The Financial Services Authority (FSA) has taken its foot off the pedal with a lull in the number of fines imposed in October.

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???

Fines imposed by the Financial Services Authority have reached a record level of £84,391,297 for the year so far. This figure dwarfs the total amount fined for the entire year in 2009 when fines meted out by the regulator totalled £35,005,523.34.

The fines are on track to meet the prediction made by Wolters Kluwer Financial Services earlier this year that by the end of the year FSA fines will have trebled that of the previous year.

As the end of the year approaches there has been no let up from the FSA’s enforcement team as the figure for total fines in 2010 rose to £84,391.297 by the end of September up from £66,798,197 at the end of August.

Mary Stevens, regulatory manager at Wolters Kluwer said while one fine of £17,500,000 took the credit for most of this increase, the remaining £93,100 was again spread across smaller firms .

She said this reconfirmed that the FSA was still chipping away at all sectors and all firms for all manner of reasons regardless of size.

Ms Stevens said: “When we analyse the reasons for most firms being penalised in recent months then senior management systems and control failures come out on top every time.

“Other clear reasons for enforcement action amongst other are: failure to protect client money; fraud and money laundering; market abuse and failure to cooperate or provide accurate timely information to the regulator.

“The FSA is sending a clear message that it will take enforcement action for breaches in its rules and regulations very seriously with firms and individuals alike being advised to take this message seriously if they are to avoid reputational and financial risk.”

An FSA spokesperson said: “Enforcement penalties are a powerful tool to help change behaviour in the industry.

“In line with our philosophy of credible deterrence, we believe that hitting companies and individuals in the pocket sends a powerful message making it clear that non-compliant behaviour will not be tolerated.”

Original Article Here

Prepare properly for your regulatory viosits, use S166.co.uk or CEI Compliance.

GET YOUR FREE S166 GUIDE (AND HOW TO AVOID THEM) HERE

The FSA has been carrying out covert monitoring of structured product advice and has asked a number of structured product providers to keep an eye on IFA firms, as part of a discreet review of the controversial sector.

The regulator has written to organisations in the last few months asking them to monitor the IFA firms who introduce business to them and conduct due diligence of the firm’s business model, client type and future plans. A shadow or stealth monitoring process?

The secretive ‘snooping’ by the watchdog has angered a number of financial advisers and providers, many of whom have privately condemned the tactics.

Arthur Childs, managing director of Surrey-based Arch financial planning and a CEI Client, said: “You cannot really use product providers to be the tools of the regulator. It is pretty clear what we have to do as IFAs and financial planners.

“We produced a guide to structured products so our advisers are singing from the same hymn sheet.

“I would be a bit annoyed if I found one of the providers was giving us the third degree over whether we were suitable or not. It seems a strange way of dealing with it. The FSA has done this in the past with people selling life bonds. It is a bit crazy”

Who will be next to be asked to monitor IFAs in the psuedo-regulator army recruited by the FSA?

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.

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.

Compliance Consultants within the UK are in extremely short supply. Whilst banks and insurance companies install and augment their regulatory obligations, such as Solvency II, they have pulled in all the expertise from what was a bouyant marketplace.

Daily rates for freelance consultants have skyrocketed as all the quality and efficient consultants have been locked into medium to long term contracts on quality projects, that recruiters are now trying increased rates to lurethem into breaking their contracts, something any consultant with a long term view would never do, as the marketplace is small and word gets around.

Niche Consultancies are struggling to find quality consultants for the ad-hoc projects that are arising more and more frequently, such as remedial actions, enforcement actions and FSMA S166 Skilled Persons Reports. CEI Consultancy has a reliable bank of experienced and qualified consultants but is always looking for more as the value for money projects we tender for are snapped up, over and above the more expensive “practices” that have to charge for a small army of consultants, many whom never even see the client or their premises.

If you are a qualified or experienced Compliance Consultant, especially in sales training or S166 reports as well as other specialisms, please contact us at consultant@ceicompliance.co.uk .

In 2008/2009 there were 56 Section 166 Reports completed costing a total of £12,800,000. Compare this to 2005/2006 when 17 reports were completed at a total cost of £3,700,000 and you will see the average case has escalated in cost, mainly due to the big consultancies charging into the area with their large teams of analysts and managers.

In 2008/2009 the largest single cost case totalled £2,400,000 which leaves the average of the other 55 cases being over £189,000 each. The good news is the cheapest cost was for a one man band at £3,000.

The areas covered in the latest year’s S166 reports were Client Money, Corporate Governance, Past Business Reviews, TCF, Systems and Controls, Capital adequacy, Regulatory Reporting and Market Abuse.

The FSA are increasingly using this tool and you could be spending more money than you need to. Call CEI for a quote on 07092 289901 or visit www.s166.co.uk for more information. CEI – Providing Regulatory Help When You Need It.

 Money Marketing article here

The FSA says its review looked at several banking groups responsible for over 70 per cent of the complaints firms receive and report to the regulator and over 60 per cent of those resolved by the Financial Ombudsman Service.

The latest FOS complaints figures, published in February, showed a big increase in the number of new complaints received against the large banking groups.  Lloyds received 20,190 complaints across all its brands while Barclays received 10,892 and RBS received 7098 complaints. Seven hundred new Barclays Bank complaints related to investments, the highest number of investment complaints received by any institution.

As a result of the FSA review, five banks have either put in place or extended the scope of major changes to their complaint handling processes.The regulator will be doing follow up work later this year to see if standards have improved and may change elements of its DISP rulebook, which will be consulted on later this year.

The Financial Services Authority (FSA) has banned Martyn Powsney, the former director of Powsney & Co Ltd, an IFA firm based near Manchester, from holding positions of significant influence in any FSA authorised firm. Pownsey, who failed to put in place systems and controls to ensure that customers received suitable advice and failed to take sufficient remedial action, was found to be not fit and proper to run an authorised firm.

 Following an initial visit in 2007, the FSA required Powsney to take action to rectify serious failings at Powsney & Co Ltd but, despite employing a compliance consultant to assist with the remedial work, he failed to take prompt, adequate action. A subsequent assessment by the FSA in 2008, as part of its assessment programme for small firms, identified similar concerns to the 2007 visit.

The FSA has concluded that Powsney failed to:

•  establish appropriate systems and controls at the firm;
• demonstrate that the firm was providing suitable financial advice; and
• fully appreciate or adequately undertake remedial action required by the FSA.

Lee Werrell, MD of CEI Compliance, the UK leading consultancy in its class said; “Whenever there is remedial action to be implemented it pays to get the right help and to follow their direction.” He added “It is vital you use specialist compliance consultants who are qualified in compliance and not just advice, and, I would recommend, who are members of the Association Of Professional Compliance Consultants.”

The APCC can be contacted at www.apcc.org.uk