FCA publishes structured products review: FCA has published a thematic review and supporting papers that show consumers do not understand structured products. FCA carried out research that showed consumers significantly overestimate the likely return on these products. FCA said this shows firms must consider their consumers when designing them. In particular:
- senior management should ensure the firm has decided on its target market during product design so this can inform each stage of development;
- there should be a reasonable chance that structured products will deliver economic value to targeted customers;
- firms should give customers clear and balanced information on products and their risks; and
- manufacturers should strengthen the lifecycle monitoring of their products, including giving distributors appropriate information and checking the product is distributed to the right market.
The review involved both wholesale and retail firms and FCA will now ask all firms involved to explain how they would ensure fair treatment of customers. It has already asked some retail firms to check whether any existing customers may have been affected by issues FCA found during the review. FCA now wants all firms involved in the structured product markets to consider the results of the review alongside existing FCA requirements and the likely changes coming from MiFID 2. (Source: FCA Publishes Structured Products Review)
FCA fines and restricts Bank of Beirut for misleading it: FCA has fined Bank of Beirut (UK) Ltd £2.1 million for breach of Principle 11, fined its former compliance officer £19,600 and its internal auditor £9,900, and stopped the bank from acquiring new customers from high-risk jurisdictions for 126 days. It found the bank had repeatedly provided FCA with misleading information after FCA told it to address concerns regarding its financial crime systems and controls. It found the two approved persons, who it appreciated were under the influence of senior management, had not been open and honest in answering FCA's requests. It said they should have challenged senior management. FCA had required the bank to put in place a remediation plan when it found the bank's culture meant it gave insufficient attention to risk and regulation despite the high risk that it might be used for financial crime. The bank failed fully to implement the plan but told FCA it had done so. (Source: FCA Fines and Restricts Bank of Beirut for Misleading It)
FCA confirms Tribunal backing on market abuse help: FCA has confirmed the Upper Tribunal has upheld FCA's decision to fine Tariq Carrimjee of Somerset Asset Management LLP £89,004 for helping a client to commit market abuse. The client (Mr Goenke) and other individuals have already been fined. Mr Carrimjee was, among other senior positions, responsible for compliance oversight at the time. The Upper Tribunal upheld FCA's finding that he did not act with due skill, care and diligence when he failed to escalate the risk that Mr Goenke could have committed market abuse. However, it did not uphold FCA's finding that he had acted without integrity. (Source: FCA Confirms Tribunal Backing on Market Abuse Help)
FCA publishes quarterly consultation: FCA has published its latest quarterly consultation, proposing changes to:
- the Client Assets Sourcebook (CASS) and Consumer Credit Sourcebook (CONC). The CASS changes will affect external custody reconciliations, registration and recording of legal title, client money segregation in relation to some regulated clearing arrangements and the delivery versus payment rules that apply to authorised fund managers and relating to regulated collective investment schemes. It is also confirming its intentions on applying CASS in the context of loan-based crowdfunding, and addressing tension between CASS and CONC in this respect;
- the Supervision Manual (SUP) to automate submission of remuneration reports; and
- various rules impacting alternative investment fund managers (AIFMs) and depositories. The changes will clarify valuation obligations, introduce notification requirements for firms taking advantage of an exclusion from the Regulated Activities Order, impose a late payment fee on reporting and give guidance on a number of issues including interpretation of certain depository rules. It also plans to clarify that in its view AIFMs may passport only "non-core" activities if they wish, without needing to passport a "core" activity also.
FCA asks for comments on the proposed changes to CASS and CONC by 6 April and on the other proposals by 5 May. (Source: FCA Publishes Quarterly Consultation)
FCA announces fraudster imprisonment: FCA has confirmed Phillip Boakes has been sentenced to 10 years' imprisonment for defrauding investors, using false instruments and accepting deposits without authorisation. The court found he had operated a classic Ponzi scheme through his company, which claimed to carry out foreign exchange spread betting for its customers. Mr Boakes had previously been an approved independent financial adviser and misled some customers into thinking he still was. The longest part of the sentence (parts of which run concurrently) was for the fraud, but one year was for the illegal deposit taking. (Source: FCA Announces Fraudster Imprisonment)
Up next from FCA: Before the end of March, FCA plans several key papers, including:
- in the High Level Standards block, policy statements on the Financial Services Compensation Scheme Management Levy, implementing the Mortgage Credit Directive, and Policy proposals on and rates for regulatory fees and levies; and
- under Prudential Standards, policy statements on Solvency 2 changes, simplification of the Mortgage and Insurance Intermediaries Prudential Sourcebook and a discussion paper on MiFID 2.
