2P market continues to grow rapidly, with industry analytics firm Briscoe reporting that P2P investors have lent more than £22 billion in the last decade. Media reports also suggest 275,000 people currently hold investments in P2P platforms.

New rules for P2P firms will come into force in December 2019. The new requirements include limit on investments in P2P agreements for retail customers who are new to the sector – they will now be unable to place more than 10 per cent of their investable assets in a P2P arrangement.

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 chief explains Brexit plans while Government minister says financial services will remain strong

Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA), spoke at Bloomberg in London in September 2019 about the financial services industry’s preparations for a no-deal Brexit.

He began by stating that the FCA will not be making any public statements regarding its opinions on Brexit. However, Mr Bailey said his organisation is preparing for a range of different outcomes, commenting that “in terms of contingency planning it would be foolish not to [prepare for no-deal]”, indeed he said that the bulk of the FCA’s preparations were for a no-deal scenario simply because that would be the Brexit outcome that would involve the biggest changes in a short time span.

The FCA chief said the regulator would continue to work closely with EU regulators after Brexit, and he said he could see no reason why the UK’s exit would affect access to the London financial markets. Indeed, the FCA has already signed new cooperation agreements with the EU markets, insurance and banking authorities and these agreements will take effect should there be a no-deal outcome.

Noting that both the FCA and firms that may be affected have already carried out a lot of Brexit contingency planning, Mr Bailey said:

“The upshot of this progress and improvements in preparedness is that the Bank of England has concluded that the appropriate assumptions to underpin a worst-case scenario would now be less severe than those of a year ago. But a worst-case scenario remains just that, even though we have worked to mitigate most of the potential disruption, we cannot provide the assurance that there will be none.”

The FCA chief then mentioned the Temporary Transitional Power, which is designed to ensure that UK-based firms don’t experience a sudden change in their regulatory obligations when opening their offices on the morning of November 1. The Power gives the FCA the ability to delay or phase changes to regulatory requirements made under the EU (Withdrawal) Act 2018. In the event of a UK exit from the EU without a deal or a transitional period, the provisions of this Power will apply until at least the end of 2020.

Mr Bailey mentioned that some EU states have arrangements in place that will allow UK-based firms to continue to trade in other European countries, even though the passporting regime may end abruptly on October 31 this year.

Summarising the present situation, the FCA chief finished his speech by saying:

“We will work with firms to make sure their contingency plans are executed effectively. We will continue to engage closely with our EU counterparts, and I hope we can commit to take the necessary joint activity to deal with issues that arise. In our view, the UK and the EU should be able to find each other equivalent on day one by virtue of having the same legislation and well-established supervisory approaches.

“We co-ordinate closely with the Treasury and the Bank of England. As I said earlier, our experience of the financial crisis has imprinted this sort of work firmly in our DNA. And, we will maintain an active programme of communications, for firms and for the public.

“So, in short, and to end, we have made considerable progress, but we do not underestimate the task ahead.”

Also in September 2019, the Economic Secretary to the Treasury and City Minister, John Glen MP, addressed the Annual Dinner of banking trade association UK Finance. Regarding Brexit he said:

“The Prime Minister has been clear. We cannot go on like this. No more dithering, no more delay. We must respect the result of the referendum. Leave the European Union on 31 October. And take the country forward in a positive direction.

“The financial services industry is well prepared for Brexit; and it will continue to thrive. Ahead of 31 October, we will continue to do all that we can to ready the sector for all scenarios.”

Any firm hoping that Brexit will lead to a large-scale repeal of financial services legislation is likely to be disappointed, however Mr Glen promised to look again at the regulatory system once the UK has left the EU. Mr Glen commented:

“The Chancellor and I have heard your representations and will be carefully and urgently considering your suggestions over the coming months. You’ve already told us that there is a need for greater “air traffic control” to manage the cumulative impact of regulatory change emanating from different sources.”

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 on improving suitability of advice

Debbie Gupta, Director of Life Insurance and Financial Advice Supervision at the Financial Conduct Authority (FCA) spoke about ‘improving the suitability of financial advice’ when she spoke at the Money Marketing Interactive Conference in September 2019.

