Understanding the Regulators' Key Principles 7-11

Understanding the Regulators' Key Principles 7-11

1. 7. Communication with clients

   • FSMA - only regulated firms can issue fin proms
     • Real time
     • Non -real time
       • internet can become real time if include facility to answer queries
       • must be approved before issue
         • approver - appropriate skill & expertise
         • records of promotions kept under review
   • Rules/ Requirements
     • Statutory - FSMA
     • FCA Handbook - Financial Promotions Order
       • COBS
         • 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
       • ICOBS
       • MCOB
     • After sales info
       • COBS
       • ICOBS
       • MCOB
   • Penalties
     • FCA new power to pull marketing
     • AXA Sun Life
     • Ancient Order of Foresters Friendly Society
     • Mortgageland Limited
     • City Gate Money Managers Ltd
     • Santander
     • Swinton Insurance Group
     • State Street Bank Europe Limited

2. 8. Conflict of Interets

   • scenarios
     • firm and its clients
     • employee of firm and its clients
     • competing clients
   • FSA areas of concern
     • soft commissions & bundling in fund mgmt sector
     • investment analysis & research
     • inducements to secure distribution in retail mkt as result of depolarisation
     • unfair inducements & conflicts in non-investment insurance sector
     • remuneration practices
   • Sys & Ctrls
     • policy on acceptance of gifts/corporate hospitality
     • Policy on personal account dealing
     • Rqmt to disclose relationships/material interests that may give rise to conflict
   • Mitigations
     • disclosure
     • Policy of independence
     • Information barriers
     • decline to act for 1 party
   • Rules
     • COBS
     • SYSC
       • formal conflicts policy
     • 2005 - FSA Dear CEO letter
       • Snr mgmt responsibility
   • Penalties
     • Martin Currie Investment Management Limited

3. 9. Customer Relationships of Trust

   • appropriate advice
     • demands & needs
     • mis-selling
       • Retail Distribution Review
   • Rules
     • suitability of advice
       • client classification
       • KYC procedures
   • Penalties
     • HFC Bank
     • Thinc Group
     • Alliance & Leicester
     • Sesame Limited

4. 10. Protecting Clients' Assets

   • Rules / Standards
     • CASS - Client Assets Sourcebook
       • custody arrangements
         • safeguarded. segregated, registered
       • treatment of client money
         • firms can't use
       • Insurers & banks exempt from CASS
       • differing levels of protection depending on customer status
   • Penalties
     • authorisation cancelled
       • Walsall Bridge Insurance Consultants Limited
       • ICM Group Ltd
     • directors disciplined - fines, public censure, prohibitions
       • Jon Uglow Batchelor & Ian Paul Ruff - ICM Directors
       • JP Morgan Securities
       • Aberdeen Asset Managers Limited

5. 11. Relationships with the Regulators

   • responsibility for managing regulator relationship sit with snr mgmt
     • Person must be able to withstand other snr mgmt challenge
   • Consequences of not reporting
     • more lenient if report yourself
   • Reporting
     • Go with a plan for remediation
       • timetable for contacting customers
       • public announcement
       • reissuing info to correct an error
   • Principle of openness applies to all regulators
     • Domestic
       • Competition commission
       • Inland Revenue
       • OFT
     • Overseas
       • FINMA
   • Rules/ Standards
     • Whistleblowing procedures
       • internally or to external regulator
       • Good Faith - Public Interest Disclosure Act 1998 (PIDA)
   • Penalties
     • JPMorgan Chase Bank N.A
     • The Prudential Assurance Company Limited
     • W Deb MVL PLC
     • Christopher Goekjian