UK: Weekly Financial Services Regulatory Update - Week To 19.04.13

This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FCA, the PRA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.

We hope that you will find this update useful.

Consultation papers:

No new developments this week.

Discussion papers:

No new developments this week.

Policy statements:

18 April: PRA policy statement on conducting statutory investigations. The PRA has published a policy statement, as required by the Financial Services Act 2012, setting out how it will identify possible regulatory failure. The statement also sets out the PRA's duty in conducting investigations into possible regulatory failure and matters of public interest. The statement explains that an investigation into regulatory failure will be required if the following two conditions are met:

  • Relevant public expenditure, significant adverse effects on safety or soundness, or significant failure to secure an appropriate degree of policyholder protections have occurred
  • Where those events were the result of a serious failure of the regulatory system or its operation

16 April: PRA Statement on CRD IV implementation timetable. The PRA has published a statement setting out its planned next steps for implementation of the Capital Requirements Directive ("CRD IV"). The PRA is currently aiming for implementation from 1 January 2014, although this may be subject to delay. In order to facilitate the implementation, the PRA is intending to undertake two consultations on elements of the framework. The main consultation, which is intended to be published in Summer 2013, will set out the changes to the PRA's rules to reflect the new Regulation and to implement the Directive and relevant directions provided in the Regulation. The PRA also intends to publish a shorter consultation on the specific issues related to the procedure for transitioning, as appropriate, existing waivers, which will be conducted ahead of the main consultation.

Press releases:

19 April: Santander UK to contact more than 270,000 borrowers after raising cap on mortgage standard variable rate in 2008 without being clear. The FCA has reached an agreement with Santander UK Ltd (Santander) that involves Santander contacting over 270,000 of its mortgage customers about unclear information it gave before increasing the cap on its mortgage standard variable rate in 2008. When Santander raised the cap it should have given affected borrowers clear information in easy to understand terms. The FCA concluded that the letters sent by Santander were not clear so borrowers may not have understood what was going to happen, how this was going to affect them and the options that were open to them. Some borrowers did not receive a letter at all. While a large number of people will be contacted, it is likely that only a minority of borrowers will be entitled to redress, because redress largely depends on whether customers could have moved to a better deal.

17 April: FCA charged eight men in relation to land banking. The FCA has charged eight men with conspiracy to defraud and criminal offences relating to the carrying out of a regulated activity without authorisation or exemption contrary to s. 19 of FSMA 2000. The charges arise out of Operation Cotton, an ongoing FCA investigation into the activities of three land banking companies: Plott UK Ltd (Plott), European Property Investments (UK) Ltd (EPI) and Stirling Alexander Ltd. These companies are believed to have taken over £5 million from UK investors between 2008 and 2011. The FSA had previously brought successful civil proceedings against Plott and EPI which resulted in the compulsory winding up of these companies in June 2011 and December 2012 respectively. Scott Crawley, Daniel Forsyth, Ross Peters, Aaron Petrou, Ricky Mitchie, Dale Walker, Adam Hawkins and Brendan Daley have been bailed to attend City of London Magistrates Court on 10 May 2013.

16 April: IOSCO proposes Principles for Financial Benchmarks. The International Organisation of Securities Commissions (IOSCO) Task Force on Financial Market Benchmarks, which FCA chief executive Martin Wheatley co-chairs, has published its proposed Principles for Financial Benchmarks for consultation. The Principles are expected to strengthen the reliability and integrity of benchmarks used in financial markets. The FCA stated in a related press release that it is undertaking further work to examine any potential weaknesses in the wider range of benchmarks captured under the IOSCO principles and will be writing to firms about this shortly.

15 April: FCA published complaints data for the second half of 2012. The FCA has published the latest complaints data showing complaints to financial services firms between July and December 2012. The figures show that there were 3,422,384 complaints in the period, an increase of one per cent on the first half of 2012. The top five complained about financial products, in terms of number of complaints opened in the second half of 2012, were:

  • PPI – 2,170,537 (a 5% increase on the first half of 2012)
  • Current accounts – 304,0196 (a 6% decrease on the first half of 2012)
  • Other general insurance products (excluding PPI) – 296,679 (a 6% increase on the first half of 2012)
  • Credit cards – 283,705 (a 14% decrease on the first half of 2012)
  • Savings (including cash ISAs) and other banking products – 100,797 (a 20% decrease on the first half of 2012)

The total amount of redress paid in the second half of 2012 was £2,946 million, a decrease from £3,169 million in the first half of the year. The complaints data is presented in two different formats: aggregate data showing overall complains, and firm-specific data showing figures for individual firms reporting over 500 opened complaints.

