|Follow the link for the transcript of the speech.|
|Useful summary for AML professionals on the latest FCA efforts in fighting financial crime.|
|The PRA Regulatory Digest is for people working in the UK financial services industry and highlights key regulatory news and publications delivered for the month.|
|Essential catch-up for compliance personnel in PRA-regulated firms.|
|The PRA and FCA (together, the 'Authorities') joint investigations into certain former senior managers at HBOS plc have now concluded with a decision by each of the Authorities' independent decision-makers to take no further action. The investigations, which began in 2016, were in response to Andrew Green QC's November 2015 report into the reasonableness of the scope of the FSA's enforcement investigations in relation to the failure of HBOS (the 'Green Report').|
|A disappointing outcome for those who were hoping to see action taken against the senior managers at the helm of HBOS during the credit crisis of 2008. The reckless lending and bonus driven culture caused the largest banking failure and taxpayer bail-out of the crisis while the then-FSA looked on meekly.|
|The FCA has today responded to complaints from people who complained to the FCA after losing money when Premier FX (PFX), a payment services firm, authorised for money remittance, collapsed in 2018. Following an independent internal assessment of each complaint, the FCA has upheld or partially upheld 5 out of 31 allegations.|
|"The upheld or partially upheld allegations relate to the timeliness and accuracy of updates made to the Register, the reauthorisation of the firm just prior to its collapse in 2018 and concerns over how information was handled and not actioned." The FCA is very sorry and assures us that it will do better next time.|
|When introducing the Investment Firm Prudential Regime (IFPR) in January 2022, we renamed and moved the definition of 'Significant IFPRU firm' used as one of the criteria for identifying Enhanced Firms under the Senior Managers & Certification Regime (SM&CR). This was to retain the definition in our rules following deletion of the IFPRU sourcebook. A number of stakeholders have since highlighted that this new definition of 'Significant SYSC firm' could result in more firms being brought into Enhanced scope than under the previous definition as it had been understood and applied.
|The FCA plans to consult shortly to make changes necessary to clarify that only firms that would have been both Significant IFPRU firms and IFPRU investment firms under the pre-IFPR arrangements fall within the new definition of 'Significant SYSC firm' for the purposes of the Enhanced Scope SM&CR regime.|
|The Financial Conduct Authority has fined Sir Christopher Gent, former non-executive Chairman of ConvaTec Group Plc, £80,000 for unlawfully disclosing inside information.
While Chairman, Sir Christopher disclosed inside information to individuals in senior positions at two of ConvaTec's major shareholders before this information had been announced properly to the market. The disclosures concerned an expected announcement by ConvaTec relating to a revision of its financial guidance and the CEO's plans for retirement.
|The FCA considers that Sir Christopher acted negligently in disclosing the information. Given his training and experience, Sir Christopher should have realised that the information he disclosed was, or may have been, inside information and that it was not within the normal exercise of his employment to disclose it.|
|The FCA confirms new rules to make authorised financial firms more responsible for their appointed representatives (ARs).
ARs are not authorised by the FCA – they can offer certain financial services or products under the responsibility of authorised firms (known as principals). Principal firms are responsible for ensuring their ARs comply with our rules. While some principals do this effectively, many do not adequately oversee the activities of their ARs.
|We think the App Rep system was a terrible idea from the start. Figures show that ARs account for more than 60% of the total value of recent claims to the Financial Services Compensation Scheme. They also generate up to 400% more supervisory cases and complaints than other directly authorised firms.|
|The Financial Conduct Authority (FCA) has finalised stronger rules to help tackle misleading adverts that encourage investing in high-risk products.
Under the stronger rules, firms approving and issuing marketing must have appropriate expertise, and firms marketing some types of high-risk investments will need to conduct better checks to ensure consumers and their investments are well matched.
|"The new rules will not apply to cryptoasset promotions. Once the Government and Parliament confirms in legislation how crypto marketing will be brought into the FCA's remit, the FCA will publish final rules on the promotion of qualifying cryptoassets. These rules are likely to follow the same approach as those for other high-risk investments. Crypto remains high risk so people need to be prepared to lose all their money if they choose to invest in cryptoassets."|
|The Financial Conduct Authority (FCA) has confirmed its plans to bring in a new Consumer Duty, which will fundamentally improve how firms serve consumers. It will set higher and clearer standards of consumer protection across financial services and require firms to put their customers' needs first.
The Duty is made up of an overarching principle and new rules firms will have to follow. It will mean that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.
|It will take considerable time for the effects of these new rules to filter down into consequences for badly behaved firms and that will be the real test of how effective the Consumer Duty regime has been.|
|The FCA has fined The TJM Partnership Limited (in liquidation) £2,038,700 for failing to ensure it had effective systems and controls to identify and reduce the risk of financial crime and money laundering in its business. This is the third case brought by the FCA in relation to cum-ex trading and the largest fine so far. This reflects the multiple examples of serious misconduct over a lengthy period.
TJM did not have adequate procedures, systems and controls to identify and mitigate the risk of being used to facilitate fraudulent trading and money laundering in relation to trading on behalf of clients of the Solo Group between January 2014 and November 2015. It also failed to adequately apply its anti-money laundering policies and did not properly assess, monitor and mitigate the risk of financial crime.
|"TJM executed trading to the value of approximately £59 billion in Danish equities and £20 billion in Belgian equities and received commission of £1.4 million, which was a significant proportion of the firm's revenue in the period." The circular trading pattern should have appeared suspicious to any properly trained MLRO or brokers.|
|Speech by Nikhil Rathi, our Chief Executive, delivered at the Peterson Institute for International Economics.|