One of her key points was to stress that it is sometimes difficult, or impossible, to reverse the customer detriment caused by poor financial advice, so firms need to ensure they give appropriate advice in the first place.

Ms Gupta said that the FCA’s 2017 review showed, across the product range, that the recommendations given by financial advisers were suitable in 93% of cases. However, this figure reduces to 50% for pension transfer cases.

The FCA director said the advice being given on pension transfers was “simply not good enough” and added “we are still seeing the same mistakes”, suggesting that many firms had failed to improve their advice standards for this product since the 2017 review was conducted.

Using the British Steel Pension Scheme saga as an example, she commented that some of the affected individuals were advised to transfer out after just one 30-minute meeting with an adviser. Other former members of this scheme have said that they were not receiving ongoing advice even though they were paying a regular fee to their adviser in the expectation of receiving a service in return.

Echoing concerns raised by some of her FCA colleagues, Ms Gupta commented that many pension fact-finds simply state “client wants more flexibility” as a justification for recommending a transfer.

Criticising firms who record very little, she said that details of other pensions, the state pension due and the client’s expected income in retirement were some of the essential items that had not been recorded on fact-finds that the FCA has seen.

Although, at present, there is no obligation for advisers to produce audio recordings of their client meetings, she urged firms to consider this, and said that this is no longer an unrealistically expensive option.

The FCA director then said that advisers should have the confidence to challenge clients’ misconceptions, commenting that “it’s not your role just to follow client orders.”

Ms Gupta then listed seven ‘don’ts’ when giving advice:

  • Don’t provide templated objectives for the client to tickas this will result in fact-finds that are insufficiently personalised
  • Don’t use shortcuts and assumptions – here she mentioned that information the adviser obtains should be up to date
  • Don’t approach the case with a biased opinion as to what the final outcome might be, e.g. assuming from the outset that it will be appropriate to recommend a pension transfer
  • Don’t see fact-finding as being just a regulatory box-ticking exercise and remember that the fact-find needs to demonstrate that the adviser has gathered sufficient information to ‘know their client’ and has made a suitable recommendation
  • Don’t keep using the same fact-find year after year – instead firms should regularly review the fact-find and other documents and consider what changes may be needed
  • Don’t leave out information from the fact-find even if the adviser thinks they know their client very well
  • Don’t proceed with a recommendation if the client can’t or won’t provide all of the relevant information the adviser requires, as without important information it may be impossible to demonstrate suitability

Her next topic was attitude to risk. Many advisers class their clients as cautious, balanced or adventurous and then make recommendations in line with this risk profile. However, Ms Gupta said that the FCA does not want advisers to use this method when advising on pension transfers – instead either they have an attitude to risk that allows them to accept the risk of transfer, or they don’t.

Capacity for loss was also mentioned as something that needs to be considered, and the example given in the speech was a client who was heavily reliant on a product or investment to meet their income needs throughout retirement, and hence cannot afford to see the investment fall in value.

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 prosecutes over destroyed documents

The Financial Conduct Authority (FCA) has revealed that it initiated the recent prosecution of an individual who is suspected of destroying important documents. This is the first time the FCA has cited the Financial Services and Markets Act when launching criminal proceedings for this offence, although similar prosecutions have previously been made under the Criminal Justice Act.

The defendant, who at the time of the alleged offence worked at an international bank, appeared at Westminster Magistrates’ Court on September 6 2019, charged with one count of “destroying documents which he knew or suspected were or would be relevant to an investigation.”

The defendant pleaded not guilty and he will now appear at Southwark Crown Court on October 4. He has been granted bail until that hearing takes place.

He was being investigated by the FCA as he was suspected of insider dealing. As part of its investigation, the regulator asked to look at his WhatsApp account. However, it is alleged that he deleted WhatsApp from his phone once the FCA had made its request.

Section 177(3)(a) of the Financial Services and Markets Act 2000 says that:

“A person who knows or suspects that an investigation is being or is likely to be conducted under Part XI of the Financial Services and Markets Act 2000 is guilty of an offence if he falsifies, conceals, destroys or otherwise disposes of a document which he knows or suspects is or would be relevant to such an investigation; or he causes or permits the falsification, concealment, destruction or disposal of such a document, unless he shows that he had no intention of concealing facts disclosed by the documents from the investigator.”

