According to research by Eversheds, a over quarter of financial services firms of all sizes do not have robust systems in place to prevent bribery that would match the standards required by the new laws. Nearly half were unaware of the criminal liability being owned by directors and businesses. CEI has been warning firms of this risk since last summer when the details were first made public.

The Bribery Bill – currently awaiting Royal Assent – could catch all sizes of financial services companies unawares.

This survey found has uncovered a real lack of awareness, understanding and preparation in the financial services sector in relation to the Bribery Bill and that many businesses aren’t set up to minimise their exposure to corrupt business practices.

The laws, expected to come into force later this year, will require all businesses to have ‘adequate procedures’ in place to prevent bribery and corruption, with clearer rules on corporate entertainment and gifts. If in doubt, concult your professional compliance consultant or call us on 07092 289901.

Clients of CEI Compliance who use their compliance manual already have a section for recording ‘Gifts and Entertainment’ and this can be adapted to suit the company concerned. For larger companies a specific policy may be required and a matrix of authority and responsibility established.

The Compliance Manual can be purchased HERE

Lloyds Banking Group has reported it made a pre-tax loss of £6.3bn last year as bad debts escalated. The bank, which is 41% owned by the UK taxpayer, made losses of £24m on bad debts – much higher than those reported by RBS on Thursday.

Eric Daniels, Lloyds group chief executive gave up a potential £2.3m bonus, and this was in the wake of the revelation last week that Lloyds has a £200m staff bonus pool.

If Lloyds bonus reciepients qualify for the “payroll Tax” their contribution to the Treasury’s coffers through its tax on bank bonuses could be between £10m and £20m.

In a statement, the bank’s chief executive said that 2009 had been “another challenging year for the financial services industry”, but despite the tough market conditions, the bank’s core businesses had “performed well”.

I guess they are in it for the journey – more like a roller coaster that has yet to hit the up ramp!

RSM Tenon Financial Services Limited have been fined £700,000 by the FSA for failings in its advice and sales processes for Lehman-backed structured products. The FSA also found there were failings in preventing unsuitable advice on structured product and pension switching.

Further to this fine, Tenon will also have to buy back any products from customers who who received unsuitable advice and reimburse them for the amount originally invested plus interest.

This is the first enforcement action resulting from the FSA’s review of the marketing and distribution of structured products concluded in October 2009.

The FSA found that, in relation to its sales of Lehman-backed structured products between November 2007 and August 2008, Tenon failed to treat some of its customers fairly and failed to fully and correctly assess the risks of structured products. They failed to ensure advisers considered those risks when providing advice to customers.

More suprisingly for this compliance consultancy, Tenon

• failed to provide suitable advice to its customers
• failed to demonstrate the suitability of its advice by recording insufficient personal and financial information on customers’ files
• failed to implement and maintain appropriate compliance monitoring to control the use of non-compliant direct offer financial promotions.

Whilst a lot of on-lookers will say it was a failing of a big player who thought they were bigger than the FSA, the more important fundamental errors of suitability, insufficient KYC and basic financial promotions rules being flouted are even more worrying.

FSA director of enforcement and financial crime Margaret Cole says: “We take failure in this area very seriously and the fine and other actions announced today demonstrate our commitment to credible deterrence.

“This is the first action we have taken for advice failings relating to Lehman-backed structured products following our recent review, and we acted swiftly and decisively in order to return money to investors as quickly as possible.  We will continue to take tough action where we find evidence that firms are giving unsuitable advice to investors.”

For the last 6 months of 2009, 27,137 compliants were received by the FOS for LLoyds (9,952), Barclays (9,836) and Bank of Scotland (7,349) the Financial Ombudsman Service shows in their latest figures.

Financial Intemediary firms St James’s Place and Sesame had 45 and 98 complaints respectively.

David Thomas, interim chief ombudsman of Fos, said: “While the number of cases referred by consumers to the ombudsman has continued to increase substantially, it is encouraging to see that some businesses are committed to handling complaints better.

“However, there is evidently still room for significant improvement in the way other financial businesses handle complaints – judged by the proportion of cases where we overturn the decision that the businesses have themselves come to in their own earlier investigation of their customer complaints.

“The data we have released today clearly shows that some businesses still need to do more to ensure that they deal with their customers’ complaints effectively and fairly – so that consumers do not then need to escalate their dissatisfaction to the ombudsman.”

The Financial Services Authority (FSA), the UK’s watchdog has allotted a £7.8M compensation bill and also fined the CEO of Park Row Associates Limited. Peter Sprung, the Royal Liver-owned firm’s former chief executive, was fined £49,000 and has withdrawn his approval to perform a controlled function at Park Row. He has  also undertaken not to perform a significant function at any firm for five years.

Park Row Associates Limited (Park Row), a national IFA network owned by Royal Liver, failed to ensure its sales were suitable and secured customer redress estimated at between £5m and £7.8m. Royal Liver announced Park Row’s demise last October.

Between January 2007 and January 2009, a number of serious failings by Park Row were identified in relation to the suitability of its customer advice.

These include;

• failing to ensure that advisers properly evidenced the suitability of sales
• failed to ensure advisers offered suitable advice to customers at all times
• for all products and they did not have adequate systems and controls.

The FSA also criticised the national IFA for consistently failing to take action to rectify these failings despite the fact that concerns were highlighted to the firm on a number of occasions.

