How is the FCA tackling unauthorised activity?

Laptop Doc2018/19 saw the FCA receive a record number of reports to its unauthorised business department about potential unauthorised activity.

This is according to the regulator’s latest enforcement annual performance report, released this week.

What is driving this increase, and how can firms ensure their own activity remains compliant?

What is the FCA's enforcement annual performance report?

The enforcement report is published alongside the regulator’s annual report and accounts. It details the FCA’s enforcement activities – how it has tackled conduct that breaks its rules.

Last year, the Authority announced an update to its approach to enforcement, promising greater transparency, a review of its Penalties Policy and Enforcement Guide, and more timely investigations and actions.

As part of its enforcement annual report, the FCA covers the work it has done to counter unauthorised activity. This shows that a record 16,600 reports of unauthorised activity were received in 2018/19, up 25 per cent from the year before.

As a result, the regulator issued 521 warnings about unauthorised firms during the period, up from 328 in the previous year.

Why is the FCA receiving increasing reports of unauthorised activity?

The regulator attributed the increase in reports to greater consumer awareness of scams, in part due to its own ‘ScamSmart’ campaign.

It also blames a growing number of fraudulent investments – particularly, a ‘proliferation of fraudulent online trading platforms, generally based outside of the UK but targeting UK consumers’, which often advertise to investors via social media.

Public awareness of financial firm irregularities has also been increased by high-profile cases such as the collapse of FCA-authorised firm London Capital and Finance, which fell foul of the regulator by carrying on and promoting unregulated activity alongside its regulated products and services.

Quoted in a Money Marketing article about the jump in unauthorised activity reports, Matt Hopkins of regulatory consultancy BDO said that ‘We would expect [the FCA] to be increasingly proactive in the year ahead’ in trying to stamp out unauthorised activity.

How can you ensure your activity complies with FCA rules?

The enforcement report is a good reminder of the types of activity that attract the regulator’s attention for all the wrong reasons. How can you make sure your firm does things the right way?

1. Provide excellent customer service

Ensuring you deliver what your financial promotions promise is essential. Make sure you convert your client care promises into action and can substantiate the claims you make in your promotions. For more tips, read our 4 steps to delivering the best client service and find out how you can use FCA complaints data to improve your compliance.

2. Familiarise yourself with the rules

Understanding what the regulator requires is essential to delivering it.

Financial promotions are one of the leading reasons for firms coming under the Authority’s spotlight – either via consumer complaints or regulatory investigations. Make sure everyone producing promotions or other customer communications appreciates what constitutes a financial promotion and what this means in terms of regulatory compliance.

3. Ensure your processes are up to scratch

When producing a financial promotion, your audit trail of reviews and approvals, as well as the promotion itself, needs to meet regulatory standards. Some firms find that introducing a level of automation to their marketing processes can help here, making Compliance sign off compulsory before anything is published.

How can automation help?

Automating your compliance approvals processes can help to mandate Compliance team review and approval, reducing the risk of regulatory breaches and non-compliant promotions.

Automation can also create a digital audit trail that meets FCA standards, ensuring your process is compliant, as well as your end result.

To read more about the ways that automation can help to make your processes and promotions more compliant, as well as increasing efficiency and saving time for your team and your business, you can download a free copy of our whitepaper, The benefits of automated workflow systems. You can read a copy here.

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