The maximum sentence for this offence is two years’ imprisonment.

The individual in question is reported to have worked as head of business development at a City of London securities brokerage and investment advisory firm since he left his role at the bank in 2016. The firm which recruited him to the business development role last year have said that he no longer works for them.

The FCA has wide-ranging powers to request data, documents etc. when investigating an individual or a firm.

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


Provider’s survey reveals many who receive pension advice don’t realise how much they need

Research by Scottish Widows has highlighted how large numbers of clients are massively underestimating how long they might live for when they seek financial advice on their pensions.

A man celebrating his 65th birthday today can expect to live to 87, while a 65-year-old woman will, on average, live to age 89, according to data from the Institute and Faculty of Actuaries. Scottish Widows says that, even when a financial adviser informs them of their likely life expectancy, only 50% of clients then decide to increase their pension contributions.

The research also highlights the extent to which some people are failing to make sufficient provision for their retirement. Those who start saving for their retirement in their 20s should be applauded for doing so, yet the average pension saver in their 20s is on course for an annual pension income of £18,500 when the average person in this age group also says they want £25,000 per annum in their retirement.

Across all age groups, Scottish Widows’ The Future of Retirement report says that 38% of UK adults are ‘dis-engaged savers’, meaning that they are unaware of how much they are saving towards retirement. The firm says that people in this group will only receive an average of £13,000 per annum in retirement – this assumes that they are only making the minimum contribution to a workplace pension.

20% of those who receive annual income of between £10,000 and £20,000 believe they will never accumulate a pension pot big enough to allow them to retire.

Another aspect of the changing times referred to in the Scottish Widows report is the possibility that many people will never get on the housing ladder and will therefore need to pay rent in retirement, and so may have higher expenses than previous generations who may have been expected to own their own homes in retirement.

Self-employed individuals are not automatically enrolled into any contributory pension scheme and the report says that only 32% of self-employed people aged between 20 and 39 are saving enough, while 41% of this group are not making any pension provision.

The research was carried out online by YouGov Plc across a total of 5,036 adults aged 18+ during April 2019.

Pete Glancy, Head of Policy at Scottish Widows, said:

“Automatic enrolment is improving the retirement prospects for many, but those who fail to save beyond the default requirements of the scheme will be faced with a significant income gap. The first step in closing this gap is acknowledging the interlocking challenges faced by different groups, from the self-employed through to those who simply don’t know how much they are saving. We need to see reform for the self-employed on a par with automatic enrolment and the introduction of new minimum and default contribution levels to address the issue of the disengaged generation.”

The firm’s annuities director Emma Watkins said:

“Life expectancy has grown substantially in the last 60 years and now one in 10 people will live to be 100. We know this is creating new challenges for advisers, as they are having to help clients who could be vastly misjudging the costs of a longer 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


Money Advice Trust hold podcast discussing the FCA vulnerable customers paper

The Financial Conduct Authority (FCA) appears to be mentioning the issue of treating vulnerable customers fairly more often than ever. The topic has been addressed in a number of speeches by FCA senior management and in late July 2019 the regulator consulted on proposed new guidance in this area.

Price caps on payday loans and rent-to-own agreements are examples of the high-level actions the FCA has taken to protect vulnerable consumers. However, the main responsibility for ensuring vulnerable individuals are treated well falls on individual firms.

In early September 2019, the Money Advice Trust held a webinar on what the FCA’s proposed new guidance means for firms. The panel included representatives of banking trade association UK Finance and representatives of Capital One and Newcastle Building Society.

Tim Hawley of Capital One suggested the guidance was quite high-level but that the issues mentioned by the FCA in the paper should prompt firms to conduct a detailed review of their existing vulnerable customer procedures. He suggested that the FCA and firms were still on a ‘journey’ and that the regulator might issue further guidance in the future.

The Newcastle Building Society representative Suzanne Wood said that it may not be possible for the FCA to write prescriptive rules in this area, but that she would recommend that firms read the guidance in detail and follow some of the examples of good practice in the paper. However, UK Finance representative Fiona Turner said many of the examples of good and bad practice in the paper were quite extreme examples.

