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FCA under fire over lack of transparency following opaque reports
By Katie Marriner 5th May 2016 3:28 pm
The FCA is under fire after a series of publications perceived as lightweight has left the industry guessing what action has been taken behind the scenes.
Following its report on due diligence report in February, commentators expressed surprise at the brevity of the six-page document and called for the regulator to be clearer about the consequences for firms failing to comply with its expectations.
Similar concerns were raised over the FCA’s response in April to its 2015 thematic review of inducements where no detail was given of the type of firm that was found to have flouted the rules.
Likewise, in March, the regulator published a short statement after a probe raising concerns that competition laws were being broken over distribution deals and compliance processes.
The statement did not provide the name, type of firms or detail of the kind of distribution deals in question.
Highclere Financial Services partner Alan Lakey says advisers are struggling to understand what the regulator requires of them. He adds: “We are very short on practical guidance and very long on theory.”
The Compliance Consortium chief executive Joanne Smith agrees it is hard to ascertain the scale of poor behaviour when it is unclear what firms have been disciplined.
On the due diligence report, she says: “According to the findings only four firms had any corrective action. If you look at the report it might say there is a problem in an area but it doesn’t say how many organisations or the types of organisations because the report covers one-man-bands to fully formed platforms. It is difficult to say how big the problem is.”
Smith would also like to see the regulator state explicitly where firms have failed on culture issues.
She says: “If culture is at the heart of the FCA’s agenda they should be calling out examples of poor cultural behaviour. For example, on inducements, is there any reason why going to a sporting event or a golf course would be to the benefit of customers? Why don’t they just come out and say it?”
But Pinsent Masons senior associate Michael Ruck says ongoing supervisory work or enforcement investigations, as well as data protection and confidentiality requirements, can prevent the FCA from providing detailed information.
He says: “In terms of how they word it within the report, to say a firm has failed and then indicate what kind of penalty is something they do not do lightly because the firm may not have had the opportunity to challenge that internally.”
However, Ruck says the regulator could do more, including indicating what firms have done that is good and what they have done to improve.
Syndaxi Chartered Financial Planners managing director Robert Reid suggests the FCA includes a section at the back of its reports detailing what it means when it refers to “firm A” or “firm B” so the market has more of an idea of the type and size of firm that has fallen short.
An FCA spokeswoman says: “We publish more information than ever before and through programmes like Live and Local are making the FCA more accessible to the firms we regulate. We publish our board minutes, expenses, our internal audit reports and key performance indicators. Through our data strategy we make available much of the information we collect. We attended over 800 events in the last two years and dealt with 789 requests made under the Freedom of Information Act.”
She adds: “However, we are legally required to protect confidential information that relates to the business or affairs of any individual or firm. The reason this is law is because having a clear confidentiality restriction encourages the free-flow of information.”
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By Katie Marriner 5th May 2016 3:28 pm
Following its report on due diligence report in February, commentators expressed surprise at the brevity of the six-page document and called for the regulator to be clearer about the consequences for firms failing to comply with its expectations.
Similar concerns were raised over the FCA’s response in April to its 2015 thematic review of inducements where no detail was given of the type of firm that was found to have flouted the rules.
Likewise, in March, the regulator published a short statement after a probe raising concerns that competition laws were being broken over distribution deals and compliance processes.
The statement did not provide the name, type of firms or detail of the kind of distribution deals in question.
Highclere Financial Services partner Alan Lakey says advisers are struggling to understand what the regulator requires of them. He adds: “We are very short on practical guidance and very long on theory.”
The Compliance Consortium chief executive Joanne Smith agrees it is hard to ascertain the scale of poor behaviour when it is unclear what firms have been disciplined.
On the due diligence report, she says: “According to the findings only four firms had any corrective action. If you look at the report it might say there is a problem in an area but it doesn’t say how many organisations or the types of organisations because the report covers one-man-bands to fully formed platforms. It is difficult to say how big the problem is.”
Smith would also like to see the regulator state explicitly where firms have failed on culture issues.
She says: “If culture is at the heart of the FCA’s agenda they should be calling out examples of poor cultural behaviour. For example, on inducements, is there any reason why going to a sporting event or a golf course would be to the benefit of customers? Why don’t they just come out and say it?”
But Pinsent Masons senior associate Michael Ruck says ongoing supervisory work or enforcement investigations, as well as data protection and confidentiality requirements, can prevent the FCA from providing detailed information.
He says: “In terms of how they word it within the report, to say a firm has failed and then indicate what kind of penalty is something they do not do lightly because the firm may not have had the opportunity to challenge that internally.”
However, Ruck says the regulator could do more, including indicating what firms have done that is good and what they have done to improve.
Syndaxi Chartered Financial Planners managing director Robert Reid suggests the FCA includes a section at the back of its reports detailing what it means when it refers to “firm A” or “firm B” so the market has more of an idea of the type and size of firm that has fallen short.
An FCA spokeswoman says: “We publish more information than ever before and through programmes like Live and Local are making the FCA more accessible to the firms we regulate. We publish our board minutes, expenses, our internal audit reports and key performance indicators. Through our data strategy we make available much of the information we collect. We attended over 800 events in the last two years and dealt with 789 requests made under the Freedom of Information Act.”
She adds: “However, we are legally required to protect confidential information that relates to the business or affairs of any individual or firm. The reason this is law is because having a clear confidentiality restriction encourages the free-flow of information.”
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D H 5th May 2016 at 4:03 pm
Very clear evidence, that the regulator (FCA) is bogged down by its own rules, processes and regulations
Reap what you sow; springs to mind !
If, what the FCA spokeswoman states is factual, can we safely say, most of the information that is provided/published (from which ever medium) is……. crap ?
