| Link(s): | Do the right thing | FCA |
Context
The FCA has published a speech by Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA. The speech gives examples of doing the right thing and also explains the FCA’s expectation of firms to do the right thing.
Key points to note
Chambers recounts a case where a firm not only took responsibility, but it took responsibility for a harm it did not cause. And then, it offered redress and co-operation beyond what was expected of it. The case is the censorship of Lighthouse Advisory Services in May 2023 for the unsuitable advice given to thousands of customers who transferred out of their valuable defined benefit British Steel Pension Scheme. The losses for many were huge, mounting into the hundreds of thousands.
Lighthouse should have treated these consumers with great care, given many of them were facing the vulnerable position of moving from a pension scheme that would give them a guaranteed income for the rest of their lives into a scheme that offered no such certainty and instead exposed them to investment risk, from which they had previously been shielded.
Quilter, the new owners of Lighthouse, took responsibility for the unsuitable advice given – advice that had been given before it had acquired Lighthouse. Quilter also took responsibility for improving the inadequate control framework that they found, while fully co-operating with the FCA.
Chambers notes that the FCA has formed a new Financial Promotion Enforcement Taskforce to stop harmful products and services from being advertised and explains that the FCA is investing in its data and technology. “It is already harder than ever to hide. We will find out eventually, so it is always better to come forward first if you do have any concerns about activity or individuals.“
Chambers goes on to explain: “In every case I see, I often think back to ‘could something have been done sooner to stop this?’ Obviously, if a firm does the right thing in the way it conducts its business, these problems should not arise in the first place. But the way a firm responds to an issue is also an opportunity to do the right thing. Often firms take this opportunity. Too often they do not.”
“It should not be up to the regulators to come in and clean up the mess. How many chains of command does something questionable pass through before it is queried?” Chambers also issues a note of caution: “Lawyers like to see themselves as risk managers. Those defending the firms should ask themselves, what poses the greatest risk in the long term? I have been in your shoes, having started in private practice around 30 years ago. You can use your skills to block an inquiry, to claim privilege for every piece
of paper and generally get in our way but what is that going to achieve? Does that mean you will get your client off the hook, that we will look more sympathetically on your call for leniency for your client?”
“We follow the evidence and where there are failures, we will hold those responsible to account. Aggressive diversionary tactics may prolong the timeline, but they will not deflect us from our purpose. And the extent to which they serve your clients’ reputations and improve their regulatory outcome is interesting to consider.”
We appreciate and reward transparency and cooperation. We appreciate and reward firms that do the right thing.
Next actions
None – for information and awareness.