Mr Hawley urged firms to ‘do the right thing’ for their vulnerable customers, even where there was no specific FCA rule to follow. This ties in with comments several FCA speakers have made about the culture within firms.

Ms Turner reminded firms of the FCA statistic that 50% of customers are potentially vulnerable. She then said there was a challenge for firms as vulnerable customers could fall into any of these categories:

  • Permanently vulnerable, e.g. someone who has a long-term medical condition
  • Temporarily vulnerable, e.g. someone who has lost their job or experiences other short-term financial problems
  • Intermittently vulnerable, i.e. they would be vulnerable at certain times of their relationship with the firm and that they might move in and out of vulnerable status more than once

Webinar chairman Chris Fitch of the Money Advice Trust drew firms’ attention to the FCA’s statement that the eventual outcomes for vulnerable customers should be at least as fair as those experienced by non-vulnerable customers. Ms Wood said that a good rule to follow when measuring outcomes is ‘would you be happy if one of your elderly relatives received the same treatment?’

Ms Wood urged firms to highlight to customers the benefits of disclosing their vulnerabilities – if a customer consents to information about their vulnerability being retained on a firm’s systems then the firm can explain how that information will be used to help them in future.

Mr Hawley had some strong words for any smaller firm that believed it couldn’t afford to put in place vulnerable customer procedures. He said the costs of doing this were much lower than the costs of not doing it.

Responses to the FCA’s consultation can be submitted until October 4.

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 and ICO place firms on ‘no deal’ alert

Early September 2019 saw a new law passed by Parliament that compels the Prime Minister to write a letter to the European Union formally requesting an extension to the UK’s proposed exit date if Parliament has not approved an exit deal by October 19.

However, Boris Johnson has said that, in spite of the provisions of the new law, there are no circumstances in which he will request an extension and has re-affirmed that the UK will be leaving the EU on October 31 this year, with or without a deal. A ‘no-deal exit’ remains the default option if no extension or deal is agreed, and even if the PM was to request an extension, the EU is not obliged to accept the request. The next EU summit is scheduled for October 17 and the UK Parliament will not now re-convene until October 14, unless the UK Supreme Court orders a recall in a hearing scheduled for Tuesday September 17.

The continued uncertainty has prompted the Financial Conduct Authority (FCA) to step up its efforts to ensure firms are aware of what they need to do to prepare for the potential of a no-deal Brexit. It warns that “firms who have not prepared appropriately may risk an impact on their business.”

The FCA has commissioned new digital adverts that link to its Brexit webpages and has launched a new Brexit helpline with phone number 0800 048 4255.

Previous information issued by the FCA on Brexit includes:

  • How almost every authorised firm could be affected by Brexit in some way
  • How the FCA has put in place a Temporary Permissions Regime to assist European firms who wish to continue operating in the UK after Brexit
  • How the FCA’s Temporary Transitional Powers will mean that most UK-based firms without significant European operations will largely be able to comply with their existing regulatory obligations for a period after Brexit

Brexit will also result in the abrupt loss of passporting for UK firms doing business in the EU and EEA. Whether firms will need new regulatory permissions to continue to do business in an EU/EEA country will depend on the activity they are carrying on, the local law and the approach of the local authorities in that jurisdiction. Firms should make themselves aware of any transitional regimes, with deadlines or registration requirements attached to them, that have been put in place by relevant member states. The EU/EEA states that have put in place arrangements to facilitate continued cross-border activity by UK firms are listed on the FCA’s site.

Nausicaa Delfas, the FCA’s Executive Director of International and de-facto ‘head of Brexit’, said:

“The FCA has undertaken significant work to prepare for the UK’s departure from the EU. We have published extensive information on our Brexit pages and held events, reaching firms and trade organisations around the country. We expect firms to ensure they are ready if there is a no-deal. If firms haven’t finalised their preparations, there is a risk they could be impacted. Firms should consult the information on our website.”

