Out-Law Analysis | 01 Mar 2016 | 2:55 pm | 3 min. read
As an example, the recently appointed new director of the FCA's Enforcement and Markets Division, Mark Steward, made it clear in November that the regulator would continue its focus on culture and related regulatory sanctions, despite stepping back from a formal review of banking culture.
Financial crime issues including anti-money laundering (AML), bribery, corruption and fraud were included in the FCA's 2015 Business Plan as one of the regulator's priority areas of focus for the first time. Since then, the FCA's Financial Crime Guide and recent enforcement action have made it clear that the regulator will take significant action against firms and individuals that fail to meet its high regulatory standards in these areas, including imposing high level financial penalties and other sanctions.
Also identified as a specific issue in the FCA's 2015 Business Plan, the numerous headlines regarding cyber attacks and data theft over the past 12 months will focus the FCA and its investigations in this area. Firms will need to consider their specific risks, and identify how they will deal with such attacks and the potential ransoming of data taken or encrypted.
FCA action against payday lending and its obvious desire to reduce the number of firms authorised to undertaken consumer credit activities provide clear indications of the FCA's potential attitude to future rule-making and its interventionist approach to regulation, which will impact all regulated firms. Rogue operators should not be lulled by the continuing struggle of the FCA more widely at getting to grips with the regulation of consumer credit and its decisions on applications from firms for full permission.
Senior management responsibility
The Senior Managers' Regime (SMR) and Senior Insurance Managers' Regime (SIMR) will take effect on 7 March 2016, with the effect that senior management could be held individually accountable for what the FCA considers to be future failings at your firm. The SMR attributes responsibility and accountability to named individuals in senior management. If a regulatory requirement has been breached, the senior manager responsible for that area will be in the frame. Senior individuals within firms should act now to ensure that they do not fall foul of the regulatory requirements.
Product design and governance
Will you be prevented from marketing products you have created? How early will the FCA intervene in the design of new products and seek to prevent products being marketed - and how can you challenge this? The FCA will also use enforcement action to sanction firms which have got this wrong historically.
After the FCA imposed just under £1 billion in regulatory fines in 2015, it is clear that the amended financial penalty regime imposed in March 2010 is continuing to bear fruit – with increasing financial penalties more in line with those imposed by the FCA's US counterparts. The FCA is due to publish the results of a review of its penalty regime this year, but in the meantime you should think about how you can challenge this - or how best to ensure that you understand the potential financial cost of enforcement action.
A 'call for inputs' from the FCA on the use of big data by insurance companies closed last month, and we can expect an announcement by the regulator on its next steps by this summer. Although the FCA is currently focusing on the use of big data by insurers, this is an issue that is clearly on its radar. How can your firm use big data while continuing to handle personal data appropriately?
Social media promotions are already in the FCA's sights following the regulator's publication of new guidance on social media and financial advice last year. Does your firm have adequate systems in place to review, approve and supervise financial promotions while including risk warnings or other statements in promotions for certain products or services?
The FCA's appetite to regulate the foreign exchange (FX) market as well as the LIBOR rate under the umbrella of market integrity highlights its desire to increase its involvement in other exchanges and benchmarks, including through the use of enforcement action. Since April 2015, the FCA now regulates a further seven UK benchmarks. How can you meet the relevant regulatory requirements, and ensure that your firm is not the next one on the wrong end of enforcement action?
Michael Ruck is a financial regulation and enforcement expert at Pinsent Masons, the law firm behind Out-Law.com.