Press release:



19 April: The importance of culture in driving behaviours of firms and how the FCA will assess this. The FCA has published a speech by Clive Adamson, FCA Director of Supervision, delivered at the UK Professionalism Conference on 19 April 2013. Mr Adamson's speech addressed the importance of culture in driving key behaviours in firms and how the FCA will assess this. He described an effective culture as one that supports a business model and business practices that have at their core the fair treatment of customers and behaviours that do not harm market integrity. Mr Adamson identified key drivers of culture as including:

  • Setting the tone from the top
  • Translating this into easily understood business practices
  • Supporting the right behaviours through performance management, employee development, and reinforcing through reward programmes

He highlighted that the FCA's approach to assessing culture will include a range of measures, such as how a firm responds to regulatory issues, what customers experience, product approval processes, the manner in which decisions are made, and even a firm's remuneration structure. Finally, Mr Adamson noted that while there are no direct rules about culture, the FCA will increasingly draw conclusions about a firm's culture and reflect back to firms as part of the risk assessment process, which it will expect firms to take account of.

Bulletins and newsletters:

No new developments this week.

Final notices:

18 April: FCA bans and censures managing director of SIPP operator Montpelier Pension Administration Services Ltd. The FCA has published a Final Notice which prohibits Kevin Peter Wells, managing director of Montpellier Pension Administration Services (MPAS), from performing any significant influence function at any regulated firm, and publically censuring him for breaching Statements of Principle 6 and 7 in his capacity as an approved person at MPAS. Wells would have been fined £58,000 if he had not been able to show that the penalty would have caused him serious financial hardship. Following an investigation, the FCA concluded that Wells did not have a sufficient understanding of the Self Invested Personal Pension (SIPP) operator's regulated activities and corresponding regulatory responsibilities or of his own responsibilities as managing director of the firm. The FCA also found that Wells' failing meant that MPAS:

  • Put client money at risk by breaching FCA rules on client assets
  • Failed to vet and monitor third parties, such as the IFAs and fund managers with which MPAS dealt
  • Lacked adequate knowledge of the assets it administered for clients

This is the first time the FCA has banned senior management of a SIPP operator and the FCA has said its focus on SIPP operators remains ongoing.

Press release:

Final Notice:

16 April: Final Notice: Castlehill Wealth Management Limited. The FCA has published a Final Notice, dated 16 April 2013, cancelling the permission of Castlehill Wealth Management Limited (Castlehill). The FCA concluded that Castlehill was failing to satisfy the threshold conditions under Schedule 6 of FSMA and was not a fit and proper person because it had failed to comply with the regulatory requirement to submit its RMAR and had not been open and co-operative in its dealings with the Authority.

Application refusals:

No new developments this week.

Approved person refusals:

No new developments this week.

Research publications:

No new developments this week.

Consumer research:

No new developments this week.

Other FCA and PRA publications:

18 April: FCA publishes its approach to regulatory failure. The FCA has published a paper on its approach to investigating and reporting on regulatory failure, as required by the Financial Services Act 2012. The paper explains how the FCA will meet its new statutory requirement to investigate possible instances of regulatory failure and provide reports to the Treasury for publication. This paper makes clear when such a level of scrutiny would, and would not be justified, and sets out the criteria for determining when the two conditions in the Act have been met. These criteria are:

  • A significant failure to either secure an appropriate degree of protection for consumers or a failure that had or could have had a significant adverse effect on the integrity of the UK financial system or on effective competition in the interests of consumers
  • If those events occurred, or were made worse, because of a serious failure of the regulatory system or on the part of the FCA

A formal statutory investigation and report for the Treasury is expected to occur only in exceptional cases.

Press release:

Full report:

17 April: FCA Handbook Release 136. The FCA has published its Handbook Release 136 containing pages to be inserted in to the Handbook in order to bring it up to date. The changes relating to this release came into force between 7 March 2013 and 6 April 2013.

UKLA publications:

No new developments this week.

Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):

No new developments this week.

Financial Ombudsman Service (FOS):

No new developments this week.

London Stock Exchange (LSE):

No new developments this week.

Legislative updates

No new developments this week.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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