What are FCA Principles of Business? - Skillcast

Summary of FCA principles of business · Integrity · Skill, care & diligence · Management & control · Financial prudence · Market conduct · Customers' ... Roadmaps Overview AML&CTF Bribery&Corruption ESG GDPR Health&Safety HybridWorking ModernSlavery SMCR Products BespokeE-learning CourseLibraries ComplianceDeclarations ComplianceRegisters ComplianceSurveys EventsManagement Integrations LMS OfflineActivities PolicyHub RegTechTools SMCR360 Courses ComplianceEssentials ComplianceRefreshers FCACompliance GDPR Health&Safety InsuranceCompliance Microlearning RiskManagement SMCRCompliance Pricing Resources Blog FreeTrainingAids GamifiedLearning E-learningAccessibility ComplianceAcronyms ComplianceCalendar ComplianceFines ComplianceGlossaries ComplianceLegislation SuccessStories Webinars&Events Company Contactus Aboutus Investors FAQs Awards Careers Press Login TheFCAhas11principlesofbusiness(orPRIN)thatareregulatoryobligationsthatmustbefulfilledbyanyfirmsthatcomeundertheirjurisdiction. We'veprovidedarundownofall11principlesofbusinessasitisvitalthatyouareawareofthemandthatyourfirmensuresthey'reimplementedandcontinuallyreviewsthatthesestandardsarebeingmaintained. SummaryofFCAprinciplesofbusiness Integrity Skill,care&diligence Management&control Financialprudence Marketconduct Customers'interest Communicationswithclients Conflictsofinterest Customers:relationshipsoftrust Clients'assets Relationswithregulators ExplanationofFCAprinciples&real-lifebreaches FCAPrinciple#1-Integrity 'Afirmmustconductitsbusinesswithintegrity'. Coverallwasfined£37kbytheFCAandhaditsauthorisationcancelledforrecklesslyfailingtomitigatetheriskstopolicyholdersarisingfromthecontractsenteredintobyitsappointedrepresentative,Aderia. Italsofailedtotakereasonablecaretoensurethatitestablishedandimplementedadequatecontrolsoveritsappointedrepresentative,andfailedtoarrangeadequateclientmoneyprotection. FCAPrinciple#2-Skill,care&diligence  'Afirmmustconductitsbusinesswithdueskill,care&diligence'. BarclaysBankwasfined£72millionforpoorhandlingoffinancialcrimerisks.Thefailingsrelatetoa£1.88billiontransactionthatBarclaysarrangedandexecutedin2011and2012formanyultra-highnetworthclients. Theclientsinvolvedwerepoliticallyexposedpersons(PEPs)andshould,therefore,havebeensubjecttoenhancedlevelsofduediligenceandmonitoringbyBarclays. FCAPrinciple#3-Management&control 'Afirmmusttakereasonablecaretoorganiseandcontrolitsaffairsresponsiblyandeffectively,withadequateriskmanagementsystems'. Between2007and2008,RoyalBankofScotlandGroup(RBSG)processedthelargestvolumeofforeignpaymentsofanyUKfinancialinstitution.However,RBSGfailedtoadequatelyscreenboththeircustomersandthepaymentstheymadeandreceivedagainstthesanctionslist.ThispresentedanunacceptableriskthatRBSGcouldhavefacilitatedtransactionsinvolvingsanctionstargets,includingterroristfinancing. TheFCA(knownastheFSAatthetime)finedRBSG£5.6millionforfailingtohaveadequatesystemsandcontrolstopreventbreachesofUKfinancialsanctions. FCAPrinciple#4-Financialprudence 'Afirmmustmaintainadequatefinancialresources'. TheBankofNewYorkMellonwasfined£126millionbytheFCAforfailingtoprotectitscustomers'assets. Between2007and2013,theUSbank’sLondonbranchandtheinternationalunitfailedtocomplywithcustodyrulesanddidnotpreventclientmoneyfromcomminglingwiththebank’sproprietaryaccounts.ThisechoedwhathappenedbeforethecollapseofLehmanBrothersin2008.  FCAPrinciple#5-MarketConduct 'Afirmmustobserveproperstandardsofmarketconduct'. Between2008and2015,brokersatTFS-ICAPcarriedoutthepracticeof'printing'trades.Thisinvolvedbrokerscommunicatingtotheirclientsthattradehadoccurredataparticularpriceand/orquantitywhennosuchtradehadtakenplace.TFS-ICAPbrokers,acrossmultiplebrokingdesks,didthisopenlyandoveraprolongedperiod. Printingtradessoughttoencourageclientstotradewhentheymightnothavedone,togeneratebusinessforTFS-ICAP.Asaresult,TFS-ICAPwasfined£3.4millionbytheFCAastheydidnotobserveproperstandardsofmarketconduct. FCAPrinciple#6-Customers'interest 'Afirmmustpaydueregardtotheinterestsofitscustomersandtreatthemfairly'. LloydsBankplc,BankofScotlandplcandTheMortgageBusinessplcwasfined£64millionforfailuresinhandlingmortgagecustomers'paymentdifficultiesorarrears. Thebankswerealsomadetopayapproximately£300millioninredress.BetweenApril2011andDecember2015,thebanks'systemsandproceduresforgatheringinformationfrommortgagecustomersinpaymentdifficultiesorarrearsmeantthattheyhadadequateinformationtoassesscustomers'circumstancesandaffordability.Thisresultedincustomersbeingtreatedunfairly. FCAPrinciple#7-Communicationswithclients  