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

UK: FCA bans/fine in mortgage fraud failures hints at differences in lenders’ processes

The Financial Conduct Authority (the Authority) has issued final notices banning two former directors of Which Mortgage Limited in respect of their failure to act with due care and skill to ensure that the firm had appropriate controls  to verify mortgage applications which were submitted to high street lenders.  The case serves as a timely reminder of the Authority’s regulatory expectations regarding verification of income and employment details, and monitoring of intermediaries by lenders.  Continue reading

Remuneration: FSA Guidance replaces tiering with new proportionality regime

The FSA has recently published finalised guidance on proportionality and remuneration in respect of its Remuneration Code.  The changes, which came into force on 25 September 2012, see the end of the current four tier proportionality system (based on capital resources), which has been replaced with a new system comprising three proportionality levels (based on total assets).  For more detail, click here.

Herbert Smith financial incentives schemes checklist: Key points from FSA review and ESMA consultation on remuneration policies and practices

Both the FSA and ESMA have recently launched consultations on proposed guidance relating to firms’ financial incentive schemes.   The FSA’s consultation marks the beginning of a programme of work which will be taken forward by the Financial Conduct Authority (FCA).  The UK regulator intends to monitor this area closely, and to take follow-up action to assess what firms have done in response to this work.  Continue reading

FSA Remuneration Code

The FSA have recently published two consultations in relation to its Remuneration Code. The first relates to a proposal to replace the current four tier proportionality system with three proportionality levels based on total assets and the second introduces proposed new remuneration data reporting requirements.  To read our more detailed briefing on the consultations, click here.

Block Listing: FSA publishes procedural note and other LPDT guidance

The FSA has published its second Primary Market Bulletin.  The Bulletin states that the FSA is planning to completely re-launch its technical and procedural notes, (together the ‘Notes’) which provide guidance on the LPDT Rules.  The reformatted Notes are currently available in draft form as the FSA has put them out for a short consultation.  The consultation closes on 24 August 2012 (FSA update today).  To read our longer briefing on the procedural notes and some remaining ambiguities, please click here.

Time barring PPI complaints

In its Policy Statement 10/12 on “The assessment and redress of Payment Protection Insurance complaints” published in August 2010, the FSA was quite firm that the publicity about PPI mis-selling, which, even then, had been very significant, would generally not be enough for a firm to reject a PPI complaint without consideration of its merits  on the basis that it was made outside of the relevant time limits (and for the firm to object to the FOS considering such a complaint).  Continue reading

Product intervention: some thoughts on the FCA’s interactions with Europe

As regulatory rules are increasingly made in Europe, within the UK, the new Financial Conduct Authority (FCA) will move to becoming – as Hector Sants put it – a “supervisory arm” of Europe in relation to conduct issues.  But has the UK really given enough thought to compatibility with European legislation, and to the need for coordination and cooperation with the ESAs and other competent authorities, or are we enshrining potential problems for ourselves in the proposed legislation and policy approach?

In considering the proposals in the UK’s Financial Services Bill (the FS Bill) to give FCA product intervention powers, the interaction with European requirements and the role of the European Supervisory Authorities (the ESAs) assume heightened importance.  Concerns about this interaction were a continuing theme emerging from responses to the FSA’s discussion paper on product intervention. 

The FCA has confirmed that its Product Intervention Committee and the Board will have due regard to how the national approach fits within the wider EU legislative framework and that they will, where appropriate, recommend consideration of the same  issues at EU level.  There is also an acknowledgment that there may be a need to change national rules with the advent of new European rules.  These are welcome assurances, but may not go far enough to address some of the issues to which the interaction of UK and EU product intervention powers may give rise.

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Regulating bidding in emissions allowances auctions: FSA proposals on authorisation, standards and market abuse

Auctions of EU Emissions Allowances may begin as early as July 2012 on the central common European auction platform.  The regulatory framework for the auctioning of aviation and phase III emissions allowances is set out in the Commission Regulation (EU) No 1031/2010 as amended by Commission Regulation (EU) No 1210/2011 (CAR).  However, specific elements of CAR need to be implemented by EU Member States to allow certain persons to participate in the auctions.

The Treasury is consulting on legislative amendments to make bidding in the auctions a regulated activity.  In parallel, the FSA is consulting on prudential and conduct rules (including amendments to the market abuse regime) which will apply to certain UK firms who must be authorised in order to bid in such auctions.  The timeframe for responding to these proposals is short, but the organisational implications for firms wishing to participate in regulated auction bidding are not insignificant.  Continue reading

FSA publishes proposed Remuneration Code guidance

On 21 April 2011, the FSA published a number of draft guidance documents to assist firms in complying with the revised FSA Remuneration Code (the “Code”). The revised Code came into force on 1 January 2011 implementing the remuneration principles contained in the amendments to the Capital Requirements Directive. The draft guidance documents provide general guidance on certain aspects of the Code and also include templates which firms subject to the Code can use to document compliance. Continue reading