Further blow for Financial Ltd after FCA recruitment ban

NatWest has announced that it is no longer accepting new mortgage applications from appointed representatives (ARs) of financial advisory network Financial Ltd.

This action has been taken by the bank as a result of the fact that, in July 2013, Financial Ltd, and its sister network Investments Ltd, were banned by the financial regulator, the Financial Conduct Authority (FCA), from recruiting new ARs for four months. This was the first time that the FCA had imposed this sanction on a firm.

Clearly NatWest believes that business submitted by Financial Ltd could pose an undue risk as a result of the issues identified by the FCA.

NatWest will however continue to process applications that have already been submitted, and will also accept applications from former Financial Ltd ARs who are now authorised elsewhere in the industry.

A NatWest spokesperson justified the move by saying: “As a responsible lender we take seriously the findings of the FCA and will undertake a full review of Financial Limited. Until we have completed this our decision is final and is not open to negotiation.”

But Financial Ltd chief executive Brian Galvin said: “There is no good reason for this suspension and we are working with NatWest to get it lifted.” He added that no other provider had taken this step, and that his members had not received any notice of NatWest’s action.

It remains to be seen whether any other providers will take this action in due course, whether with Financial Ltd or any other firm who have been subject to FCA action.

The failings identified by the FCA at Financial Ltd were wide-ranging, encompassing recruitment, training, supervision, file reviews and risk management; and continued over a five-year period. In summary, the regulator said that the firms treated their ARs as the end customers, rather than the clients they were servicing. Many of the products the ARs advised on were higher risk, such as unregulated collective investment schemes (UCIS), pension transfers and pension switches. ­

The FCA has also ordered Financial Ltd to conduct a historic review of its pension switch and UCIS business, and to pay compensation to affected clients.


MOJ publishes details of second quarter enforcement action

On August 14 2014, the Claims Management Regulator at the Ministry of Justice (MoJ) issued an update on its enforcement activities.

The MoJ revealed that, in the second quarter of 2014 (April to June), it visited 29 claims management companies (CMCs), carried out 124 audits, commenced 25 investigations into regulated CMCs, issued 136 warnings, cancelled the licence of two companies and refused one authorisation application.

The report goes on to reveal that the MoJ is particularly concerned about the activities of CMCs active in financial services, including those who handle payment protection insurance mis-selling claims. In this area, it has warned companies over matters such as: accepting business from unauthorised companies, issuing generic claim letters and submitting claims without taking time to substantiate them.

Mention was also made of financial CMCs who were failing to meet the rules regarding processing of claims and website marketing. A number of investigations in this area are ongoing, and one company, Morgan Bentley Ltd, lost its authorisation in June 2014 as a result of breaches of the rules in these two areas.

With regard to unathorised use of trademarks, the MoJ said it may take enforcement action against companies. It is not uncommon for a CMC’s website to list banks and other firms that they have pursued claims against, and sometimes the logos of the firms in question are displayed alongside their names, but this must be done in accordance with the law.

The next section of the report deals with unsolicited marketing messages. The MoJ has increased the number of checks it carries out on this issue, and is investigating two companies as a result. CMCs are reminded of the May 2014 special bulletin on this issue which covered issues such as: not calling persons on the Telephone Preference Service register; only sending text, email and automated voice marketing messages to those who have consented to receive them; and clearly identifying the name of the company and the nature of its services at the outset.

Finally, the report gives details of the actions the MoJ is taking to enforce the referral fee ban in personal injury cases, and the steps it is taking to combat data fraud.

New rules for CMCs will take effect on October 1 2014, and guidance on application of these new rules will be issued by the MoJ in September 2014. These rules include: a requirement to establish that claims have a realistic chance of success before submitting them, new obligations to provide evidence to back up claims and the need to conduct thorough audits of data obtained, e.g. sources of marketing leads.


Banks increase their PPI provision

The half-yearly results from the UK’s banks for the first six months of 2014 show that all of the largest institutions have once again increased their provision for mis-sold payment protection insurance (PPI).

The most eye catching piece of news in this area is that the amount set aside by Lloyds Banking Group to pay PPI redress now runs into 11 figures, at some £10.4 billion. This represents an increase of £600 million on the previous figure announced by the group. The Lloyds group includes Bank of Scotland, TSB and Halifax.

Barclays increased its provision by £900 million to £4.85 billion. Royal Bank of Scotland, which includes NatWest, announced an increase of £150 million to £3.25 billion. HSBC announced an increase of £50 million earlier in 2014, taking its total to £2.1 billion. Santander has set aside an additional £65 million, and its compensation reserves now stand at £816 million.

This means that the five largest banking groups have collectively set aside a total of £21.4 billion to pay PPI claims. Some previous estimates suggested that the industry’s final PPI compensation bill could be as much as £40 billion, but it now appears that a figure closer to £20 billion might be more realistic.

Latest figures from the regulator, the Financial Conduct Authority (FCA), show that the 24 firms who are responsible for the most PPI complaints had paid out £15.5 billion in redress up to the end of May 2014. Data from both the FCA and the independent Financial Ombudsman Service (FOS) show that PPI complaint volumes have fallen significantly in the last 12 months or so, but the numbers of complaints being received are still well in excess of those being made about other financial products.

It is now six years or more since most of the mis-sold policies came into force.  However, as the FOS will accept complaints until ‘three years from when the consumer knew, or could reasonably have known, they had cause to complain’, PPI complaints can certainly still be made. Many PPI policyholders did not realise just how unsuitable their insurance was, and in some cases were unaware they even had the cover, so it is considered that these customers will meet the above criterion.

