Our pick of key compliance stories this month
- Metro Bank fined £10m for misleading investors
- FCA proposes new ESG code of conduct
- Santander UK fined £107.7m for AML failures
- FCA fines Pembrokeshire Mortgage Centre Ltd £2.4m
- UK marketers risk hefty fines for GDPR complacency
- Three broker companies fined £4.7m for failing to detect market abuse
- Company fined £800k after worker suffers serious burns
- FCA outlines stricter rules for financial marketing
Metro Bank fined £10m for misleading investors
Metro Bank and two of its former executives have been fined by the FCA for misleading investors. The bank itself will have to pay £10m, while former chief executive Craig Donaldson and former chief financial officer David Arden face fines of £223,100 and £134,600, respectively.
The fines were dished out primarily because the bank chose not to tell investors that its figure for risk-weighted assets reported in October 2018 was incorrect.
The FCA said, "Metro Bank was aware at the time that this figure was wrong and failed to qualify it or explain in the October announcement that it was subject to an ongoing review and would require a substantial correction."
FCA proposes new ESG code of conduct
The FCA has proposed the formation of a new ESG data and ratings group, which will work to develop a Code of Conduct for Environmental, Social and Governance (ESG). The code's main aim is to stop companies from abusing their ESG data and ratings, potentially causing harm to the wider market.
The FCA has described the code of conduct as "a comprehensive, proportionate and ambitious set of best practices" and said that it would be structured around four key outcomes:
- Good governance
- Robust systems and controls
- Sound management of conflicts of interest
Once the code of conduct is published, regulated companies should review which of their providers are signatories to it or agree to comply with it on a public or contractual basis.
Santander UK fined £107.7m for AML failures
The FCA has fined Santander UK £107.7m after it discovered serious and persistent gaps in its anti-money laundering (AML) controls, affecting its Business Banking clients. The FCA found these failures to have been ongoing for almost five years.
According to the FCA, "Santander's poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime."
Santander's failures led to over £298m in suspicious funds passing through the bank before it closed the accounts. The bank has not disputed the FCA's findings and has agreed to settle. This means it has qualified for a 30% discount. Without the settlement, the fine would have been £153.9m.
- Ensure your company has a robust anti-money laundering policy and that all employees and third parties comply with it
- Always be on the lookout for unusual behaviour and transactions, and high-risk customers and jurisdictions
- Report any concerns, knowledge or suspicions of money laundering immediately
- Never tip off anyone suspected of money laundering that an investigation has been launched
FCA fines Pembrokeshire Mortgage Centre Ltd £2.4m
The FCA has fined Pembrokeshire Mortgage Centre Limited (PMC) £2.4m for unsuitable advice to consumers to transfer out of the British Steel Pension Scheme (BSPS) and other defined benefit (DB) pension schemes.
The FCA's official stance is that most consumers should retain the guaranteed income provided by a DB pension. However, it was found that PMC advised almost 400 persons, almost two-thirds of whom were BSPS members, to transfer out of their DB scheme.
Many of the customers advised were in a vulnerable position due to the uncertainty surrounding the future of BSPS and the short period they had to make a decision. However, they did not receive the quality of advice required to make an informed decision.
In all, PMC was found to have pocketed over £2m in transfer and ongoing advice fees.
UK marketers risk hefty fines for GDPR complacency
Many marketing companies are taking huge gambles, with a YouGov study revealing that more than 50% of them are failing to use Consent Management Platforms (CMPs). These are essential to comply with GDPR, and failing to have them in place could lead to astronomical fines.
The YouGov study also looks into the reasons behind this. The most common reason, at 47%, is that firms don't believe CMPs are needed. The next most common reason (29%) is that firms believe their process is compliant as it is.
Other reasons include not knowing what to do (9%), having a plan that hasn't yet been implemented (4%), and the belief that a CMP would reduce the ability to acquire customers, create effective marketing campaigns and track marketing performance (2%).
Three broker companies fined £4.7m
Three broker firms, BGC Brokers LP, GFI Brokers Limited and GFI Securities Limited, have been collectively fined £4.7m by the FCA over their failure to implement appropriate systems and controls to detect market abuse effectively.
All three companies were found to be deficient in several areas, including having manual, automatic and communications surveillance processes that were lax and, therefore, unable to address the risk of market abuse properly.
"Oversight of our markets is a regulated partnership between the FCA and market participants, and so gaps or holes in a firm's ability to monitor and detect abusive trading poses direct risks to market integrity. This case is another example of the FCA's determination to ensure firms prioritise market integrity and the maintenance of high standards of compliance."
- Ensure you have adequate systems and controls in place to detect market abuse effectively
- Never disclose material non-public information to anyone except in the performance of your duties
- Never make statements or give signals through your actions that may impact the price of a security
- Remember that dual reporting may be required if you are trading on both UK and EU trading venues to comply with the UK and EU MAR
Firm fined £800k after worker suffers serious burns
A chemicals firm, International Paint Limited, has been fined £800k after an employee suffered life-changing injuries in an explosion. He was unable to work for 16 months following the incident and has been left partially blind in one eye.
The explosion occurred when the worker was making paint in a large mixing vessel, and an electrostatic spark ignited flammable vapour.
A Health and Safety Executive (HSE) investigation concluded that the firm failed to implement sufficient measures to control the risk. This included a failure to use a proper extraction system to get rid of flammable vapours and effective electrical earthing of the bulk bag to prevent the accumulation of electrostatic charge that led to the explosion.
FCA outlines stricter rules for financial marketing
The FCA has proposed new rules to protect consumers from illegal, unfair or misleading financial marketing. The proposed rules will require firms to show they have the correct expertise for the promotions they wish to approve.
Companies will be required to report to the FCA on their approved financial promotions, helping the regulator crack down on rogue adverts.
The new rules will ensure the FCA can act promptly to stop harmful financial promotions communicated by unauthorised companies, including in areas such as high-risk investments and "Buy Now Pay Later".
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