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FCA to crack down on conduct and conflict of interest failings

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The FCA has put the spotlight on the handling of confidential and inside information across financial services, after a thematic review of investment banks found failings among firms.

In its latest thematic review, Flows of Confidential and Inside Information, the FCA calls for senior management to take responsibility over controlling flows of information, but adds that all employees should be aware of their role in dealing with confidential and inside information.

The report says: “Employees at all levels should understand their role in controlling flows of confidential and inside information and make it an integral part of how they carry out their work.

“We expect to see business heads acting in a supervisory capacity taking responsibility for controlling flows of information, with appropriate challenge and monitoring from the second and third lines of defence.

“Firms should place the assessment of circumstances that could present heightened regulatory and conduct risks at the centre of their ongoing risk assessment. These circumstances could also give rise to misuse of confidential and inside information.”

The FCA has also laid out guidelines on the role of compliance in financial services firms, having found in the review that in some businesses compliance was “remote” while in others it was overbearing.

The review says: “At some firms, compliance appeared to be seen as a quasi-administrative function, removed from the business both in terms of location and the quality and level of interaction.”

In one instance the FCA found that the compliance function sat in a different office, while another was based in another city.

It says: “There were other cases of compliance being strong and constantly present at all stages of transactions. This can lead to the first line relying too much on compliance, when the business itself should be taking responsibility.

“Compliance should challenge the business where required, and provide insight and oversight at the appropriate times. This includes assisting the first line in ensuring inside information is identified and logged.”

The FCA says this is not a one-off exercise and calls for all firms in the industry to “continually review their practices and procedures for handling confidential and inside information both from a market abuse and conduct of business perspective”.

The regulator will provide individual feedback to the 16 firms that participated in the review and expects them to address any issues raised.

It adds: “We have a number of regulatory powers at our disposal to ensure firms comply with our rules. These include the power to stop firms and individuals providing regulated financial services, levying fines on firms and, where we think it is necessary, taking enforcement action.”

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Comments

There are 4 comments at the moment, we would lover to hear your opinion too.

  1. This is insulting, frankly I cannot even begin at any level to start to explain how the regulator maybe should take a good long and hard look at their own structure. Glass houses and stones very much springs to my mind.

    Maybe if they listened to advisers, actually reviewed the information they insist on receive every six months from firms, actually had interdepartmental discussions, listened to advisers and industry concerns we could have avoid many of the past disasters.

    Funny old world when you cannot see how your diplomatic immunity means you cannot see that what you wish to apply, a set of rules for everyone else, you should look at internally.

  2. Correct Martin Evans. I would love to know what the sanctions would have been if it was a financial firm who c*cked up in the way the FCA did over the back book of business review earlier this year.
    The FCA need to stop adding more and more cr*p to the rulebook and instead start sensibly and effectively regulating the industry.
    They appear to simply want to create more and more rules that firms can and will trip up with and so keeping themselves in the spotlight and hence increasing the “need” for them to continue.

  3. Whether those that live in glass house should throw stones or not is one debate, however I have seen far too many examples of massive conflicts of interest, that are detrimental to the clients being utterly ignored. For example SIPP firms being both the professional Trustee and the scheme administrator and sometimes also the adviser. Are you honestly trying to tell me that a “trustee” who is also the director and part owner of the scheme administrator and or the scheme adviser is going to act in the schemes best interest?

  4. Yet again we see the regulator regulating part of the industry instead of looking at the whole problem.

    Yes, it is important that sensitive information is kept within the departments that are responsible for that information as all too often it is easy for trading desks in particular to leak information or even create rumours to drive the market in a particular way.

    When is the regulator going to take action against journalistic websites that have little or no regulatory oversight. I read constantly that the regulator is going to crack down on financial services firms for receiving any form of incentive which in my professional opinion is quite right. I like many financial advisers have been concerned about some so-called journalists who are operating commercial activities online without any regulator oversight due to the so-called journalistic opt out within the financial servicing marking act 2000.

    These sites sometimes have links to financial services firms selling products or offering services. What I find surprising is there is no mention on the sites of how they are receiving remuneration, so when we are talking about vested interests within financial services surely we should be looking at all aspects and areas of financial advice.

    Has anybody ever really wondered the vested interests of a journalist writing a story about certain market conditions and where that information came from for that story.

    I’m not asking for controls on journalist I am asking for accountability and for the total removal of journalistic principle when it comes to giving advice online particularly when that advice is linked to a buy button or a sponsored link.

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