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FCA and Accountants Disciplinary update | Financial disciplinary lawyer

FCA and Accountants Disciplinary update | Financial disciplinary lawyer

The new Financial Conduct Authority [FCA] and the Financial Reporting Council [FCA] have been quietly flexing their teeth to demonstrate that there is a new sherrif in town. Cyncis might say however that it's very much business as usual, with new regulators picking up where the the former FSA and AADB left off.

Financial Conduct Authority

Payday lending

The FCA regulates firms and financial advisers so that markets and financial systems remain sound, stable and resilient. They also encourage transparent pricing, putting the interests of customers and the integrity of the market at the core of their activities. 

The FCA regulates over 50,000 firms and the prudential standards of those not covered by the Prudential Regulation Authority. It protects the Financial Services Industry by ensuring that firms stick to the rules and dont fall victim of scams or get tied into unfair contracts. They also ensure that firms treat customers fairly.

Recent activity has resulted in action against payday loans companies. In July 2014 the new plans were announced ensuring that people taking out payday loans will never have to repay more than twice the sum they borrowed in a proposal which is estimated will cost the payday loan industry more than £420m in lost revenues. The plan was announced the day after payday loan giant Wonga accounted that the company was going to end its 'cuddly grandparent puppet' advertising campaign that has come in for huge criticism.

Chief Executive of the FCA Martin Wheatley said it was not the regulators intention to drive the payday loans companies out of business. The new cap on default charges will be finalised in November, but they have already come in for criticism. Stella Creasy, Labour MP has campaigned against the payday lenders says that the FCA should go much further to protect those who get into trouble.

HomeServe fined £30.6 m re complaints handling and mis-selling

In February 2014, the FCA handed out the largest ever retail fine to boiler and electrical cover firm HomeServe for mis-selling insurance policies and poor complaints handling. The firm was punished for 'serious, systemic and long- running failings, extending across many key aspects of it's business' between January 2005 and October 2011.

Vulnerable clients, often of retirement age, were sold products irrespective of the need for such plans, and inadequate IT systems meant that they were often overcharged or paid for duplicate cover.

HomeServe Chief Executive Richard Harpin apologised for the failings and was improving it's business practices. In late 2011, the company suspended its entire sales workforce amid fears that they had been mis-selling products. In 2012 the company was fined £750,000 by OfCom for making excessive numbers of silent cold calls.

The FCA is currently investigating the conduct of other companies who use high pressure sales techniques in other market sectors, in particular solar panel and other 'ethical trading' businesses.

Ponzi Schemes and unregulated business

The FCA continues to be active in the traditional areas that the FSA concentrated on, of Ponzi schemes and the thorny issue of unregulated business. 

In February 2014, Benjamin Wilson,  a financial trader who swindled his friends and employees out of £22m was sentenced to seven years for a 'cruel and sophisticated' fraud which was described as an elaborate Ponzi scheme. The fund SureInvestment drew in more than 300 victims some of whom gave their life savings. 

In February 2014, Benjamin Wilson,  a financial trader who swindled his friends and employees out of £22m was sentenced to seven years for a 'cruel and sophisticated' fraud which was described as an elaborate Ponzi scheme. The fund SureInvestment drew in more than 300 victims some of whom gave their life savings. 

Cases of unlawful deposit taking were originally prosecuted by the Bank of England, but the team then moved over to the FSA and continued enforcement action in both the criminal and civil cases, many years before the Ponzi scheme was made famous by Bernard Madoff. It is fair to say however that the scale of the cases pursued by the regulators under different names was far smaller than the $50 billion fraud that involved numerous 'feeder funds' and recent allegations of regulators failing to take account of whistleblowers allegations in the USA.

Surge in Suspicious Transactions.

The FCA today reported that there has been an increase of 28% in the number of suspicious transactions reported in it's first year of operation. Information was obtained by Pinsent Masons following a freedom of information data request.

This would seem to indicate that firms and individuals are now concerned that failure to pass on information will be uncovered and regulatory action taken by the FCA. 

Financial Reporting Council

The FRC is the independent disciplinary body for accountants, accountancy firms and actuaries in the UK. It operates two separate disciplinary Schemes, one for the accountancy profession and the other for the actuarial profession.  The scheme was previously operated by the Accountancy and Actuarial Disiplinary Board [The AADB].

The FRC operates schemes for:

The investigation of cases which raise or appear to raise important issues affecting the public interest in the UK; and

Where appropriate, bringing disciplinary proceedings against those whose conduct appears to have fallen short of the standard reasonably to be expected of members or member firms of the relevant professional body. 

Recent decisions have been published in respect of:

Computer 2000 Distribution Ltd, where the FRC has extended the scope of the investigation launched under the Accountancy scheme into the preparation and approval of the financial information of the company between 2009 - 2013, to include the audits and the conduct of Members and Ernst & Young LLP, a Member Firm of ICAEW.

On 12th August 2014, the FRC also announced that they had launched an investigation under the Accountancy Scheme into the preparation, approval and audit of the financial statements of AssetCo Plc over a two year period leading up to the identification of the restatement reported in the financial statements for the period ended in September 2011.

Note: Jeremy Barnett appeared in a number of cases on deposit taking including R v Finnegan and Braud and FSA v Rourke. He is currently advising a marketing firm in relation to an FCA investigation into Unregulated Collective Investment Schemes. For four years, Jeremy was a board member of the AADB.

For any advice and assistance for issues like these please do call Jeremy on 0844 2722322 or submit a comment below. Jeremy will come back to you at the earliest convenience.

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