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Directors feel the heat following increased FCA scrutiny

Investigations into financial directors’ conduct jumped by 29%, in the year leading up to December 2018

Directors feel the heat following increased FCA scrutiny

Investigations into financial service directors’ conduct jumped by 29% in the year leading up to December 2018.

The increase from 45 investigations in 2017 to 58 in 2018 was partly driven by the Financial Conduct Authority (FCA)’s crackdown on products and services aimed at low-income customers, according to City-based law firm RPC. These firms include debt management advice companies, sub-prime lenders in car loans and other types of consumer credit.

With the FCA paying attention to unregulated products being mis-sold as regulated products (including high-risk/high-return mini-bonds), pressure is expected to increase on this area of the market. For example, this year saw the collapse of London Capital & Finance (LCF), which promised rates of up to 8% on high-risk mini-bond schemes.

The FCA plans to investigate the risks posed to consumers by the sale of all mini-bonds by both regulated and unregulated firms, potentially leading to the FCA overseeing the sale of all mini‑bonds in the future.

Price comparison websites are also being examined; a high-profile case relating to Secure My Money, which ran an online consumer credit business, saw four directors of the company banned from the financial services industry for 28 years between them last year, for running consumer credit websites which ‘consistently misled vulnerable customers’.

Jonathan Cary, partner at RPC, said: ‘The FCA has ramped up investigations into directors it believes have used underhand tactics for personal gain. While much of the recent activity has been focused on directors of smaller firms, the FCA is clear no directors are immune.

‘Investigating and fining directors has a much greater deterrent effect on individuals than just fining a large corporate [firm].’

RPC also noted the number of investigations launched into directors based on ‘culture and governance’ reasons rose to 27 in 2018 from just 10 in 2017. These investigations now represent nearly half of the total number.

With the FCA introducing its Senior Managers and Certification Regime (SMCR) in 2016 to hold senior managers personally accountable for departmental wrongdoing, the full rollout planned for December 2019 across all financial services will see ‘a further surge in investigations into directors,’ according to Cary.

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6 Comments FCA: we'll visit every DB transfer adviser if we need to

FCA: we'll visit every DB transfer adviser if we need to

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