FCA publishes disappointing results of its review of principal firms within investment management
The FCA has conducted an investigation into how principal firms within the investment management sector understand and comply with their regulatory obligations in respect of appointed representatives (ARs).
The regulator examined firms’ understanding and compliance within the following areas:
- The business impact of appointing ARs and appropriate frameworks to manage any risks associated with them
- Oversight and ongoing monitoring of ARs to ensure ongoing compliance
- Whether principals had adequate capital and liquidity to manage risk.
The FCA uncovered significant shortcomings in the governance and controls of the firms reviewed, with a significant risk of consumer and market harm. Specifically, the regulator highlights:
- A lack of effective framework for overseeing ARs, with some conducting business outside of their principal’s core area of expertise
- No product governance arrangements in place
- Monitoring was not bespoke to the AR business model and often relied on high-level attestations, rather than appropriate evidence gathering
- Several AR websites contained non-compliant financial promotions, indicating that these weren’t being reviewed or signed off according to the FCA’s rules.
In response, the FCA has sent a ‘Dear CEO’ letter to all principal firms setting out its expectation that firms review their compliance with the Handbook requirements concerning ARs and address any shortcomings. Any action a firm takes in response to this letter is likely to be considered as part of the FCA’s ongoing supervisory work.
Regulator wins case against unauthorised forex firm
The FCA has won its case against a forex firm which the High Court has ruled was involved in operating an unauthorised investment scheme. At least £1 million was collected from investors, with the promise of 6% returns, but only a small amount of this was ever invested. Instead, the business owner used the funds to finance his personal spending.
Latest figures show over £27 million lost to forex and crypto scams
The latest report from the FCA and Action Fraud shows that consumers have lost more than £27 million to forex and crypto investment scams in the last financial year. This equates to an average loss of £14,600. The regulator received 1,800 reports of scams and unauthorised schemes, which has tripled from the year before.
As part of the FCA’s ScamSmart campaign, the regulator will be running a series of adverts to raise awareness of online trading scams and make consumers more sceptical of ‘get rich quick schemes’.
[speech] How the FCA is leading the way in regulation
Karina McTeague, Director of General Insurance and Conduct Specialists Supervision, recently gave a speech on how the FCA is leading the way in insurance regulation. We bring you her key points.
The FCA’s approach is innovative and sets a high standard globally, particularly around culture and enabling firms to bring innovative solutions to market. Its expectations for the industry are similar to those set by many boards – sustainable business models and a customer-focussed culture, underpinned by customer trust.
Trust is not only a firm-specific thing, it impacts the entire industry, and can be gradually eroded or lost suddenly following an incident. The implementation of the Insurance Distribution Directive (IDD) has introduced further measures to protect the industry’s reputation, including enhancing the requirements around the design, targeting and selling of insurance products.
The regulator has a number of other projects running to enhance the conduct of the sector, including:
- Thematic work around GI distribution chains and delegated authorities
- Follow-up actions resulting from the wholesale intermediaries market study
- GI pricing practices market study.