Regulation round-up August 2013

Information for all firms

Positive Compliance – New dates added

We have added further dates to the schedule for the remainder of the year. This seminar programme explores specifically our expectations and common failings in the areas of pension switching and Income Drawdown and include interactive case studies.

These sessions are an excellent opportunity to hear directly from us and provide clarification on our requirements in the areas covered. Book a place.

Financial crime newsletter

Our first financial crime newsletter was published last month.

It covers:

  • the financial crime conference
  • latest report on money laundering and terrorist finance risks
  • European anti-money laundering legislation
  • investment fraud trends and
  • frequently asked questions.

Anti-money laundering annual report 2012/13

Our anti-money laundering report sets out our obligations relating to anti-money laundering, our approach to carrying out those obligations, and the trends and emerging risks in money laundering that we are seeing in the firms we regulate.

The discussion of trends and risks focuses on the ways in which the firms we regulate may be vulnerable to being used by money launderers, rather than on the types of crime (such as drug smuggling) from which the illicit funds are derived.

Transaction reporting Failings

We fined RBS £5,620,300 for incorrectly reporting 44.8 million transactions between November 2007 and February 2013 and failing to report 804,000 transactions between November 2007 and February 2012.  RBS breached our rules on transaction reporting and our requirement for firms to maintain adequate systems and controls.   Accurate and timely transaction reporting allows us to identify suspected market abuse.

Abusive high frequency trading (HFT)

We fined Michael Coscia £597,993 for market abuse, specifically the manipulation of commodities futures.  The manipulative HFT ‘layering’ strategy employed by Coscia relied on the placing of large bids and offers that were subsequently cancelled, to move the price in the direction of a small order placed on the other side of the book. It is important for firms to be vigilant around manipulative trading strategies which can lead to consumer detriment.  

Preventing and reporting market abuse

We have fined two approved persons for failing to recognise and prevent manipulation of the London Stock Exchange’s (LSE) closing auction process in 2010.  We also published a Decision Notice to the client’s wealth adviser, proposing a fine of £70,258 and a full prohibition for recklessly assisting the client in his plan to manipulate LSE closing prices.  Approved persons need to be both alert to indicators of market abuse and to be ready to proactively challenge suspicious behaviour.  

Insurance intermediaries

FCA’s approach to supervision

In late July we wrote to a number of General Insurance & Protection (GI&P) firms to inform them of changes to their contact arrangements with us. Our supervisory approach has now been fully implemented for GI&P firms with those classified as a category 3 or 4 (C3 or C4) supervised by a team of sector specialists rather than a single named supervisor.

Some firms were already supervised in this way but for others it is an important change. As a result, going forward it is important that if C3 and C4 firms would like to proactively contact the FCA, they do so through our Contact Centre rather than approaching a supervisor. The letter sent to firms affected by this change explains in more detail the reasons for this and what it will mean for them.

TR13/2 – Mobile phone insurance (MPI) - ensuring a fair deal for consumers

On 27 June 2013 we published the MPI thematic review.

We looked at MPI in response to concerns raised by consumer groups and the media about the design, sales process, claims and administration of the product. Concerns had also been raised by the Ombudsman in relation to the number of complaints coming through to them.

Our overall aim was to ensure that consumers are treated fairly throughout the product lifecycle, and the thematic review identified that when the product is designed, sold and administered fairly it can be useful to consumers.

However, our findings highlight that there is sometimes a gap between what mobile phone insurance delivers and what consumers have been led to expect the policy to cover them for. In summary the report shows that we found a number of issues;

  • Product governance in firms was not always effective
  • Aspects of the products were not designed to meet consumers’ needs
  • Product terms and conditions were not always clear and fair to consumers
  • We found some examples of poor sales practices
  • In some instances MPI claims handling was slow and unfair
  • Some firms were not adhering to complaints handling rules.

We are now engaging with firms, consumer groups and industry bodies to ensure that consumers are at the heart of firms’ MPI business. We have already seen positive changes made by firms and a commitment to improving their products.

The Referral Fee Ban

As part of our approach to coordinating the provisions of the Legal Aid Sentencing and Punishment of Offenders (LASPO) Act 2012, we have established a robust working relationship with our regulatory counterparts, the Solicitors Regulation Authority and the Claims Management Regulator. 

These relationships are formally underpinned by memoranda of understanding (MoUs) as well as working documents that facilitate information sharing, evidence gathering and enforcement action. This ensures effective regulation of all firms and markets within our remit.

Further information on the referral fee ban.  If you have any information you would like to provide to us about referral fees, please email us at [email protected].

Investment Managers and Stockbrokers (Retail and Wholesale)

Capital requirements for investment firms

We have published our proposals (CP13/6) on implementing the Capital Requirements Directive (CRDIV) for investment firms. CRDIV will come in to effect by 1 January 2014.

CRDIV is the implementation of Basel III, and affects approximately 2,400 FCA prudentially regulated investment firms. It is split in to two sections:

  • the Capital Requirements Regulation (CRR, Regulation 575/2013) and
  • the Capital Requirements Directive (CRD, Directive 2013/36/EU).

We have also published high-level frequently asked questions relating to the consultation.

European Banking Authority (EBA) published implementing standards for CRDIV

EBA published a technical standard on COREP and FINREP which finalises the rules on harmonised reporting. Once the final standards are adopted by the European Commission as EU regulations and published in the Official Journal, the rules will be directly binding on firms subject to CRDIV. Firms prudentially regulated by the FCA should carefully consider the content when ensuring compliance and building systems to implement COREP, and where applicable, FINREP.