The FCA has recently given an indication of where it sees the main focus of activity during the forthcoming year.
These are also areas where it has some significant concerns over possible breaches and matters which may lead to potential enforcement investigations, so it is worth looking at some of these areas.
Financial crime includes matters such as money laundering, proceeds of crime, bribery, corruption and fraud and prevention of these is a key operational objective of the FCA in ensuring market integrity.
The FCA's Financial Crime Guide (copies of which are available in the templates area of the Development Zone) and recent enforcement action have made it clear that the regulator will take significant action against firms and individuals that fail to meet its high regulatory standards in these areas, including imposing financial penalties and other sanctions.
Also identified as a specific issue in the FCA's 2015 Business Plan, the numerous stories we see in the media regarding cyber-attacks and data theft over the past 12 months have certainly focused the FCA and its investigations in this area. Firms will need to consider their specific risks and identify how they will deal with such attacks and the potential ransoming of data taken or encrypted. This week has seen more stories of firms (not necessarily in the Financial Services sector) being held to ransom and being locked out of their own data.
The regulator’s previous actions against payday lending firms (and others) provide clear indications of the FCA's desire to see the highest level of consumer protection (again another operational objective) for those participating in the consumer credit market and we are likely to see yet more consumer credit specific rules emerge over the forthcoming year, some of which may impact on the general insurance broker.
Senior Management Responsibility
The Senior Managers' Regime (SMR) and Senior Insurance Managers' Regime (SIMR) took effect on 7 March 2016, with the effect that senior management could be held individually accountable for what the FCA considers to be future failings at the firm. The SMR attributes responsibility and accountability to named individuals in senior management. If a regulatory requirement has been breached, the senior manager responsible for that area will be in the frame. Senior individuals within firms should act now to ensure that they do not fall foul of the regulatory requirements.
At this stage, it does not apply to the general insurance broker, but we do know that this will be extended in 2018 to all firms. So, the FCA will be watching the new regime and its participants carefully as this will certainly impact on the content of the consultation process going forward.
Product Design and Governance
Where you design and bring to market your own products, the FCA will be looking to potentially be more involved nd will need to see the most robust of due diligence throughout the whole process.
Social media promotions are already in the FCA's sights following the regulator's publication of new guidance on social media and financial advice last year.
The regulator will expect all firms to have adequate systems in place to review, approve and supervise financial promotions while including risk warnings or other statements in promotions for certain products or services. Remember everything “out there” with your name could be seen as a financial promotion however innocuous, and must be treated in the same way as any other promotion. Social media is a growing marketing channel and the FCA do have concerns about how this is used.