CTP NEWS

Facebook, Twitter, Financial Promotion and the FCA

Thu, 23 May 2013 10:07:01 GMT

FCA to focus on 'cultural characterstics' of firms

Mon, 22 Apr 2013 15:21:39 GMT

In a recent speech, Clive Adamson, Director of Supervision at the FCA, stated as follows:

"Our approach today is to draw conclusions about culture from what we observe about a firm – in other words, joining the dots rather than assessing culture directly. This can be through a range of different measures such as how a firm responds to, and deals with, regulatory issues; what customers are actually experiencing when they buy a product or service from front-line staff; how a firm runs its product approval process and the considerations around these; the manner in which decisions are made or escalated; the behaviour of that firm on certain markets; and even the remuneration structures.

We also look at how a board engages in those issues, including whether it probes high return products or business lines, and whether it understands strategies for cross-selling products, how fast growth is obtained and whether products are being sold to markets they are designed for.

We are able, from all of this, to draw conclusions about the culture of a firm. This includes assessing if the perceived customer-focused culture is supported by, for example, regular discussions on conduct at board level and appropriate sales incentives plans.

We don’t have direct rules about culture, although our high-level principles for business come close to this in some respects. As I have set out here, we don’t directly supervise ‘culture’. However, as culture and business practices are so important in driving behaviours, we do want to encourage positive culture change in firms.

We will therefore increasingly, as I have indicated, draw conclusions about a firm’s culture and reflect that back to firms as part of the risk assessment process. Where we believe cultural measures exposure the firm to a high level of risk in the context of our objectives, we will expect the firm to take account of it."

To read the speech in full click here. For details of our next half day workshop on Culture please click here, email or call us on 01908 488170.

New product intervention powers for FCA

Wed, 27 Mar 2013 11:36:43 GMT

The new temporary product intervention rules will allow the FCA to take action to restrict the use of certain product features, require a product not be promoted to some or all types of customers, or – in the most serious cases – prevent a product from being sold altogether.

Some of the instances in which the FCA might consider making temporary rules (which do not require any previous consultation) include:

Where a product is in serious danger of being sold to the wrong customers, for instance where complex or niche products are sold to the mass market
Where a non-essential feature of a product seems to be causing serious problems for consumers
Where a product is inherently flawed.

Rules made before consultation would last for no longer than twelve months and could not be renewed. During this time, the FCA will either consult on a permanent remedy or will work to resolve the problem another way.

Martin Wheatley, chief executive of the FCA, said: “The creation of the FCA is our opportunity to reset conduct standards. This power, along with our other new powers, helps define how we will regulate going forward. We know that some in the industry are concerned about us using this power too hastily; I want to be clear that we know proportionate judgement is needed, and that is what we will exercise. I do not expect us to use this power frequently, but both industry and consumers need to be clear that we will not hesitate to use these powers where we have serious concerns.”

For further information or to download the PS click here.

New Regulator sets out priorities for 2013/14

Mon, 25 Mar 2013 09:54:16 GMT

The FCA's Risk Outlook, which underpins the Business Plan, highlights the following main risks for the coming year are:

Firms not designing products and services that respond to real consumer needs or are in consumers’ long-term interests
Distribution channels not promoting transparency for consumers on financial products and services
Over-reliance on, and inadequate oversight of, payment and product technologies
Shift towards more innovative, complex or risky funding strategies or structures that lack oversight, posing risks to market integrity and consumer protection
Poor understanding of risk and return, combined with the search for yield or income, leads consumers to take on more risk than is appropriate.

In response to these identified risks, the FCA plans to focus particularly on the following areas:

Ensuring that firms’ strategies are aligned with producing appropriate outcomes for consumers - for example, through the work on product governance and incentives
Market abuse
Competition: this will involve building a new Competition Department to embed competition analysis across the organisation, which will take action as appropriate
Ongoing misconduct, such as LIBOR, Payment Protection Insurance and interest rate swaps
Carrying forward major policy initiatives such as the Mortgage Market Review, the changes to retail investment advice and extensive engagement with Europe on important Directives.

For more information or to read the FCA Risk Outlook and Business plan in full click here.

CTP are developing a range of workshops, courses and briefings to help firms adapt to the new regulatory environment. For the latest information click here, email or call 01908 488170 to discuss our open and in-house compliance training programmes.

New course dates for 2013

Fri, 21 Dec 2012 15:14:30 GMT

Do you have the right Culture?

