The UK financial services sector is arguably one of the most regulated in the commercial world. The UK’s reliance on financial services to support and contribute to economic growth has been underpinned in recent years, with increasingly sophisticated regulatory requirements being imposed both on institutions and individuals. Not only are these obligations at times difficult to understand, any failure to observe them could result in significant sanctions.
Financial Regulatory Defence Lawyers London
The team at Lewis Nedas are among the UK’s most experienced criminal lawyers, who have been advising on the law as it applies to clients operating in financial services for many years. If you need a legal team who is acutely aware of the requirements imposed on you and your business, and who can provide practical solutions to satisfy regulatory concerns, contact the financial regulatory defence team at Lewis Nedas.
The Financial Conduct Authority (FCA) is the body responsible for supervising the work of the majority of businesses and institutions that operate in financial services. Certain regulatory requirements may, however, be the responsibility of other regulatory agencies. The FCA’s main concerns are that organisations run their commercial operate in a way that, given their proximity to it, does not pose an unnecessary risk to the financial markets system.
What does the FCA expect of institutions?
The expectations of the FCA for the financial services sector are not to be taken lightly. It has been apparent for quite some time that organisations working in financial services deal in complex matters. It is for this reason that regulators require them to observe certain rules while operating their businesses day-to-day.
The main body of rules that institutions regulated by the FCA are expected to observe are its ‘Principles for Business’. This collection of principles is effectively an industry handbook that outlines what the FCA expects of financial service organisations. It includes requirements of organisations to, amongst other things:
- Engage in their activities with the necessary skill and care that is to be expected of them;
- Ensure that they conduct their business in such a way so as not to contravene what is deemed as accepted market conduct;
- Conduct their affairs with integrity; and
- Cooperate with the FCA in all of their dealings with it.
These principles are drafted in such a way that other specific requirements of institutions by the FCA can easily be couched within them. More tangible examples of regulatory requirements of financial service institutions include:
- The duty not to become involved with Money Laundering
Firms must instil in their organisation a series of processes and procedures that will actively guard against the commission of Money Laundering, under the Money Laundering Regulations 2007. The FCA is empowered to prosecute any organisation that (i) is found to have been involved in business that involves money that is the result of criminal activity, or (ii) fails to report a suspicion of money laundering. While it is not the primary enforcement organisation in respect of Money Laundering rules, the FCA is able to issue significant fines against organisations it regulates which have failed to observe the rules.
- The duty not to engage in corrupt practices
The FCA imposes a regulatory obligation on financial service organisations to have a framework in place to guard against their becoming involved in corrupt practices i.e. bribery or corruption. It is vital to understand that the FCA is not required to wait until it has evidence that bribery has taken place before it takes action. If the FCA is satisfied that an organisation either has engaged in corrupt practices, or the procedures in place are not sufficiently robust, it may again issue substantial fines against the organisation concerned.
There is also the possibility for criminal charges to be raised where there is evidence of corrupt practices, but this is not the responsibility of the FCA.
What does the FCA expect of individuals?
The expectations that the FCA has of individuals working in financial services have historically been limited to the requirement that they observe the ‘fit and proper test’ for approved persons. This test requires individuals approved by the FCA to perform certain functions in financial services to a certain standard. These functions typically concern the exertion of significant influence over organisations’ regulatory activities, or providing advice to financial services customers. The requirement of these individuals is that they will perform their duties with integrity and honesty; have the competence and ability to do so; and are financially sound.
If the FCA is ever provided with any information that leads it to believe that an individual is not honouring their obligations under the ‘fit and proper persons’ test, they are entitled to withdraw their approval and prevent the individual from working in financial services. It will depend on the circumstances whether or not an individual is prevented from working in the financial services sector for a limited period of time, or if they are completed banned from being employed in the sector at any point in the future. It should also be pointed out that the FCA has additional powers in respect of individuals who fail to conduct themselves properly, in respect of discharging their duties where their role in an organisation involves a degree of risk. Any failings on the part of individuals to conduct themselves in a manner expected of them can result in their career being adversely affected.
How to deal with regulatory investigations?
The FCA will in most circumstances, before it exercises its regulatory powers, seek to gather evidence of failings by institutions and/or individuals to comply with their obligations. This may take the form of either an investigation by the FCA, or a request for an interview by FCA personnel. It is important that if this is the case, individual or organisational interests are protected: interviews should be conducted in the presence of an experienced legal advisor who thinks strategically, and will be able to ensure that individuals do not compromise themselves; investigations should be handled by those who can ensure that officials do not exceed their mandate.
Furthermore, it is important to be aware that it is possible, where the FCA intends to exercise its enforcement powers, for the matter to be referred to a Tribunal for its consideration, where the propriety of the FCA’s proposed action can be subject to scrutiny. It is vital that expert financial regulatory defence lawyers, who understand the procedure involved, handle these proceedings.
Our Specialist Lawyers
Contact our FCA Defence Experts
The FCA imposes a significant regulatory burden on actors in the financial services industry. If you are worried about how to discharge the obligations that you owe to the FCA, or are in need of assistance in dealing with regulator inquiries into your activities, contact the team at Lewis Nedas. Our financial regulatory defence team are specialists in this field of the law, and are accustom to representing the interests of our clients before the FCA and other regulatory bodies.
For legal advice that will be tailored to your needs, from lawyers that are tenacious and who will provide a practical solution to your concerns, contact our team now.