Although it is certainly possible to make a mis-selling claim for PPI today, the FOS has reported that many of the PPI complaints it receives at present concern how the financial firm calculated the compensation payment. The FOS has indicated that it is concerned about firms failing to take account of additional charges incurred by customers as a result of taking out credit card PPI, and that firms are using ‘alternative redress’ to settle PPI claims. Alternative redress, also known as comparative redress, involves the financial firm deciding that whilst single premium PPI was indeed unsuitable, that regular premium PPI would have been suitable instead. Consequently, the firm does not offer the customer a refund of all premiums paid, and instead offers a lower amount of compensation.


A Must for New UK Firms: Getting Reliable Advice on FCA Authorisation

Here at Scott Robert, we work tirelessly to provide comprehensive and reliable advice on FCA authorisation. So, let us navigate the regulatory maze for you.

Legislation and regulation are ever evolving, and navigating FCA requirements can be confusing for budding firms. Seeking advice is crucial, and here at Scott Robert, we pride ourselves on keeping our clients happy.

A Group of Field Experts

We are experts in financial regulation, with a team made up of industry experts, ex-regulators and legal professionals. We offer advice on regulation to both government and independent firms.

Offering effective guidance on financial services regulation requires us to listen to our clients to determine their needs and regulatory requirements, including obtaining a consumer credit licence from the FCA. Scott Robert offers real solutions for firms seeking to position their services in line with regulatory requirements.

Services We Provide

We offer comprehensive legal and compliance advice, making sure our clients implement workable frameworks for their financial services. Offering advice on FCA authorisation is one of our most popular and important services. The process involves wide-ranging support for firms, helping individual firms implement the systems and controls necessary for obtaining authorisation.

We can offer instructions to legal counsel directly, given our licensed access to the Bar Council. Consequently, we work with some of the most experienced barristers working in financial regulation.

Commitment to Confidentiality

At Scott Robert, we offer cost-effective solutions for those seeking authorisation with the FCA. We do not publish a list of clients, given our commitment to confidentiality, but those who use our services always receive the guidance they need. This mutual understanding underwrites our intimate relationship with the clients on our books.

We are a committed and erudite team of experts who enjoy our dynamic working environment. We offer a value and quality of service unparalleled in the broader market.

We offer a service that most financial firms require. Legislation can be confusing and is subject to ceaseless evolution. Navigating regulation is not a simple task and firms offering financial services know the importance of seeking independent guidance and advice. Importantly, acquiring FCA authorisation is essential and breaches of financial legislation carry severe penalties. These should start from

Firms cannot be too careful. When seeking advice, experience talks. Here at Scott Robert, we understand the importance of experience and customer-care, as well as value for money. Contact us for more information regarding our top services.

If you are seeking advice or more information about acquiring FCA authorisation, one of our team would love to hear from you.


FCA fines insurer over sales practices

In August 2014, financial regulator the Financial Conduct Authority (FCA) fined Stonebridge International Insurance Limited, a subsidiary of Aegon, £8,373,600 over its failings when selling personal accident, accidental death and accidental cash plan insurance.
The fine concerns telephone sales made to customers in Germany, France, Italy and Spain, as well as in the UK.

In addition to the fine, Stonebridge faces the prospect of paying significant sums in compensation to affected customers. £400,000 in redress has already been paid, and it is estimated that almost 500,000 customers could be due a redress payment.

When selling the policies, outsourcing companies used by Stonebridge encouraged customers who were wavering over whether to purchase to buy the plan anyway and make use of the cancellation period if desired. However, when customers tried to cancel, they were then actively discouraged from doing so, and staff were financially rewarded for preventing cancellations. Some customers who wished to cancel were persuaded to take reduced cover instead, but here they were not given sufficient information about the revised policy terms.

Although the policies were being sold by outsourcing companies, they did so using a sales script designed by Stonebridge. These scripts were designed to direct customers towards costlier and more comprehensive forms of insurance, whether the customers needed this or not.

When selling the cover, the outsourcing companies failed to state that they were acting on behalf of Stonebridge at the start of the call, did not properly explain the extent of the limitations and exclusions on the plan (or on occasions gave incorrect or misleading information about exclusions) and conducted the calls too quickly to allow customers to digest information. Many customers were not informed of extra charges they would incur as a result of their chosen payment method.

Reviews by Stonebridge of sales made by the outsourcing companies were limited, and reference is made in the FCA’s Final Notice to the compliance department being ‘under-resourced’. All Stonebridge’s compliance monitoring activity took place remotely in the UK, with no visits being made to the European offices, and there was no monitoring of any kind of the German and Italian activities between April 2011 and December 2012.

Although each European outsourcing operation did carry out their own internal monitoring, this was often of poor quality. One example is that quality assurance of sales calls in France consisted simply of listening to the first five minutes of each call, rather than the entire conversation.

No management information regarding the sales was reviewed by Stonebridge, and on one occasion Stonebridge failed to identify that an outsourcing company had amended a previously approved script.

The FCA noted that Stonebridge purposely targeted lower income customers and those without degrees and professional qualifications, meaning that their financial knowledge may have been lower than that of the average customer.

Tracey McDermott, FCA director of enforcement and financial crime said of the firm’s actions:

“Customers are entitled to expect firms to provide them with fair and balanced information to enable them to make the right choices about the product that is right for them. Stonebridge failed to do this.”

Stonebridge has now ceased selling the products covered by this action. The firm is also said to have put in place new arrangements for monitoring its outsourcing companies, and according to the Final Notice, has “comprehensively revised its governance structure.”

Posts navigation