Fri, 12 Oct 2012 15:15:23 GMT

Regulator to focus on incentive schemes and culture

Thu, 06 Sep 2012 10:45:04 GMT

Following a review of 22 firms of various sizes (including banks, building societies, insurance companies and investment firms) that produced "disturbing findings", the FSA has published for consultation some guidance notes on Risks to customers from financial incentives.

In a conference speech, the head of the new regulatory body went on to make the following points:

All financial firms need to take the following steps:

Look at your incentive schemes to see if they increase the risk of mis-selling, and if so how.
Review whether your governance and controls are adequate.
Take action to deal with any weaknesses and flaws identified.

"Firms need to change how they incentivise their staff and learn to manage their risks. CEO’s are ultimately accountable for the way their staff are incentivised, so we expect them to take a real interest in fixing this . . .

I want to draw a line in the sand here, and use the report we are publishing today to set out our clear expectations."

The FCA will take forward a programme of further supervisory work, involving a wider review of incentive schemes, enforcement proceedings and a possible strengthening of rules.

"From boardroom to point of sale, the behaviour and attitude of financial firms needs to be examined and assessed – especially in terms of what experience and outcomes it offers customers."

You can read Martin Wheatley's speech in full here.

CTP will shortly be offering a series of events on the issues and challenges associates with Culture, Sales Quality and Incentives. For further information, or help in any of these areas, please call us on 020 3170 5779.

Suitability: FSA to commence further thematic work

Wed, 05 Sep 2012 12:27:16 GMT

Following the 'Dear CEO' letter concerning Suitability sent to Wealth Management firms by the FSA in June, the regulator has started a further phase of thematic monitoring.

"We will be interviewing key individuals from firms that formed part of our previous work to review the approach their firms have taken to remediate problems identified in their client portfolios, and in particular whether they have taken sufficient steps in identifying and dealing with past detriment that consumers may have suffered. Following these interviews we shall consider whether we need to take further regulatory action."

The FSA will focus on "making judgements on the suitability of client outcomes, but also complementing this approach with a direct assessment of firms’ systems and controls. We will be acutely interested in whether firms have heeded the warnings and concerns contained within our previous communications."

To read the FSA Statement in full click here.

To find out how CTP can help with Suitability or FSA visits please call us on 020 3170 5779.

Enforcement after the FSA

Fri, 06 Jul 2012 14:38:33 GMT

Speaking at the FSA's recent Enforcement conference, Martin Wheatley (CEO designate of the FCA) and other senior regulators outlined some of the differences firms can expect under the new regime.

As previously, it was made clear the current FSA strategy of 'credible deterence' will be continued and, if anything, intensified under the FCA.

Here are some of the most significant developments:

"We will be more prepared to use formal tools including enforcement actions to support the FCA’s emphasis on intervening earlier to stop problems from occurring. Members of our Enforcement Division will get involved in supervisory decisions at an earlier stage, and provide specialist support and expertise to our supervisors. We will take action earlier to tackle root causes – like poor remuneration arrangements – rather than waiting for the risks to crystallise." (To read speech in full click here.)

"We need to have a low tolerance for firms that constantly bump along the bottom. We will be much more prepared to intervene and limit business where each time we raise an issue or take action against a firm when we see it fixing only the immediate problem but failing to think about how the underlying causes – whether they be culture, product design, training or reward – might read across and cause similar problems in other areas. I expect the FCA to have a lower tolerance for repeat offenders." (To read speech in full click here.)

CTP provides a range of events to help clients keep up to date with the latest regulatory developments and prepare their businesses for the new regulatory regime.

For further information click here or call us on 020 3170 5779.

FSA ban Insurance Co chairman over governance failings

Thu, 10 May 2012 08:20:26 GMT

The FSA sent a strong message this week by banning the executive chairman of an international insurer and fining the firm £3.3 million for failing to address weaknesses in governance and risk controls (details here).

Tracey McDermott, the FSA's Director of Enforcement, warned:

"Senior management must take responsibility for the firms that they run . . . If those who hold senior positions in financial services firms had had any doubt about how seriously we view their regulatory responsibilities this fine and ban should make our position crystal clear . . . The FSA requires firms to have effective corporate governance and controls. They must adapt these appropriately to reflect changes in their risk profile, especially growth into new areas.”

Make sure you are in a position to meet FSA expectations by attending our focused and timely events Governance Update for SIFs and Risk Management for SIFs in the City of London next month.

Please click on the links above or call 020 3170 5779 for further details.