FCA fines for financial promotions failures: FCA has fined Credit Suisse International (CSI) £2,398,100 and Yorkshire Building Society (YBS) £1,429,000 for failures in financial promotions relating to CSI's "Cliquet" product. The product was aimed at investors who were conservative and risk averse, and offered a guaranteed minimum return, with an apparently attractive maximum return if the FTSE 100 performed consistently well. FCA found that promotions designed by CSI and approved and distributed by YBS highlighted the potential maximum return when the firms had conducted research which showed the changes of achieving the maximum were virtually nil. In the light of concerns raised by third parties, YBS eventually changed its literature, but still gave a misleading impression as to the likelihood of achieving the maximum return. FCA found the failings of both firms were particularly serious given the number of industry warnings and fines relating to financial promotions. It also criticised CSI because it had previously been fined. Also FCA commented that CSI had a policy of reviewing only changes to promotions without reviewing the entire promotion. Had it done so, the failings might have been noticed more quickly. The firms are conducting a customer contact exercise so customers can exit the contracts without penalty and receive interest based on a fixed term deposit rate up to the date of exit. (Source:FCA Fines for Financial Promotion Failings)
FCA updates on IRHP progress: FCA has published the May update to its figures on how banks are progressing their review of sales of interest rate hedging products (IRHP). It says 86% of eligible customers have opted to have their cases reviewed and that all nine banks have now completed their review of customers who joined the review before March. Most banks have already delivered redress letters to customers within the 12-month deadline, and the rest should do so before the end of June. Banks are now reviewing customers who joined the process after March and FCA encourages the 600 customers who have not yet joined the review to do so. (Source: FCA Updates on IRHP Progress)
FCA finalises FC changes on trade finance: FCA has published its feedback and finalised guidance with amendments to the Financial Crime guide (FC) on how banks deal with money laundering risk in trade finance. Respondents to the consultation commented that some of the examples of good and bad practice were too prescriptive and in conflict with the risk-based approach to money laundering prevention. The main areas of concern were:
- the suggestion that banks should always check the pricing of goods, verify underlying trade documentation and transacting parties and identify dual-use goods. Respondents thought this at best unduly restrictive and at worst impossible to implement; and
- lack of acknowledgment of the risk-based approach. FCA responded that it has made it clear that firms should apply their policies and procedures in a way that responds to their own risk assessments.
One respondent said there was no need for guidance as the risk of financial crime in trade finance was very low. FCA disagreed, saying it had found some significant shortcomings in banks' understanding of the risks and that it is critical banks assess the risks and put in place appropriate policies to mitigate them. FCA made some changes to its draft text for FC to address some of the responses and the new guidance took effect when published on 12 June. (Source: FCA Finalises FC Changes on Trade Finance)
FCA makes new rules: FCA's latest Handbook Notice includes notification of the following rule changes:
- the Conduct Of Business Sourcebook (COBS) (Use of Dealing Commission) (Amendment No 2) Instrument 2014, which it made on 1 May and which took effect on 2 June, making changes to COBS and the Glossary. FCA had previously published these changes (and FReD reported them) but had not included them in the previous Handbook Notice;
- the Retail Distribution Review (Complaints Data) Instrument 2013 was made on 5 June and took effect on 9 June. It amends the Supervision Manual (SUP) and the Dispute Resolution: Complaints Sourcebook (DISP) to reflect changes that ensure complaints relating to various retail advisory services are properly reported in GABRIEL; and
- the Client Assets Sourcebook (CASS) (Amendment No 5) Instrument 2013 was also made on 5 June and makes changes mainly to CASS on various dates. See FReD 13 June for details of the change.
(Source: FCA Makes New Rules)
FCA publishes IFL guidance: FCA has published guidance to lenders explaining where it has found information from lenders (IFL) about referrals and intermediaries helpful in investigating financial crime in the mortgage markets. (Source: FCA Publishes IFL Guidance)