The Financial Conduct Authority (FCA) has recently published a ‘Dear CEO’ letter on the 26th of October 2020 to Claims Management Companies (CMCs). It is common for the FCA to post letters to its regulated firms as part of its supervision methods, but what is not common is for the FCA to outwardly highlight so many issues with the firms it supervises. In a sentence which sums up the FCA’s view on CMCs it suggests CMCs have ‘a poor understanding of, and sometimes attitude to, their regulatory obligations.’
As a way of background, the FCA recently took on supervision of CMCs from the Ministry of Justice (MOJ) as a result of the Brady Review in 2019. Ever since taking on the supervisory role the FCA has been fairly combative with CMCs making CMCOBS (the rulebook for CMCs) quite anti-business as it forces many of them to give out disclosures which could deter potential customers. In this latest development, the letter from the FCA proves the FCA does not hold the CMC industry in high regard.
The FCA have noted general trends within the CMC industry most of which seem negative. Examples of some of the issues the FCA identified are: Misleading advertising, poor disclosure practices, poor service standards and individuals involved with CMCs having previous history of misconduct. The FCA are looking to ramp up the pressure on CMCs within this letter and issue it as a general warning to the industry.
It is interesting to note that the FCA may consider any of the issues outlined in the letter to be against its threshold conditions for authorisation and will look into possible refusal/withdrawal of authorisations for CMCs if they do not improve. For more information, the letter can be found here.
With the FCA magnifying glass firmly on CMCs for the foreseeable future, we at Scott Robert can help. As part of our service offering, we can assist CMCs with their internal compliance to ensure they meet the standard the FCA expects. Please feel free to contact us for further information.