In its June 2015 regulatory round-up, the FCA urged firms to co-operate with them at all times.
FCA Principle 11 says that: “A firm must deal with its regulators in an open and co-operative way, and must disclose to the appropriate regulator anything relating to the firm of which the regulator would reasonably expect notice.”
Many firms of all types and sizes have lost their authorisation after failing to submit regulatory returns, or failing to pay fees.
Firms are also expected to notify the FCA when significant rule breaches occur. Firms might be wary of alerting the regulator to instances of wrongdoing, but the rules require firms to do this. The FCA is also likely to view the matter in a more favourable light if the firm admitted to the mistake rather than waited for the FCA to uncover the issue at a monitoring visit.
When a firm notifies the FCA of a significant issue of this type, it should also supply information regarding: steps taken to investigate the cause of the problem, any compensation that will be paid to customers disadvantaged by the issue, lessons learned from the issue and steps taken to stop the issue recurring.
Examples of occasions on which a firm might need to notify the FCA include:
- It becomes aware that information on a data return was inaccurate
• It sells a product that it does not have permission to advise on/arrange
• Evidence of possible fraud, market abuse or other improper conduct
Warning notices issued against directors of advice firms
The FCA has published two Warning Notices on its website regarding the alleged activities of two directors of investment advice firms. Enforcement action may follow as a result of the FCA’s investigations into these individuals.
On the first notice, the individual is alleged to have:
- Failed to monitor the firm’s advisers sufficiently, giving rise to an increased risk of unsuitable advice
• Not implemented sufficiently rigorous controls regarding the advisers’ activities
• Not developed a business model that addressed previous advice failures
The alleged failings of the second individual are:
- Not reviewing and scrutinising the firm’s risk controls sufficiently
• Not implementing measures that would have allowed the firm to control risks – partly due to the lack of a review referred to above, and partly because the individual lacked understanding of the relevant risks
• Not putting a system in place to assess the effectiveness of the firm’s risk controls