'Afirmmustpaydueregardtotheinformationneedsofitsclients,andcommunicateinformationtotheminawaywhichisclear,fairandnotmisleading'. ThePrudentialAssuranceCompanyLimited(Prudential)wasfined£24millionforfailuresrelatedtonon-advisedsalesofannuities. BetweenJuly2008andSeptember2017,Prudential'snon-advisedannuitybusinessfocusedonsellingannuitiesdirectlytoexistingPrudentialpensionholders.Firmsarerequiredtoexplaintocustomersthattheymaygetabetterrateiftheyshoparoundontheopenmarket,andPrudentialwasawarethatmanycustomerscouldgetahigherincomeinretirementbyshoppingaroundontheopenmarket. Prudentialfailedtoensurethatcustomerswereconsistentlyinformedthattheymightgetabetterdealiftheyshoppedaroundandfailedtotakereasonablecaretoorganiseandcontrolitsaffairsinbreachofitsobligationtoensurefairtreatmentofcustomers.Prudentialalsofailedtoensurethatcallhandlers'documentationwasappropriateanddidn'tmonitorcallswithcustomersappropriately. FCAPrinciple#8-Conflictsofinterest 'Afirmmustmanageconflictsofinterestfairly,bothbetweenitselfanditscustomersandbetweenacustomerandanotherclient'. StandardLifeAssurance(SLA)wasfinednearly£31mafteritspracticesledtoconflictsofinterestandSLAemployeesputtingtheirfinancialneedsabovethoseofthefirm’scustomers. TheFCAsaidSLAfailedtoputinplaceadequatecontrolstomonitorthequalityofthecallsbetweenitscall-handlersandnon-advisedcustomers. Atthesametime,thelifeandpensionsgiantoffereditsfrontlinestafffinancialincentivestosellannuities,whichtheFCAsaidencouragedthemtoputtheirownfinancialinterestsaheadoftheircustomers.Duringtheperiodofmisconduct,morethanafifth(22%)ofcall-handlersreceivedmorethan100%oftheirbasicsalaryinbonuspayments. FCAPrinciple#9-Customers:relationshipsoftrust 'Afirmmusttakereasonablecaretoensurethesuitabilityofitsadviceanddiscretionarydecisionsforanycustomerwhoisentitledtorelyuponitsjudgment'. IFAfirmJohnJosephFinancialServicesLimited(JJFS)wasfined£20kfornotadequatelyassessingcustomers'needsandtheirriskappetitewhenrecommendingKeydataproductstoatotalof29customers.Theyalsodidnotdiscloseallmaterialrisksoftheproductsadequatelytocustomers. JJFSdidnottakesufficientcaretoestablishandmaintaineffectivesystemsandcontrolsforcompliancewiththeregulatorysystemanddidnotcreateandretainadequaterecordsofmatters. FCAPrinciple#10-Clients'assets  'Afirmmustarrangeadequateprotectionforclients'assetswhenitisresponsibleforthem'. CharlesSchwabwasfined£9millionforfailingtoprotectclientassets.TheFCAlikenedittomisstepstakenbyLehmanBrothersbeforethe2008financialcrisis.Thefirmcarriedoutaregulatedactivitywithoutpermissionandcompoundedthiserrorbymakingafalsestatementtothewatchdog. TheFCAsaidCharlesSchwabneitherhadtherightrecordsandaccountstoidentifyitscustomers'clientassetsnoradequateorganisationalarrangementstosafeguardthem. FCAPrinciple#11-Relationswithregulators 'Afirmmustdealwithitsregulatorsinanopenandcooperativeway,andmustdisclosetotheFCAappropriatelyanythingrelatingtothefirmofwhichthatregulatorwouldreasonablyexpectnotice'. Santanderfailedtotransferfundstotallingover£183mbelongingtodeceasedaccountholdersovertobeneficiarieswhenitshouldhavebeendone.Over40kcustomersweredirectlyaffected. Inthisincident,SantanderbreachedPRIN11whentheyfailedtodiscloseinformationrelatingtotheissueswiththeprobateandbereavementprocesstotheFCA.Thebankdidnotnotifytheregulatorofthenatureorextentoftheissuesitfaced,includingthenumbersofpotentiallyaffectedcustomersandassets,andwasselectiveintheinformationitprovided. AvoidFCAenforcementaction YourfirmwillbeliabletoFCAenforcementactionifitbreachesanyoftheseprinciples,whichcouldtaketheformoffinesorevenresultinyourauthorisationbeingremoved.Makesurethese11principlesareimplementedandundertakeregularreviewstoensurethatthesestandardsarebeingmaintained. WanttolearnmoreaboutFCACompliance? Ifyou'dliketostayuptodatewithFCAbestpractices,industryinsightsandkeytrendsacrossregulatorycompliance,digitallearning,EdTechandRegTechnewssubscribetoSkillcastComplianceBulletin. TohelpyounavigatethecompliancelandscapewehavecollatedsearchableglossariesofkeytermsanddefinitionsacrosscomplextopicsincludingEquality,FinancialCrime,GDPRandSMCR.WealsoregularlyreportkeylearningsfromrecentFCAfines. YoucanfollowourongoingYouGovresearchintocomplianceissues,attitudesandriskperceptionsintheUKworkplacethroughourComplianceInsightsblogs. Andifyou'relookingforacompliancetrainingsolution,whynotvisitourFCAComplianceCourseLibrary. Lastbutnotleast,wehave80+freecompliancetrainingaids,includingassessments,bestpracticeguides,checklists,desk-aids,eBooks,games,handouts,posters,trainingpresentationsandevene-learningmodules! Ifyou'veanyquestionsorconcernsaboutcomplianceore-learning,pleasegetintouch. Wearehappytohelp! ComplianceEssentials ComplianceEssentialsLibraryisourbest-sellingcomprehensivecorporatetrainingsolution. 100+e-learningandmicrolearningcoursesthathelpcompaniesfromSMEstomultinationalsachievecompliancesuccess. 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