February 24th, 2015
The Financial Conduct Authority saw a vast increase in its investigatory activity in 2014, with 109 enquiries opened across the year, compared to 90 during 2013. This uplift in scrutiny of companies and individuals provided a 20 per cent rise in the level of opened investigations for the body, showing that a renewed focus on maintaining a cautionary presence is high on the regulators priorities.
As confirmed in the Financial Times, a varied approach to dealing with the outcome of investigations is being taken by the FCA. Stories within the financial sector note that the body appears to be keen to promote confidential rulings where possible, acting as a reminder that the regulator will not always be required to publish any confirmation of poor practice.
These secret reprimands have seen the body issuing unpublished warnings to companies and individuals, while on occasion the FCA has also forced firms to no longer distribute products considered to be financially misleading or potentially unfair for customers, such as the action taken against payday loan companies over the past 6 months.
Commenting on the approach, Michael Ruck, a former FCA official, noted that: “The increased number of investigations into companies being closed without a public outcome may raise eyebrows, although this needs to be seen within the context of a rise in the number of such investigations launched and the increasing sophistication of compliance functions within financial institutions.”
It would also appear that the FCA focus has shifted to investigating organisations, or rather the key figures within a company, as opposed to solely targeting individuals. Tackling the Libor scandal has severely drained resources, and the figures from 2014 paint a picture of an organisation adjusting its lines of enquiry to better manage the issue of regulating the sector.
Across 2014 the organisation opened 60 new inquiries on individuals. While this provided a marginal increase from 2013’s 54 cases, when compared to the 87 cases opened by the FSA in 2012, it demonstrates that the body has seemingly adjusted its approach to investigating perpetrations of poor practice.
Yesterday, the FCA chose to outline a revised approach for banks and insurers to follow when dealing with whistleblowers. The body made it clear that expectations are that a company should provide appropriate guidelines and routes for its staff to safely inform on instances of perceived poor or illegal practice. The revisions are applicable to all UK banks, building societies and credit unions, except those with less than £25m in assets.
The FCA has taken these measures in response to a request by the Parliamentary Commission on Banking Standards, for banks to review their practice to aiding staff to feel comfortable when raising concerns of malpractice. The FCA stated: “Ideally, employees should feel comfortable speaking openly to management, but, where employees do wish to blow the whistle in confidence, there must be a route available to them.”
“Mistreatment of a whistleblower would be a matter of regulatory concern regardless of whether their disclosure related to a breach of a specific FCA or a PRA rule because it may be evidence of a culture harmful to those choosing to speak out.”
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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