Stephen Bell, the senior compliance officer of two firms that engaged in advisory activity regarding pension investments, mortgages and general insurance/protection products, was sanctioned by the Financial Conduct Authority for the firms’ failure to have adequate compliance systems and controls related to the retention, training and supervision of its registered representatives. Mr. Bell was sanctioned despite FCA acknowledging that “Mr. Bell took significant steps during the [r]elevant period to introduce and improve the firms’ compliance systems and controls.” However, these measures “were ultimately insufficient to ensure that the firms complied with the regulatory requirements,” claimed FCA. The two firms—Financial Limited and Investments Limited—are part of the Standard Financial Group Ltd. FCA had previously imposed a recruitment ban on the two firms because of their representatives’ alleged mis-selling and provision of unsuitable advice to consumers regarding certain high-risk transactions and other wrongful conduct (click here (regarding Financial Ltd.) and here (regarding Investments Ltd.) for details). FCA claimed that, during the relevant period, August 2008 through April 2013, Mr. Bell was aware of the firms’ failings and need for improvement. Because the systems and controls implemented by Mr. Bell were not adequate to prevent the firms’ regulatory breaches, Mr. Bell was determined by FCA to lack adequate “competence and capability.” In resolving this matter. Mr. Bell agreed to pay a fine of GBP 33,800 (approximately US $50,000) and not to serve as the senior compliance officer for any firm in connection with activity regulated by FCA.
My View: Among international regulators, FCA may be the most aggressive in sanctioning senior compliance officers. However, in prior cases, the compliance officer arguably crossed the line in either affirmatively furthering the bad actions of his/her firm, or misleading FCA (click here for background in the article “FCA Sanctions Bank of Beirut, Former Compliance Officer and Former Internal Auditor for Providing Misleading Information Regarding AML Systems and Controls Remediation” in the March 2 to 6 and 9 edition of Bridging the Week). In this matter, FCA acknowledges that the compliance officer improved the firm’s procedures, but said the improvements were not enough. The sanctioning of a compliance officer regarding the alleged inadequacy of a firm’s procedures absent some affirmative misconduct appears dangerously to transform compliance officers from advisors to a firm, to potential guarantors of the firm’s compliance with all applicable laws and regulations. This is too great a burden and fails to distinguish the difference between an advisor and a supervisor—even accepting that compliance officers have proactive obligations and cannot just give advice and then turn aside and ignore unlawful actions when they know (or reasonably should have known) they are being committed.