UK: The FS Express – April 2018

Last Updated: 11 April 2018
Article by Michael Ruck and Elena Elia

A quick guide to the FCA's new approach

FCA has published its Approach to Supervision and its Approach to Enforcement

  • The FCA has published a series of documents articulating how it carries out its main activities and its thought and decision-making processes with transparency.

Approach to Supervision

  • This defines supervision as the continuing oversight of firms/ individuals to reduce harm to consumers and markets.
  • The FCA is taking a forward-looking and pre-emptive approach to address risk and associated risk of harm.
  • A proportionate and risk-based approach will be implemented to target firms where misconduct would cause the most harm.
  • Focus is on culture and governance; the firm's purpose, attitude, behaviour, competence and compliance of firm leadership, and controls and key processes.

Approach to Enforcement

  • The overriding principle is a commitment to achieve fair and just outcomes in response to misconduct.
  • A responsive and efficient approach to investigate fairly is to be adopted.
  • Powers include investigation, taking civil, criminal and/or disciplinary action.
  • The FCA will only put their case to a firm/individual once investigation is completed and serious misconduct has been found.

FCA reviews approach to UK financial penalties

  • The FCA is launching a consultation on penalties this year, almost four years after it announced it would in 2014.
  • It will review its approach to how it levies penalties, which have gone from record highs to new lows over the past 5 years.
  • The FCA has denied going soft on misconduct and said it is emphasising redress to customers as much as headline fines.

The FCA and Culture

  • The FCA published a paper "Transforming culture in financial services".
  • Culture is seen as a key root cause of the major conduct failings in the industry.
  • The paper covers what a good culture looks like, role of regulation and how to go beyond incentive to change behaviour.

Click here to read the Out-law article on culture change.

British and Australian regulators strengthen cooperation on FinTech through Enhanced Cooperation Agreement

  • The FCA and ASIC have signed an Enhanced Cooperation Agreement between their Innovation Hubs to extend their existing agreement of cooperation and coordination on FinTech innovation.
  • They have agreed to explore quickening licensing processes of authorisation of innovative businesses authorised in other jurisdictions.
  • They will also look to co-host FinTech and regtech events, conduct joint policy work, research and experimentation.

UK will study crypto-assets before weighing rules, financial secretary says

  • Financial services minister John Glen said that the UK will evaluate virtual currencies before drafting any regulations. A new crypto-assets task force of financial regulators has been set up as one element of a strategy to boost financial technology. Glen stated:

Regulation could be an enabler of a stable, flourishing cryptocurrency exchange in the City of London...But I think it's right that we take appropriate, not really cautious, but proportionate steps to evaluate in a proper way, before we respond as a government.

New credit card rules introduced by the FCA

  • New rules come into force on 1 March 2018, which provide more protection for credit card customers in persistent debt or at risk of financial difficulties.
  • Firms must comply from 1 September 2018. FCA estimates changes will save consumers between £310m - £1.3b. Director of Strategy and Competition said:

Under the new rules firms will have to help customers to break the cycle of persistent debt and ensure customers who cannot afford to repay more quickly, are given help


Restrictions imposed on Beaufort Securities Limited (BSL) and Beaufort Asset Clearing Services Limited (BACSL) and insolvency.

  • The High Court has appointed administrators of both companies further to an urgent application by the FCA, which has imposed requirements on the firms under FSMA, requiring the firms to cease all regulatory activity.
  • The FCA is also assisting the DOJ with a separate investigation into BSL's involvement in securities fraud and international money-laundering.
  • The investigation continues.

CBL Insurance Europe dac placed into provisional administration

  • The Central Bank of Ireland has made an application to the High Court to have a provisional administrator appointed to CBL Insurance Europe Dac (CBLIE).
  • Central Bank of Ireland recommends policyholders to contact the firm directly or their broker to arrange alternative cover as soon as possible.

FCA bans former Co-operative Bank Chair, Paul Flowers from the financial services industry

  • Mr Flowers was chair of the Co-op Bank between 15 April 2010 and 5 June 2013. Flowers used his work mobile to make inappropriate calls to a premium rate chat line and sent and received sexually explicit and inappropriate emails despite previous warning of earlier misconduct.
  • Mr Flowers stepped down as Chair, and was also convicted for possession of illegal drugs.
  • The FCA stated:

Mr Flowers failed in his duty to lead by example and to meet the high standards of integrity and probity demanded by the role.

The FCA fines Vanquis £1.98m and orders the company to pay compensation to customers

  • The FCA has fined the credit card lender Vanquis £1,976,000 for failing to disclose the full price of an add-on product called Repayment Option Plan (ROP).
  • Customers who bought the product were not told the full cost included an interest component.
  • Vanquis have been ordered to pay back interest to customers charged from 1 April 2014 to the date of being informed of the interest component.

Barclays becomes first UK bank to receive ring-fencing approval

  • A UK High Court judge has given Barclays the go-ahead to complete the ring-fencing of its retail banking activities into a new entity.
  • This will be the first bank to receive approval following recommendation of the Independent Commission on Banking. To read the Out-law article, click here.

Top ten takeaways from the FCA's new approach

1. Business models, culture and prudential soundness are key areas of focus under supervision.

2. Potential, as well as actual risk of harm to consumers and markets will be supervised.

3. Senior individuals with a significant effect on the conduct of their firm will be held accountable in addition to the firm.

4. Effectiveness of governance will be assessed and not merely the design.

5. Various sources of intelligence will be used to target engagement.

6. Firms voluntarily accounting for misconduct and redress are likely to see lower sanctions.

7. Technical or minor breaches are less likely to be seen as serious misconduct, and may not require enforcement action.

8. Assessing the seriousness of misconduct includes weighing the nature, severity and implications of the harm.

9. Sufficient evidence of misconduct is required for an investigation to become a civil/criminal or disciplinary action.

10. A combination of powers may be used to resolve a finding of serious misconduct.

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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