Understanding the Regulators' Key Principles 7-11

7. Communication with clients
1. FSMA - only regulated firms can issue fin proms
  1. Real time
  2. Non -real time
    1. internet can become real time if include facility to answer queries
    2. must be approved before issue
      1. approver - appropriate skill & expertise
      2. records of promotions kept under review
2. Rules/ Requirements
  1. Statutory - FSMA
  2. FCA Handbook - Financial Promotions Order
    1. COBS
      1. investments
        not make unfair comparisons with other products
        all claims must be able to be substantiated
        Claims to be balanced - risk/rewards
        past perf data not used to suggest future perf
    2. ICOBS
    3. MCOB
  3. After sales info
    1. COBS
    2. ICOBS
    3. MCOB
3. Penalties
  1. FCA new power to pull marketing
  2. AXA Sun Life
  3. Ancient Order of Foresters Friendly Society
  4. Mortgageland Limited
  5. City Gate Money Managers Ltd
  6. Santander
  7. Swinton Insurance Group
  8. State Street Bank Europe Limited
8. Conflict of Interets
1. scenarios
  1. firm and its clients
  2. employee of firm and its clients
  3. competing clients
2. FSA areas of concern
  1. soft commissions & bundling in fund mgmt sector
  2. investment analysis & research
  3. inducements to secure distribution in retail mkt as result of depolarisation
  4. unfair inducements & conflicts in non-investment insurance sector
  5. remuneration practices
3. Sys & Ctrls
  1. policy on acceptance of gifts/corporate hospitality
  2. Policy on personal account dealing
  3. Rqmt to disclose relationships/material interests that may give rise to conflict
4. Mitigations
  1. disclosure
  2. Policy of independence
  3. Information barriers
  4. decline to act for 1 party
5. Rules
  1. COBS
  2. SYSC
    1. formal conflicts policy
  3. 2005 - FSA Dear CEO letter
    1. Snr mgmt responsibility
6. Penalties
  1. Martin Currie Investment Management Limited
9. Customer Relationships of Trust
1. appropriate advice
  1. demands & needs
  2. mis-selling
    1. Retail Distribution Review
2. Rules
  1. suitability of advice
    1. client classification
    2. KYC procedures
3. Penalties
  1. HFC Bank
  2. Thinc Group
  3. Alliance & Leicester
  4. Sesame Limited
10. Protecting Clients' Assets
1. Rules / Standards
  1. CASS - Client Assets Sourcebook
    1. custody arrangements
      1. safeguarded. segregated, registered
    2. treatment of client money
      1. firms can't use
    3. Insurers & banks exempt from CASS
    4. differing levels of protection depending on customer status
2. Penalties
  1. authorisation cancelled
    1. Walsall Bridge Insurance Consultants Limited
    2. ICM Group Ltd
  2. directors disciplined - fines, public censure, prohibitions
    1. Jon Uglow Batchelor & Ian Paul Ruff - ICM Directors
    2. JP Morgan Securities
    3. Aberdeen Asset Managers Limited
11. Relationships with the Regulators
1. responsibility for managing regulator relationship sit with snr mgmt
  1. Person must be able to withstand other snr mgmt challenge
2. Consequences of not reporting
  1. more lenient if report yourself
3. Reporting
  1. Go with a plan for remediation
    1. timetable for contacting customers
    2. public announcement
    3. reissuing info to correct an error
4. Principle of openness applies to all regulators
  1. Domestic
    1. Competition commission
    2. Inland Revenue
    3. OFT
  2. Overseas
    1. FINMA
5. Rules/ Standards
  1. Whistleblowing procedures
    1. internally or to external regulator
    2. Good Faith - Public Interest Disclosure Act 1998 (PIDA)
6. Penalties
  1. JPMorgan Chase Bank N.A
  2. The Prudential Assurance Company Limited
  3. W Deb MVL PLC
  4. Christopher Goekjian

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Understanding the Regulators' Key Principles 7-11

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