FCA fines and bans directors: FCA has banned the managing and finance directors of Pritchard Stockbrokers Limited for client money failings. The firm was censured. FCA would have fined it nearly £5 million had the firm not entered into Special Administration. It would have fined David Gillespie, Managing Director, £144,000 and David Welsby, Finance Director, £72,000 were it not for evidence of their financial hardship which resulted in fines of £10,500 and £14,000, respectively. FCA found the firm recklessly relied on an offshore facility as an available client money resource to plug a deficit in the firm's client money. FCA found that as a result of failings by the firm and the two individuals:

  • client money was used to pay business expenses;
  • the firm routinely failed to pay funds to cover shortfalls in client money into its client bank account;
  • the firm relied on the offshore facility as a client money resource which it should not have done; and
  • FCA was not told when a client money shortfall occurred.

The Financial Services Compensation Scheme had to step in to compensate clients after the firm lost around £3 million of client money. FCA found the failings particularly serious because it had given the firm a private warning in 2007, which included client money issues, and the firm had confirmed in 2010, in response to a "Dear CEO" letter, that it had appropriate client money controls in place. It found Mr Gillespie, among other things, accepted the controlled function 10a for client money oversight without making any attempt to understand his responsibilities. Mr Welsby had responsibility for accounting and performing internal client money reconciliations and, in that capacity, he should have verified the existence of the offshore facility. (Source: FCA Fines and Bans Directors)

FCA feeds back on with-profits and Solvency 2: FCA has published feedback to its consultation on the with-profits rules in Chapter 20 of its Conduct of Business Sourcebook (COBS 20) and parts of its prudential rules. It has made rules, which it will review again when further EU measures implementing Solvency 2 are available, but tells firms they must get ready to comply with the new rules from the beginning of 2016. The changes relate to:

  • distributions;
  • connected persons;
  • contingent loans and other support assets;
  • other rules and guidance;
  • stopping new business and going into run-off;
  • the Principles and Practices of Financial Management;
  • governance and responsibilities for with-profits committees;
  • capital requirements;
  • internal contagion risk;
  • assets to cover technical provisions;
  • key definitions and concepts; and
  • transitional arrangements.

(Source: FCA Feeds Back on With-Profits and Solvency 2)

FCA updates on IRHPs: FCA has published its latest data on how banks are progressing claims relating to Interest Rate Hedging Products (IRHPs). All nine banks have completed their sales reviews of customers who joined the review before March 2014 and have delivered redress letters to almost all customers. Of the 17,000 redress determinations to customers, 14,000 include a cash redress offer. The rest confirm the sale was compliant or the customer suffered no loss. So far, customers have accepted 71% of offers the banks have made. (Source: FCA Updates on IRHPs)