Regulator plans to change the fee tariff for IFAs from being based on number of approved persons to a firm’s income.

Read the rest here:
FSA to overhaul IFA regulatory fees

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The FSA have fined three mortgage brokers over £400,000 and banned them due to mortgage fraud.

Mark bates of Pace Financial Management in Sheffield has been fined £74,683 disgorgement fine included in the overall fine of £264,683. He has been banned from working in regulated financial services.

Alan Hill of Pace has been fined £150,000 and banned from working in regulated financial services for breaching principle 1.

Waqarul Hassan Shah of K S Financial Services in Manchester has been banned from working in the regulated financial services world for inflating his income from £11,700 to £65,000 on a buy-to-let mortgage. He would have been fined £40,000 had it not caused him serious financial hardship.

96 Mortgage brokers have now been banned by the FSA. Perhaps you will be buying a used car from them sometime???

That is over 3 times last year! Figures released by Wolters Kluwer Financial Services under the Freedom of Information Act found that the FSA has already issued fines worth £941,500 directed at IFAs, during the first half of 2010, which is a significant increase from the £236,676 that IFAs coughed up to the City regulator in 2009.

Last year, IFA fines amounted to just 0.7 per cent of the total penalties. But this has now spiked to 1.5 per cent of total issued in 2010 so far.

Mary Stevens, regulatory editorial UK manger from Wolters Kluwer Financial Services, said: “Even though we are only part way through 2010 the fines percentage is well over double last years’ final total reflecting the FSA’s increased pressure on IFAs as it gears up for the retail distribution review implementation.”

Lee Werrell, CEO of CEI Compliance Consultancy said “The FSA fines are not always a measure of findings as many investigations take a long time to materialise or fizzle out. There is no doubt that S166 activity is increasing, and that is derived from many reasons. Many distributors still stick their head in the sand and pretend that it won’t happen to them but they need to be aware that S166 actions can cost them well into 6 figures for a modest organisation of only a few advisers. Prevention is always cheaper than cure.”

CEI have recently produced a Guide for Senior Managers on S166 Reports and this can be downloaded free from HERE.

There is much discussion and conjecture about the final look of the financial services landscape post-Retail Distribution Review. There is a sector within the RDR proposals that may have been overlooked or dumbed down; the Recognised Professional Body (RPB) advisers.

 Many of these practices, attached to solicitors and accountants’ practices are often run by themselves and whilst overseen by a partner, they may not be fully aware of the changes planned and the FSA regulatory compliance requirements that are impacted by these changes.

In CP10/14 Delivering the RDR: Professionalism, the FSA states that it is worth noting that existing professional bodies operating in the retail investment advice sector and elsewhere, typically operate sanctioning regimes for their members. For current retail investment adviser professional bodies, these disciplinary regimes are not assessing compliance with the FSA’s regulatory requirements, but with the professional body’s own standards.

 By implementing the new “Statement of Professional Standing” (SPS) by accredited bodies for advisers in the future, it would be reasonable that these bodies will have disciplinary measures that involve a range of sanctions. Included in this range would be the withdrawal of the SPS and notification to their firm that this is the case. Under Principle 11, the firm would then be obliged to inform the FSA as this would impact on the rules for Approved Persons under FIT.

Email rdr@FSAregulatoryCompliance.co.uk to get your firm compliant.

 The FSA are introducing a requirement for firms to ensure that their advisers provide documentary evidence of verification. They believe that the potential threat of the body withdrawing such evidence would be an effective deterrent against non-compliance with requirements. This will only be effective if the RPBs are up to speed with the RDR implementations and this element does not get overlooked or considered irrelevant. There is a risk that the FSA rules are ignored as RPBs consider their own professional body as the overseers instead of their own firm’s responsibility.

 FSA regulatory compliance requirements are in a huge state of change, like white water rapids, and it is always best to ensure you have grasped the entire impact on your distribution model whether an RPB, IFA, stockbroker or Friendly Society. Contact CEI Compliance for a FSA Regulatory Compliance Health-check and evaluation before you are put under the spotlight. Call 07092 289901 or email rdr@ceicompliance.co.uk TODAY!

The link to CP10/14 is here

The Financial Services Authority, in their wisdom have increased their enforcement activity and a surge of S166 Skilled Persons Reports demands have arived through the doors of many authorised firms in the UK.

As many people are aware, the S166 Report is a tool used by the FSA to better understand what goes on within a company in its treatment of customers, front and back office procedures and to ensure consistency between policy and practice for all advisers.  

 This tool can be used for diagnostic, monitoring, preventative or redial purposes and this will vary depending on the level of perceived risk and the standard of evidence previously collected and assessed by the FSA. If general and specific concerns are apparent, the FSA may instruct investigators under Section 167 or Section 168 of the FSMA 2000 and sometimes these may be separate investigating teams.

While the report can sometimes be seen as a personal attack on advisers or the companies they work for, as well as being an undesirable cost, there are a number of benefits that can be gleaned from the experience. Benefits could be;

• Comfort that the firm’s contemporary written procedure has been adopted and embedded within the sales process and that there is or was general adherence to it.
• Identification of any potential systemic errors, inconsistencies and anomalies that have occurred through evolution, legacy practices or habit, but may remain masked by local knowledge and practice
• Provide a focus and direction for recommendations on rectification and remedial actions that may already have been started and are designed to enhance or strengthen the already robust system.
• Identification of any areas and placing them on the tactical radar and which may need review or revision, providing a firm with a more accurate risk from a purely regulatory perspective.
• Show the firm where blindspots exist in their current practices or governance

No one likes criticism, and especially not from an almost faceless bureaucracy that appears to descend out of the blue for a few hours, pick holes in seemingly robust and happy client files, note every absence of ideal documentation and then respond with a S166 Skilled Persons Report demand some time afterwards with no other notification in the meantime.

The S166 process can appear daunting and expensive – get the facts straight, get the process right and take control. Use a firm that is not just a one person outfit, but a firm that can provide a skill match to your business and a Quality Assurance and project oversight, steering everything toward a positive and accurate report for the FSA. If the content is lacking, they will either order another S166 at your cost, or enter into supervisory proceedings, suspension or worse. Get it right first time, get CEI Compliance.

Details of S166 can be found at wwwS166.co.uk.

In a speech to the Association of Professional Compliance Consultants (APCC) on 9 March 2010 (and published later), the Financial Services Authority’s (FSA’s) Head of the Savings and Investments Department, Linda Woodall, emphasised that no firm is too small to avoid the regulator’s supervision and provided an overview of what intensive supervision means for small firms.

See Here for Details

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

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.