The Information Commissioner’s Office (ICO) has also called on firms to “prepare for all scenarios”. UK firms that already comply with the General Data Protection Regulation (GDPR), who have no contacts in the EEA who send data to them and no customers in the EEA will not need to do much to prepare for data protection after Brexit. The ICO says that their best preparation for data protection after Brexit is to comply with the existing GDPR but also advises firms to review their privacy information and documentation to identify any minor changes that need to be made after Brexit, such as removing references to European legislation.

Firms that send data from the UK to the EEA will still be able to do so post-Brexit. If an EEA firm sends personal data to a UK-firm, the ICO advises the UK firm to “take action with [the European firm] so the data can continue to flow. Standard Contractual Clauses are one method by which the ICO says this can be arranged.

UK firms that operate in the EEA will need to comply with both UK and EU data protection law after Brexit.

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 refuses application from lender over competence issues

A Bradford-based firm has been seeking to offer the type of loans usually described as ‘high cost short-term credit’ but was intending to do so using a firm name that implied the loans would be interest free. However, the Financial Conduct Authority (FCA) has refused the firm’s application for authorisation after taking issue with the interest-free claim. It also had significant concerns over the competence, capability and experience of the firm’s sole director, who was not planning to undertake additional training or engage third-party compliance support.

The firm had planned to offer loans of between £50 and £250 over terms of one to three months. Their headline interest rate would have been 0% but the Annual Percentage Rate (APR) of these would be between 81% and 243% as the firm would still charge a transaction fee. Nevertheless, the original set of policies submitted to the FCA by the firm stated its APR as 0% because it was unaware that transaction fees need to be included in APR calculations. Until it was pointed out to him by the FCA, the director did not know that the firm would need to calculate and publish the APR for its loans. The regulator said it was technically true that there would be no interest charged on the loans but that it was concerned use of the ‘interest-free’ name could be misleading given the fees to be charged.

The FCA also commented that:

  • The firm’s proposed affordability and creditworthiness assessment procedure did not explain how it would use income and expenditure details to make lending decisions. This procedure also failed to explain what information the firm would obtain from credit reference agencies or how it would use credit information in lending decisions. The firm said it would not carry out standard credit reference checks but provided no information as to how it would satisfy FCA rules relating to creditworthiness
  • The firm did not provide a procedure explaining how it would assess applications for repeat lending
  • The firm’s loan agreements did not include the loan term or the interest rate
  • The firm did not provide sufficient detail regarding how it would deal with customers in arrears
  • The complaints procedure made reference to the European Online Dispute Resolution Platform even though it is not possible to refer high-cost lending complaints to this organisation
  • The financial projections submitted by the firm were not sufficiently detailed
  • The initial compliance monitoring plan did not explain what compliance monitoring the firm would carry out or how often this monitoring would be conducted. Although the firm did submit a revised plan at a later date the FCA was concerned by the references to “maintaining overdraft procedures” when the firm was not proposing to offer overdrafts and by references to “other departments” of the firm carrying out certain functions when in fact the firm’s director proposed to operate the business single-handedly

The FCA issued a Warning Notice to the firm on March 22 saying it was “minded to refuse” the application. The firm was invited to make submissions in response to this Warning Notice, but when the regulator did not receive a reply to the Warning Notice it issued a Decision Notice stating it would be refusing the application on May 16. The firm did not appeal this decision to the Tribunal so the FCA confirmed the application refusal via a Final Notice dated July 10 2019.

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


ICO issues enforcement notice to firm who ignored SAR

The Information Commissioner’s Office (ICO) has served an enforcement notice on a Wirral-based finance firm that failed to respond to a Subject Access Request (SAR). There is no evidence that the firm has failed to comply with more than one customer SAR but for just one transgression the ICO has served the firm with the notice. The firm will now be liable for prosecution if it does not respond to the SAR.

On May 18 2018 the customer made a complaint to the firm and made an SAR for a copy of her personal data at the same time. The complaint was made via recorded delivery and the firm signed for this on May 21.

All firms are expected to respond to an SAR within 30 days of receipt and cannot charge the customer for providing this information. However, four months later the customer complained to the ICO saying she had not received a copy of her personal data from the firm.

