The UK’s financial watchdog more than doubled the number of times it stepped in to alter company practices in 2014, making good on its pledge to be a more interventionist regulator by forcing businesses to change their models, products and marketing.
The Financial Conduct Authority made 31 so-called early interventions — which are conducted without a lengthy official investigation — in 2014, compared with 14 in 2013, according to its own statistics. The FCA has the power to make companies comply, or risk having their business lines closed down or their entire regulatory licence revoked.
The interventions are normally private but examples last year have targeted the UK’s payday loan sector, which has been under increasing public and political scrutiny. Cheque Centre, a lender, exited the single-instalment payday loan market and had to pledge to improve how it treated customers. Moneysupermarket.com, which compares financial products, agreed to stop advertisements that the FCA felt pushed misleading statistics.
Twelve of the 31 early interventions last year related to financial-crime issues such as money-laundering, the FCA said. “The early-intervention power is probably the most significant addition to the regulator’s armoury and it was provided on the explicit basis that the FCA would be a more intrusive and judgment-led regulator,” said David Scott, a partner at Freshfields Bruckhaus Deringer, the law firm. “It’s interesting to note that the majority of usage has been through private means, as more public usage would have sent a louder message about the FCA’s new approach to regulation.”
The FCA was devised as a more proactive regulator with a stronger mandate for protecting customers than its predecessor, the Financial Services Authority. Martin Wheatley, the FCA chief executive, promised early in his tenure to “shoot first and ask questions later” when it came to shutting down potentially harmful products or promotions.
However, that tough approach has been questioned by some in the City of London. Last month, Clive Adamson, the regulator’s outgoing director of supervision, told a parliamentary select committee that some insiders felt the agency had gone too far.
The early intervention statistics are part of a wider array of data that show the FCA is taking a more rigorous approach to regulating firms.
US authorities have typically imposed stiffer fines than their global counterparts, with Bank of America paying a record $16.7bn in August for allegations it mis-sold mortgage securities before the financial crisis.
In 2014 the FCA levied a record £1.4bn of fines, the bulk of which was accounted for by the £1.1bn paid by five banks to settle allegations over the manipulation of the foreign-exchange market as part of an unprecedented $4.3bn global settlement with US and Swiss regulators. UBS’s £233m that it paid to the FCA as part of the deal was the watchdog’s single-highest penalty ever.
The forex probe, and an earlier unfinished investigation into Libor-rigging, have weighed on the FCA’s resources: the number of fines against both companies and individuals are both down on 2013.
The global aspect of the forex and Libor probes were reflected in other statistics over the year: there were a record 1,014 requests for assistance made to the FCA from its foreign counterparts, continuing a rise over the past few years. This makes the FCA the most requested regulator in the world.
“If trust in financial services is to be rebuilt we need to see the industry working together with the regulator to instil the right culture in their organisations and to stamp out poor practice,” said Tracey McDermott, the FCA’s head of enforcement, who is taking over from Mr Adamson.
Additional reporting by Gina Chon
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