Month: April 2019

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FCA publishes its ‘Approach to Supervision’ and ‘Approach to Enforcement’

On 24 April 2019, the UK Financial Conduct Authority published its ‘Approach to Supervision’ and its ‘Approach to Enforcement’.

Both of these approach documents provide a helpful insight to firms on the FCA’s approach to both supervision and enforcement.

The FCA’s approach to enforcement gives the following insights:

– The “overriding principle in our approach to enforcement is a commitment to achieve fair and just outcomes in response to misconduct. Wrongdoers must be held to account and our rules and requirements must be obeyed”;

– “Not all breach’s of our rules or requirements constitute serious misconduct. Many breaches can be addressed and remedied elsewhere (and we expect them to be) without the need for enforcement action, especially where the error is technical or minor”;

– “Firms and individuals should not wait for an investigation to end before acting in a way they think is right”; and

– “We aim to make sure the sanction is sufficient to deter the firm or individual from re-offending and deter others from offending”.

The FCA’s approach to supervision also gives the following insights:

– “We expect firms and their employees to meet [our] standards and hold them to account when they fail to meet them”;

– The supervisory principles (a) are forward looking, (b) focus on strategy and business models, (c) focus on culture and governance, (d) focus on individual and firm accountability, (e) are proportionate and risk-based, (f) involve two-way communication, (g) are co-ordinated and (h) put right systemic harm that has happened and stop it happening again;

– Culture and business models are still key things the FCA considers important;

– The FCA continues to adopt a decision-making framework (see, for example, Chapter 4; there are some real nuggets of information here).

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FCA’s Andrew Bailey gives speech on the future of financial conduct regulation

On 23 April 2019, the UK Financial Conduct Authority’s chief executive, Andrew Bailey, gave a speech to the ‘Future of Financial Conduct Regulation’ conference in London.

If there is any speech you are going to read, it probably should be this one. It gives a clear insight into the FCA’s thinking and, in particular, the role and use of the FCA’s Principles for Businesses. There seems a clear will within the FCA to re-look at these principles (and potentially increase their scope). As Mr Bailey says, “principles are not debating points, they are the bedrock of our regulation, and there is a good case for enhancing their standing and practical impact”.

For good measure, there is also some focus on Brexit (and its impact on financial services) and the FCA’s consultation on introducing a ‘duty of care’ in financial services.

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FCA publishes ‘Dear CEO’ letter to firms approving financial promotions

On 11 April 2019, the UK Financial Conduct authority published a ‘Dear CEO’ letter to firms approving financial promtions. This letter is aimed at firms approving financial promotions for unauthorised firms.

The FCA reminds firms:

– Before approving a financial promotion for an unauthorised firm, the authorised firm must ensure the promotion complies;

– Despite its earlier letter dated 9 January 2019, the FCA has found “a number of examples where it appears the due diligence carried out on a financial promotion may have fallen well short of the standard we expect”.

– The approver of a restricted financial promotion (ie one which can only be sent to certain persons) must ensure any restriction is complied with (and express reference is made to mini-bonds)

– Firms not complying are reminded of the FCA’s extensive enforcement toolkit.

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Treasury makes the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019

On 29 March 2019, the Treasury made the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019. 

From ‘exit day’, these Regulations will effectively mean the rules in Rome I, Rome II and the Rome Convention will continue to apply as domestic law in all parts of the UK to decide the applicable law for contractual and non-contractual obligations.

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European Commission consults on the effectiveness of the Distance Marketing Directive

On 9 April 2019, the European Commission started a consultation on the effectiveness of the Distance Marketing of Financial Services Directive 2002/65/EC (the DMD).

The European Commission’s webpage says the goal of the consultation is to “ensure that all relevant stakeholders have the opportunity to express their views on the effectiveness of the Directive”.

The Commission’s webpage goes on to say that since the DMD came into force, “the retail financial sector has gone increasingly digital, with new products and actors available on the market and new sales channels being used. Several EU laws pertinent to financial services have also been adopted or updated”.

The deadline for responding to the consultation is 2 July 2019. The European Commission expects to publish its findings and conclusions by the end of 2019.

The DMD was last reviewed by the Commission in 2009.

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Employment Tribunal decides adverse credibility findings by a judge are enough to justify dismissal of an employee subject to the FCA’s approved person regime

On 30 November 2018, the Employment Appeals Tribunal decided in Radia v Jefferies International Limited [2018] UKEAT 0123_18_3011 that a firm regulated by the UK Financial Conduct Authority (the FCA) was entitled to dismiss an equity research analyst for not being a “fit and proper person” under the FCA’s approved persons regime after an employment tribunal expressed the view the analyst lacked credibility as a witness.

The Employment Tribunal “made adverse findings about the Claimant’s credibility” and “found that the Claimant’s evidence was “not credible in many respects” and “on lots of occasions evasive” and that he had not told the truth or had misled the” Tribunal.  These findings were enough, the Employment Appeals Tribunal said, to justify the analyst’s dismissal (and it was not necessary to prove dishonesty).

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House of Commons publishes written responses to questions on mortgage regulation

On 1 April 2019, the House of Commons published answers to two written questions:

–           What discussions the Chancellor of the Exchequer has had with the Financial Conduct Authority on the development of the cost benefit analysis used to assess the potential impact of the its proposals in ‘Mortgage customers: proposed changes to responsible lending rules and guidance’ (CP19/14); and

–           What estimate (with reference to CP19/14) the Chancellor of the Exchequer has made of the number of mortgage customers currently unable to switch their mortgage product who will not be able to benefit from modified affordability assessment proposals.

The answer to the first question can be found by clicking here (including the relevant letters) and the answer to the second question can be found by clicking here (including relevant letters).

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Financial Services Consumer Panel’s Consultation Response: High-Cost Credit

The Financial Services Consumer Panel (the Panel) has responded to two consultations on high-cost credit by the Financial Conduct Authority (the FCA): (a) overdrafts and (b) ‘buy now, pay later’ offers.

Overdrafts

Commending the FCA’s analysis, the Panel agrees with the FCA that ‘fundamental change’ is needed in the overdraft market. The Panel’s key points and recommendations seek to build on the FCA’s proposals to ensure the protection of consumers, by making overdrafts simpler, fairer and easier to manage.

‘Buy Now, Pay Later’

The Panel notes the consultation, on paper, makes proposals that better protect customers. However, it remains concerned about the likely effectiveness of information disclosure remedies given what it claims to know about firms’ exploitation of consumer behavioural biases.

The Panel

The Panel was established under the Financial Services and Markets Act 2000 by the FCA.  The Panel represents the interests of consumers in the development of policy by the FCA for the regulation of financial services.

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Claims management companies become regulated by the Financial Conduct Authority

On 1 April 2019, the UK Financial Conduct Authority took over regulation of claims management companies (CMCs) in England, Wales and Scotland. CMCs had previously been registered by the Claims Management Regulator (a part of the Ministry of Justice). The FCA has issued a press release stating that more than 900 CMCs have registered for a temporary permission while they apply for authorisation from the FCA.

The FCA has also published a webpage on using CMCs.