Financial firms: protecting customer personal data

A recent case provides a rare example of the criminal prosecution of an individual (in this case the former employee of an insurer) for breach of the Data Protection Act 1988 (DPA). 

David Barlow Lewis was a former employee of the insurer LV. He offered an ex-colleague £3,000 a month to send him the details of customers involved in road accidents. She refused to do so, and Lewis was subsequently prosecuted at Bournemouth Magistrates’ Court for attempting to commit an offence under section 55 of the Data Protection Act 1998 . He had knowingly or recklessly attempted to obtain personal data without the data controller’s consent.

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UK: New Regulators’ Code now in force

On 6 April 2014 the new Regulators’ Code (the “Code”) replaced the Regulators’ Compliance Code, which dated back to December 2007.  The Code applies to a range of regulators, including more than 50 national regulators, all local authorities and some regulatory functions carried out by government ministers.  Relevantly for readers of this blog, BIS’s summary of the regulators and regulatory functions covered by the Code includes the Financial Conduct Authority, the Prudential Regulation Authority, the Pensions Regulator, the Information Commissioner, the Financial Reporting Council, the Insolvency Service and HMRC (in relation to functions conferred by the Money Laundering Regulations 2007). 

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FCA wins case against operators and promoters of unauthorised CIS

The regulator continues to be successful in clamping down against the operation and promotion of unauthorised collective investment schemes (CIS).  The High Court has laid down judgment in the FCA’s legal action against Capital Alternatives: the High Court agreed with the FCA and found that the investment schemes at the centre of the legal action constituted collective investment schemes.  When structuring investment schemes, it is important to consider the definition of CIS within the Financial Services and Markets Act 2000 (FSMA) and to ensure that CIS operators are authorised by the FCA.  Those who have structured schemes which push at the boundaries of FSMA should take note of a statement made by Tracey McDermott, the FCA’s director of enforcement and financial crime, in a press release published by the FCA yesterday: “This ruling shows that even if operators have deliberately tried to structure their scheme to avoid regulation, the court will still look at whether those operating the scheme should in fact be regulated for consumer protection”. Continue reading

Anti-money laundering and anti-bribery systems and controls at asset management firms: FCA thematic review

In October 2013, the Financial Conduct Authority (FCA) published the much-anticipated report of its thematic review into anti-money laundering (AML) and anti-bribery and corruption (ABC) systems and controls at asset management and platform firms.  The report follows the FSA/FCA’s previous thematic reviews of ABC controls in commercial insurance broking (2010), ABC controls in investment banks (2012), and AML and sanctions controls in trade finance (2013).  As with other thematic work, whilst the review is of a particular sector, the FCA expressly expects other regulated firms to consider the findings and examples of good and poor practice. Continue reading

FCA confirms how it will use new powers to publicise warning notices

On 15 October 2013, the FCA published its Policy Statement (PS13/9) on the publication of information about warning notices under its new powers (see section 391(1)(c) FSMA).  The FCA’s new approach will apply in respect of warning notices issued on or after the date of the Policy Statement.

Before these powers came into force in April 2013, the regulator had only been able to publish information about decision or final notices.  There had been considerable opposition to the introduction of these powers, on the basis that such publication could inflict irreparable reputational damage, even though a warning notice is little more than an indication of what the regulator is minded to do before considering full written and oral representations from the person concerned.  The government nonetheless chose to give the regulators these powers, and the FCA had initially consulted on their proposed use in March.  Continue reading

Further enforcement action by UK FCA in relation to suitability issues in wealth management

The UK’s Financial Conduct Authority (FCA) has imposed a £1,802,200 fine on AXA Wealth Services Ltd (AXA) for failing to ensure the investment advice given to its customers was suitable, and putting customers at risk of buying unsuitable products.  The case is interesting not just because it provides some elaboration on existing guidance on suitability, but also because the FCA examined the adequacy of controls over sales incentives to ensure that advisers did not make unsuitable recommendations or seek to sell unwanted products. 

Interestingly, the FCA highlights the fact that the investment funds underlying the products recommended to customers were predominantly managed by members of the AXA Group, although the FCA does not directly criticise the bancassurance model, nor is there any overt suggestion that potential conflicts of interest were not adequately managed (other than the inadequacy of controls over sales incentives).  The fine is however based on a percentage of AXA’s total revenue from sales of investment products during the relevant period.     Continue reading

A new statutory cause of action against credit rating agencies – inconsistent messages from Europe

On 31 May 2013, new European legislation was passed to amend the Regulation on credit rating agencies which was first introduced in the aftermath of the financial crisis. Its primary objective is to help discourage the high level of reliance which has typically been placed by market participants on credit ratings. However, amongst its most controversial provisions, it introduces a new cause of action giving rise to civil liability on the part of credit rating agencies where losses are suffered by investors or issuers as a result of breaches of the Regulation caused by the agency’s gross negligence.

In an article recently published in Law and Financial Markets Review, Senior Associate Harry Edwards looks at the detail of the new cause of action and considers the tensions it creates with the wider objectives of the legislation. Click here to read the article.

FCA bans and fines two in relation to Unregulated Collective Investment Schemes sales failures

On 16 August 2013, the FCA announced that it had banned and fined two individuals for providing insufficient oversight of activities carried out by their respective firms regarding the promotion of three Unregulated Collective Investment Schemes (“UCISs”). John Leslie of Leslie & Nuding and Jeffrey Bennett of Burlington Associates Limited (“Burlington”) were each fined £28,000 and banned from performing any significant influence function in relation to any FCA-regulated firm. This is the latest in a string of FCA enforcement action relating to Collective Investment Schemes. Continue reading

The FCA’s financial crime priorities

The Financial Conduct Authority (“FCA”) recently published two documents which provide additional information about its current supervisory and enforcement approach and priorities in relation to financial crime issues.  These are the FCA’s Anti-Money Laundering Annual Report 2012/13 (“AML Report”) and the first Financial Crime Newsletter since the transition to the FCA (“Newsletter”).  This e-bulletin summarises points of particular interest in these documents. Continue reading