(Source: Policy Development Update 20)
FCA finds payday lenders fail TCF on customers in arrears: FCA has published a thematic review that shows payday lenders have often failed to meet their treating customers fairly (TCF) obligations in respect of customers who are in arrears. It found poor practices in all firms it visited, including firms which continued to pursue customers despite having received documentation with medical or other evidence explaining why customers could not pay (which the firms sometimes had not read). Other failings included agreeing payment plans that were clearly not sustainable and engaging in misleading practices to seek payment from customers in arrears. FCA is encouraged by actions firms have taken to address failings, but in several cases it has ordered firms to undergo a skilled persons review or has restricted their business while they put things right. (Source: FCA Finds Payday Lenders Fail TCF on Customers in Arrears)
FCA publishes benchmarks feedback: FCA has published a policy statement on bringing additional benchmarks within the supervisory regime. Most respondents to its consultation supported its proposals, and in response to some of the questions raised FCA will provide further guidance on who falls within the definition of a benchmark submitter. The changes to the Glossary, the Fees Manual, the Market Conduct Sourcebook and SUP will take effect on 1 April. (Source: FCA Publishes Benchmarks Feedback)
FCA publishes retirement guidance instrument: FCA has published the Conduct of Business Sourcebook (Retirement Guidance Guarantee) Instrument 2015. The instrument amends the Conduct of Business Sourcebook (COBS) by inserting provisions relating to the advice that firms must give to pensions customers and the information that must be included in an open market options statement following the commencement of the Pensions Schemes Act 2015. (Source: Conduct of Business Sourcebook (Retirement Guidance Guarantee) Instrument 2015)
FCA publishes pensions guidance providers instrument: FCA has published the Standards for Designated Guidance Providers Instrument 2015. The instrument sets out standards that firms designated as pensions guidance providers must meet, including that:
- services are free to consumers;
- firms provide particular information and references when providing a consumer with information about their retirement options providers; and
- there is a ban on the receipt of inducements or other financial advantage by providers except in very particular circumstances.
The instrument comes into force on 6 April alongside the Pension Schemes Act 2015. (Source:Standards for Designated Guidance Providers Instrument 2015)
FCA and BoE review MoU: FCA and BoE have carried out their second review of the MoU that sets out how they cooperate with one another in relation to the supervision of markets and market infrastructure. The CEO of FCA and the Deputy Governor Financial Stability at BoE considered the views of industry and staff, concluding that the MoU’s arrangements for cooperation have worked well, with appropriate coordination and no material duplication. They emphasised their continued commitment to effective cooperation and that staff should work together to take forward those suggested improvements identified by industry and the necessary revisions to the MoU and supporting coordination processes in light of the new PSR. (Source: FCA and BoE Review MoU for Supervision of Markets and Market Infrastructure)
FCA updates MiFID 2 pages: FCA has updated its MiFID 2 pages on its website to give an update on expected MiFID 2-related publications at UK and EU level. It says the discussion paper, due by the end of March, will focus on issues where FCA has discretion and where there is potential read-across to non-MiFID business. It says it may publish other papers, and will engage in several less formal dialogues, with the industry in the run up to MiFID 2 implementation. It also notes its plans to review its Handbook and have in place all systems and controls to allow it to process all necessary applications in time for 3 January 2017. (Source: FCA Updates MiFID 2 Pages)
FCA publishes consumer banking alerts evidence: FCA has published an occasional paper showing how consumers appear to be more aware of potential unarranged overdraft charges if they receive text or app alerts. Research found that consumers tend to take no action in respect of these charges, changing balance levels or switching providers, if they receive only annual statements. FCA commissioned the research in the light of a potential Competition and Markets Authority investigation. (Source: FCA Publishes Consumer Banking Alerts Evidence)