The ICO wrote to the firm on December 11 to ask the firm to respond to the SAR. This letter was ‘returned to sender’ so the ICO wrote to the firm again on January 17 2019.

On three occasions in March 2019 an ICO staff member telephoned the firm to discuss the matter. The data protection watchdog has not disclosed what happened on the first two calls but has confirmed that on the third occasion the firm’s staff member hung up.

The ICO sent more letters to the firm in March and made a number of calls in June. The firm did not answer some of these calls and did not return the other calls as requested.

The ICO’s next step was to send a preliminary enforcement notice on June 26, which instructed the firm to respond to the SAR by July 26. The firm again failed to comply with this instruction.

On August 9 the ICO issued a further enforcement notice, again giving the firm 30 days to respond. However, on this occasion it will be a criminal offence if the firm fails to comply with the request. There is no indication of whether the firm replied to the latest ICO notice within the 30-day period.

The ICO believes that the firm’s actions constitute a breach of the sixth data principle of the Data Protection Act.

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 chair speaks on scams

Financial Conduct Authority (FCA) chairman Charles Randell spoke about the regulator’s continuing fight against scams when he addressed the 37th Cambridge International Symposium on Economic Crime in early September 2019.

Mr Randell began by saying financial crime had reached “epidemic proportions”, and that many victims were individual consumers who had lost their savings to a scammer. He observed that the FCA needed to tackle investment fraud in order to meet two of its statutory objectives: protecting consumers and promoting market integrity. In view of this, he said the FCA was:

  • Investing in intelligence and data analytics
  • Increasing the number of staff involved in fraud prevention
  • Raising public awareness of scams
  • Supervising firms and taking enforcement action where appropriate
  • Shutting down unauthorised firms, although the FCA cannot do this for firms based overseas

He then highlighted that the FCA believes that the actions of authorised firms who promote inappropriate investments to retirement savers are scarcely any more trustworthy than the criminals. Here Mr Randell referred to “financial firms which manufacture or promote poor value products to consumers” and that “some firms promote these products through incompetence, some through greed”. There have certainly been a number of individuals who have lost some or all of their retirement savings after being advised to transfer it into an alternative investment scheme, and the FCA has highlighted that five million people are potentially at risk of being duped by a pension scammer.

The FCA chair said that his organisation would continue to prosecute firms and individuals who break the law, but he observed that prosecutions take a long time and that only 3% of fraud cases reported to the police resulted in a criminal charge or summons. A 2017 National Audit Office report concluded that fraud was not a priority for a number of police forces. Mr Randell therefore believes that it is necessary to prevent fraud from occurring in the first place.

He highlighted the creation of the National Economic Crime Centre and the new Economic Crime Plan which calls for co-ordination of strategy and better information sharing between the Home Office, Serious Fraud Office, police forces, Action Fraud and the National Crime Agency.

The FCA has the power to impose fines and remove authorisations, but Mr Randell also mentioned some circumstances in which it could initiate prosecutions, including:

  • Conducting business without authorisation
  • Issuing unapproved financial promotions
  • Making misleading statements in relation to some forms of investment
  • Conducting fraudulent activities

However, Mr Randell said that it was difficult for the FCA to take action in many cases, either because the firm is based outside the UK, or the scam involves products that the FCA doesn’t regulate. On this topic he commented:

“We don’t regulate the issue of retail minibonds. We don’t regulate car parking spaces, hotel rooms, student accommodation, storage pods, forestry, land in the Cape Verde islands or any of the other get-rich-quick schemes which you will come across if you do a Google search for ‘high return investments”.

Mr Randell highlighted some of the changes that are being made in response to scams and questionable conduct by firms, including:

Strategies Mr Randell suggested could be implemented in the future include:

  • Providing more clarity about what is regulated by the FCA and what isn’t
  • Imposing further restrictions on the promotion of risky investments
  • Increasing the scope of the Financial Services Compensation Scheme coverage
  • Changing the rules so that issuing financial promotions becomes an FCA regulated activity – although these promotions can only be issued by authorised firms, there is no need to obtain additional regulatory permissions in order to issue these

Mr Randell also called on internet service providers, search engines and social media firms to do more to stop scammers from using their services.

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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