FCA and Accountant’s Disciplinary

What is the Financial Conduct Authority (FCA)?

The FCA regulates firms and financial advisers so that the 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 don’t fall victim to scams or get tied into unfair contracts. They also ensure that firms treat customers fairly.

Jeremy Barnett has appeared in a number of cases on deposit taking, including R v Finnegan and Braud and FSA v Rourke. Our FCA Regulation Barristers.

The Financial Conduct Authority and Payday Lending

Activity over the last 10 years 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. This is estimated to 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 regulator’s intention to drive the payday loans companies out of business.

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 its business’ between January 2005 and October 2011.

Vulnerable clients, often of retirement age, were sold products irrespective of their 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 its 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.

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 whistleblower allegations in the USA.

The FCA offers information on Ponzi and pyramid schemes on their website, offering advice on how to avoid being scammed.

Financial Reporting Council

What is the FRC?

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 one for the actuarial profession. The scheme was previously operated by the Accountancy and Actuarial Disciplinary Board.

The FRC operates schemes for:

• The investigation of cases that raise, or appear to raise, important issues affecting the public interest in the UK;
• 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.