Margaret Cole, director of enforcement of the FSA, said: “Park Row failed to take adequate action to address failings in systems and controls to ensure its advisers were giving customers suitable advice, despite the real risk of customer harm.

“The FSA has secured funding estimated at between £5m and £7.8m to ensure that where customers were not given suitable advice, or where Park Row can not demonstrate suitable advice, they will receive redress.

“As chief executive, Peter Sprung was responsible for ensuring that there were appropriate systems and controls at the firm and that it treated its customers fairly.

“He failed to do this despite being given the opportunity to do so on a number of occasions. As a result, he has been fined and can no longer work in a significant influence function for five years.”

The state of the slow lending in January was apparently due to the heavy snowfall and an over inflated December lending activity, according to the British Bankers Association. Sounds to me like British Rail’s excuse of leaves on the track causing delays in Autumn! Fancy, having snow in the winter!

The Law firm “Regulatory Legal” is gaining the support of IFAs to challenge the FSCS’ £70m interim levy.

In February 2010 the FSCS announced it would be imposing a £70m levy on the 6,500 firms operating as investment intermediaries to pay for claims relating to Keydata, and stockbrokers Pacific Continental and Square Mile.

The basis of the challenge would appear to be that Keydata was classed in the investment intermediation sub-class for FSCS purposes despite being widely undertood to have been a structured product provider.

Regulatory Legal will assess the validity of the FSCS’s decision and see if there are adequate grounds look to pursue a judicial review. Nearly 300 firms have so far signed up to get additional information.

For more information contact the firm at info@regulatorylegal.co.uk

This week the FSA has fined two stockbrokers for poor sales practices and in one case, Wills & Co, failure to implement remedial action from previous failings.

For the WIlls and Co fine, Director of enforcement Margaret Cole says: “It is shocking that despite previous action, Wills & Co still failed to put its customers’ interests first.

“The FSA has made no secret of the fact that it expects higher standards of customer treatment in the stockbroking sector.  What makes this case particularly serious is that the firm was fined by the FSA and promised the FSA that its treatment of customers had improved when that was plainly not the case.

Direct Sharedeal Limited (DSL) failed to provide adequate warnings to their penny share customers and Director of enforcement Margaret Cole  said: “It is totally unacceptable for customers to be given misleading information, particularly when it relates to the risks of investing in penny shares. This applies whether that misleading information is given by an FSA authorised firm or by its appointed representatives.

“The small cap stock broking sector has been under increased vigilance by the FSA because of a need to drive up standards of customer treatment in this sector.

“This fine should serve as a warning to firms with similar business models that they need to be vigilant about what is going on at their appointed representatives – the responsibility lies with the authorised firm.”

CEI Compliance’ sister company ComplianceConsultant.Org provides remedial sales process and other systems and controls advice to firms that have had a disappointing FSA review.  Often the remedial actions can be implemented reasonably quickly and provide all stakeholders with adequate satisfaction that measures have been taken. Contact us for details at remedial@cei-compliance-limited.co.uk or at remedial@complianceconsultant.org

An interim levy of £70m will be forced on IFA firms who offer investment advice by March 31 2010 to Financial Services Compensation Scheme to cover the recent failings.

The failures of Keydata, costing £43M coupled with Pacific Continental and Square Mile which collectively will cost £27m. This is a further blow to IFAs who are also likely to be hit by an additional interim levy of £20m for claims made in respect of NDF Administration, Defined Returns and Arc Capital and Income.

Late last year Aifa announced it was taking legal advice over the FSCS’s decision to place the Keydata costs with advisers rather than providers.

The FSCS says it is currently consulting with the FSA and administrators to determine which sub-class pays but that it is likely to fall on investment advisers.

Depending on the ultimate decisions, this could trigger a break in the £100m ceiling for the investment adviser sub-class with any overflows paid by the fund management sub-class.

Theses interim levies come on top of the already promulgated £19m levy investment advisers will have to pay the FSCS for 2010/2011 and the £13.5m that life and pensions advisers will have to pay over the same period.

In ironic contrast, the investment fund management sub-class will only be required to pay £3.5m, plus any overflows from the investment adviser sub-class.

The FSA Chief Executive Hector Sants has resigned and will leave the UK city regulator in the summer.

After 3 years in the position, Mr Sants will be handing over the reins to a new chief executive, one who will face a potential hurricane of change if the general election falls to the conservatives, and they implement the changes they have proposed. A poisoned chalice if ever there was one.

The outgoing FSA chief executive said in interview that it had always been his intention to leave the post after three years.

He added: “Of course, those three years have encompassed the most extraordinary circumstances for a financial regulator, and I am very proud of the manner in which the FSA rose to the challenge of dealing with such unprecedented turbulence across global financial markets.

“Moreover, I believe the FSA candidly examined the failings in financial regulation that contributed to the onset of the crisis, learned the lessons and has gone on to reform itself into a much stronger and better equipped organisation.”

Adair Turner, chairman of the FSA, said: “Hector has given outstanding service and leadership through the turbulent last three years and has played a pivotal role in reforming the FSA into a truly effective organisation.

“He will leave behind an organisation with strong purpose and a clear strategy. We will be immensely sorry to lose him, but understand his decision to move on in the summer and wish him well in whatever he chooses to do after his departure.

“In the meantime, we will continue to work together to deliver the FSA’s reformed and intensive supervisory approach and drive forward the global regulatory reform agenda.”

All change at the FSA, in more ways than one.