We provide enforcement support to ensure firms meet the necessary requirements when involved in enforcement action and to minimise the likelihood of additional FCA sanctions.
Whether you’ve been served a 166 notice or you’re just trying to make sure your marketing strategy is foolproof, it’s key to know a thing or two about FCA enforcement.
So, what is the role of the FCA and what is it actually on the lookout for?
The Role of the FCA
If you were going to describe the role of the FCA in the simplest way possible, it would be that it exists to protect the UK consumer. It defines its areas of work as regulating, protecting, championing and enforcement.
Regulating refers to the FCA’s role in supervising the work of some 58,000 financial firms through regular assessment and monitoring and responding to any behaviour that may threaten the integrity of the industry.
Protecting concerns the FCA’s involvement with firms from a consumer perspective, ensuring that they adhere to its rules and regulations and that customers are not treated unfairly. Firms are required to take measures to protect themselves against financial crime, including fraud and money laundering.
Championing refers to the FCA’s understanding of what will provide a better outcome for customers. The FCA believes that well-trained staff, unbiased, appropriate advice and a healthy level of competition within the industry are what the consumer needs.
Enforcement involves the FCA looking to take action against financial crime or against firms that act unethically or disregard consumer interests. The FCA has wide-ranging powers in how it can use enforcement, from withdrawing a firm’s authorisation and administering fines, to applying for court injunctions or bringing criminal prosecutions against firms or individuals.
Tools and Powers
Now that you know what its purpose is, we can move on to look at how the FCA goes about fulfilling this purpose. It has a number of tools at its disposal and powers in place to ensure that it can protect the consumer to the best of its ability.
The set of tools that the FCA has available can be grouped under the following four headings:
- Diagnostic – to identify, assess and measure risks (i.e. meetings with management of firms, desk-based reviews, use of skilled persons, section 165 information requests etc.)
- Monitoring – to track the development of identified risks (i.e. review of past and current business, transaction monitoring, on-site inspections etc.)
- Preventative – to limit or reduce identified risks and prevent them from escalating
- Remedial – to respond to risks which have crystallised (i.e. varying a firm’s permission, imposing requirements, providing guidance etc.)
The powers that the FCA holds include:
- The power to ban investment products, subject to a consultation process
- Where immediate action is required, the power to ban investment products that pose a risk to consumers for a period of up to 12 months, without any consultation
- The power to remove misleading financial promotions immediately from the market without the use of any formal enforcement process
- •The ability to announce publicly that disciplinary action is being taken against a firm or individual, prior to a decision notice being issued
- The ability to directly contract with skilled persons such as legal or accounting firms where a section 166 report is required
Application of Powers
Now that you’re aware of the tools and the powers at the FCA’s disposal, why would it need to use them?
The FCA would look to use its powers if there is, for example:
- Concern about the effectiveness of a firm’s internal audit department,
- An inability of a firm to quantify its current financial position,
- Concern about the quality of a firm’s systems and controls,
- An indication of financial crime or money laundering,
- Failure by a firm to provide information to the FCA, or
- A need to develop a remedial action plan
If you are aware that the FCA intends to use its enforcement powers against your firm, we will be happy to meet you to discuss the help that we can offer in relation to areas including:
- Interviews under caution
- Compulsory FCA interviews
- Voluntary FCA interviews
- Compulsory requests for documents and information
- Responses to information requests
- Searches of your home and/or office
- Restraint orders and the freezing of company or personal assets
- Seizure of computers and other electronic devices
- Hearings before the FCA Regulatory Decisions Committee
- Hearings before the Upper Tribunal
- Negotiated settlements and final notices
- How to deal with adverse publicity
- Investigations into breaches of the FCA’s principles and rules
- Insider dealing and market abuse
- Perimeter offences (that is, carrying on regulated activities without the necessary authorisation or approval)
- Collective Investment Schemes and Unauthorised Collective Investment Schemes
- Systems and controls issues
- The Senior Managers Regime and SM&CR
- Approved person applications and the fit and proper test