Just three weeks into the new year, the Financial Conduct Authority issued its first fine of 2020.
The fine, levied against Hall and Hanley Limited (HHL) (in liquidation), a claims management company, was for ‘misleading consumers to claims and unfair treatment of consumers in the claims management sector’.
What does the fine tell us about FCA priorities?
The claims management sector is a current area of focus for the financial regulator. We identified it recently as one of the FCA’s key priorities for 2020.
The FCA took over regulation of claims management firms on 1 April 2019. Since then it has taken a tough stance, sending CMCs a ‘Dear CEO’ letter in June last year to remind them of their obligations under the FCA regime, launching a new co-operation agreement with the Competition and Markets Authority aimed at improving competition in claims management, and announcing a number of new rules in relation to financial promotions.
In December last year, the regulator issued its first fine to a CMC since taking over regulation, fining claims management firm Professional Personal Claims Limited £70,000 for misleading consumers through its websites and printed materials.
FCA fines at record levels
The regulator is not afraid of penalising businesses – whether CMCs or others – for breaching its rules. In 2019, the Authority’s fines reached record levels. Mis-selling, mis-reporting of financial data and other shortcomings in care, skill and diligence were among the misdemeanours to catch the FCA’s eye last year.
With the regulator raising huge amounts of money from fining companies that fall short of its standards, how can your firm ensure it avoids becoming an FCA statistic?
Improve your own regulatory compliance and minimise your risk of an FCA fine
If you want to stay on the right side of the FCA, there are a number of steps you can take to make your own regulatory compliance more robust.
Understanding your obligations is an essential first step. Do all your activities fall under the regulator’s remit? Reading the FCA’s Perimeter Report might be helpful here; it details what the FCA does and does not regulate, and enables firms to understand which of their activities need to abide by its rules.
Much of the regulator’s guidance and requirements relates to financial promotions. You therefore need to ensure that all the teams in your business that produce marketing and communications materials understand the FCA’s financial promotions rules.
Complying with these rules is multi-faceted and can’t be easily summarised. However, some things are non-negotiable. You must include all mandatory information, for instance, including all the relevant risk warnings and disclaimers. Terms and conditions have to be clear and prominent.
Your communications need to be suitable for your audience. If you are working in specific products, there are particular additional rules you need to follow; for example, when promoting services that fall under MiFIDII or PRIIPs regulations.
And when it comes to compliance with FCA requirements; the finished FP isn’t the only concern. The review and approvals process your team goes through to sign off the promotion also needs to meet the regulator’s standards.
One of the things that earned HHL its fine was ‘negligently failing to take all reasonable measures to avoid purchasing marketing leads generated in breach of the Privacy and Electronic Communications (EC Directive) Regulations 2003’. Ensure that your approach to data is squeaky-clean by brushing up on your requirements under the GDPR.
Avoid a fine from the regulator
Follow the tips above, and you will increase your chances of steering clear of an FCA fine. Ultimately, though, the only way to ensure that your business always acts in a way that meets with regulatory approval is to put compliance front and centre across your entire firm.
If this is something your business is still getting to grips with, you might want to read our blog detailing 5 steps to creating a culture of compliance. And if you want to read in more detail about how you can make compliance a central part of the way you work, you can download our whitepaper, How to embed a compliance culture into your business. You can get a free copy from our online resource library.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.