A round-up of recent enforcement actions and investigations in the financial services sector.
The FCA has published its business plan for 2020 - 2021 with its short-term priority being to address the unprecedented challenges posed by the Covid-19 outbreak. The FCA has stated that it is committed to ensuring that the financial services industry ‘give people the support they need, that people avoid scams, and that financial services businesses and markets know what we expect of them.’
Beyond this however, the FCA has stated that it is focusing on transforming how it operates and regulates. It has 4 key priorities, specifically aiming to ensure that consumers:
This is in keeping with the FCA’s previously stated aim of moving towards a regulatory approach that's focused on end outcomes for consumers, markets and firms. This will include looking at how firms are supervised and how unacceptable firms and individuals are prevented as quickly as possible.
Following on from the FCA business plan, on 9 April the PRA released its Business Plan for the coming year. From an enforcement perspective, one of the PRA’s key strategic goals is to establish robust prudential standards capable of holding regulated firms, and those in charge of them to account for meeting these standards. Following the UK’s withdrawal from the EU back in January, the PRA is eager to ensure that there is ‘an effective regulatory and supervisory framework at the end of the transition period’. What this framework will look like remains to be seen however.
Additionally, the PRA has also highlighted the development of its supervision of operational resilience in order to mitigate the risk of disruption to the provision of important business services. The PRA has stated that operational resilience will be key in ensuring the viability of individual firms and preventing ‘harm to consumers, policyholders and other parts of the financial system.’
The FCA published a ‘Dear CEO’ letter to banks on 15th April regarding lending to SMEs during the current Covid-19 pandemic. The FCA stated that the SMCR regime requires senior managers to be accountable for unregulated activities conducted by a bank, including lending to SMEs.
Where a bank does lend to SMEs, there should be at least one senior manager at the bank with clear responsibility for activity of lending to SMEs.
The FCA warned that it was vital that banks’ previous treatment of SMEs during times of financial turmoil was not repeated and that when carrying out its supervisory work, it will take account of the fact that banks may now be making different judgements and adopting a different risk tolerance than they would before the pandemic to support SMEs.
Based on the above, we consider there is clearly a heightened risk of enforcement action being taken against lenders which are not showing compliance with the SMCR regime in relation to transactions with SMEs and is something the FCA will pay great attention to going forward.
The SFO previously entered into the Deferred Prosecution Agreement (the DPA) with Tesco on 10 April 2017. The terms of the DPA involved Tesco paying a £129m fine and £3m investigation costs, as well as implementing an ongoing compliance programme.
On 10 April 2020, the SFO confirmed that Tesco has complied with the terms of the DPA and subsequently served a notice of discontinuance on the court, ending the SFO’s case.
This is the third DPA to have concluded with its terms fulfilled, after Standard Bank PLC and Sarclad Ltd. The remaining four of the SFO's seven DPAs (Rolls-Royce PLC, Serco Geografix Ltd, Güralp Systems Ltd, and Airbus SE) remain open.
The members of Uncle Buck LLP have placed the short-term lender into administration following the FCA’s decision to require it to stop lending to customers.
The FCA took this action because of concerns that Uncle Buck LLP was failing to meet the adequate resources Threshold Condition after reviewing the viability of the firm’s business plan.
The FCA has issued proceedings against 24HR Trading Academy Ltd and its sole director (Mr Maricar) whom it alleges has been advising on investments and arranging deals in investments without FCA authorisation since 2017.
An interim injunction stopping these activities has been granted as well as a freezing order over the defendants’ assets up to approximately £625,000. The FCA is seeking a declaration that the defendants carried on regulated activities without the required FCA authorisation and unlawfully made financial promotions as well as an order preventing them from carrying out these activities in the future.
The FCA will also seek a restitution order that would distribute the defendants’ frozen assets to consumers who suffered financial losses as a result of the alleged breaches.
The FCA alleges that 24HR Trading Academy Ltd and Mr Maricar had been making investment recommendations via Whatsapp and other social media platforms.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.