This Week in Regulation


The Speed Read - what's been happening this week?

  • Monthly PPI Refunds and Compensation
  • Upper Tribunal Confirms Decision to Fine and Ban CEO
  • Occasional Paper: Investment Platforms’ Recommendations

Monthly PPI Refunds and Compensation
The FCA has recently announced that customers who complained about the miss-selling of PPI were paid a total of £260m back in May, taking the total sum of claims to £27.4bn since January 2011.

95% of the complaints received about PPI since September 2015 can be attributed to twenty-three firms. Customers have until the 29th August 2019 to make a complaint about the sale of PPI but are advised to apply as soon as possible as they can be waiting up to 8 weeks for a response from their provider. Customers have been urged to visit the FCA’s website for information around the reasons for which they can claim, or to get in contact with the Financial Ombudsman Service.


Upper Tribunal Confirms the FCA’s Decision to Fine and Ban CEO of Financial Service Companies

An upper tribunal held for a former CEO of a financial advice provider confirmed the decision to ban and fine the adviser from conducting any further FCA related activity. In addition to the ban, the adviser also faces a fine of £86,691 for their poor care and skill in their role as a director.

The individual was a significant shareholder and CEO of two financial service companies. The adviser failed to conduct their role with skill, conscientiousness and diligence in both firms. Both the FCA and the tribunal agreed that the individual’s actions were a serious matter in result of the evidence from the Financial Services Authority (FSA), which was made aware to the individual in a final notice in February 2010.

In addition to the lack of response to the notice, the individual also failed to take steps to ensure that one of the businesses was structured with adequate controls, oversight and monitoring of AI’s and RI’s during a particular time of growth for the business.

Mark Stewart, Executive Director of Enforcement and Market Oversight at the FCA stated the individual’s performance was below the standards that the FCA would expect from a Senior Manager of an authorised firm. In addition to their lack of performance in their role, the individual failed to address the concerns highlighted to them back in 2010.

Following a hearing in February 2017 the tribunal’s decision was made. Final notices were made to the firms in July 2014, to the firms Compliance Director in early 2015 and to its Risk Director later that year. The individual can leave to appeal to the Court of Appeal if they wish to do so.


Occasional Paper 30: Best Buys and Own Brands: Investment Platforms’ Recommendations of Funds

The FCA has recently issued an occasional paper around the motivation, impact and analysis of performance of investment platform’s best buy lists.

Investment platforms, or ‘fund supermarkets’ are online services that enable retail investors to research, buy and sell, manage and keep up-to-date on the process of their holdings in funds. Investment platforms currently channel over 50% of UK funds and continue to grow in significance.

Investment platforms are a concern as they are impacted by conflicts of interest e.g.:

  • Some platforms offer their ‘own brands’ though the platform
  • Until a change in regulations in 2016, platforms in the UK were able to receive a share of the fee revenue on investments that were directed through the platform.

Using data from the FCA’s asset management market study, this occasional paper examines:

  • The motivation for platform recommendations
  • The effect of these platform recommendations on fund flows
  • Whether the recommendations add value for investors

Findings & Conclusions

The findings from the occasional paper identified that affiliated funds are more likely to be recommended by platforms, particularly since commission-sharing was prohibited, and affiliated funds are less likely to be deleted from recommendation lists leading to a higher proportion of affiliated funds compared to non-affiliated.

The paper also highlighted that platform recommendations influence flows, particularly since revenue-sharing agreements are not disclosed in the UK.

On the question of whether recommendations add value, the paper highlighted that affiliated funds on best buy lists did not outperform non-recommended, unaffiliated funds.

The general conclusion has been drawn that investment platforms are driven by favouritism rather than guided by available information when adding own-brand funds to best buy lists, which could influence investors to make decisions that are not in their best interests.

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