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Here to help with Regulation and Compliance
Consultancy & Professional Advice: Firms take heed!
Today’s FCA Final Notice to Keydata’s former Compliance Officer shows the benefits of Compliance Consultants and why firms must take heed of professional advice.
19th May 2016
Why firms should take heed of professional advice:
The FCA have today issued a final notice informing that Mr Peter Francis Johnson the former Compliance Officer of Keydata Investment Services Ltd has been banned from performing any function in relation to any financial activity.
The FCA’s final notice highlights Mr Johnson’s breach of regulatory requirements and failure to act upon Professional Advice that has not only proven costly to his career, but also to the financial services sector, with the FSCS having had to pay out over £330 million to KeyData investors.
Furthermore, had it not been for his serious financial hardship, the regulator would have made him foot the bill of a £200,000 fine.
Why was he banned?
Mr Johnson was an Approved Person with KeyData and held the Significant Influence Controlled Functions for Compliance Oversight (CF10) and Money Laundering Reporting (CF11) as well as Customer Function (CF30).
However, despite this, Mr Johnson failed to adhere to the Statement of Principles for Approved Persons in carrying out his role by failing to act with integrity (a contravention of Principle 1) and failing to deal with the FCA in an open and co-operative way (a breach for Principle 4) whilst in his role as Keydata’s compliance officer.
The details in the FCA’s final notice provide a little more insight into the specifics of Mr Johnson’s failings and it seems things might have been different had he taken heed of advice received from industry professionals.
Compliance Consultants & Professional Advice:
It is well known that a firm cannot outsource their compliance and regulatory obligations, in fact the FCA explicitly state to firms that:
“Compliance is your responsibility. If we find inadequate controls in your firm, we may take action against you, not your compliance consultant.”
(FCA, Compliance and Consultants)
However, professional advice from compliance consultants can prove invaluable to firms in establishing, reviewing, revising and determining the regulatory requirements specific to their business.
Professional Advice Ignored:
In his role as Compliance Officer at KeyData, Mr Johnson was responsible for carrying out the due diligence, overseeing the verification and approval of any financial promotions with regards to the firm’s products as well as the firm’s compliance with regulatory standards as a whole.
However, during Mr Johnson’s time at the firm, Professional Advice with regards to the following failings had been received:
- That the firm’s financial promotions contained unclear, incorrect and misleading statements;
- That the firm’s due diligence in relation to its products was inadequate;
- That with regards to certain products, the firm had failed to take adequate steps to ensure that the risk was being effectively managed; and
- That the firm had failed to ensure investors and IFAs we aware of these risks
In each aspect, the FCA’s final notice states that Mr Johnson “had failed to take the steps recommended by its advisers” to address theses failings. These failings ultimately resulted in a significant level of consumer detriment with 37,000 investors having invested over £475 million in KeyData products, which subsequently the FSCS has had to repay £330 million to investors.
Lessons for firms:
Much is at stake not only for firms, but for individuals also, should they lose sight of their regulatory obligations.
It is clear that today’s final notice not only acts as a reminder to firms to take heed of the professional advice they receive, but also a suggestion to others that seeking professional advice or insight into their business practices may prove beneficial in the long run.
In failing to take action, Mr Johnson showed he is not fit and proper and thus he must now seek out a new career - having been prohibited from performing any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm.
Furthermore, had his financial standing been better, he would also have been required to pay £200,000 in fines.
Benefits of Compliance Consultants:
Compliance consultants, like the specialists at Compound Growth, often have many years of industry experience from having dealt with the ongoing response to ever-changing and developing regulatory standards over time.
This regulatory experience can be drawn upon, tailored and applied to the needs of your business to help you ensure your controls are appropriate.
If you should have any regulatory query or requirement you would like professional advice or assistance upon, please feel free to contact our helpful team of specialist for a no obligation discussion.
Our team of compliance specialists are able to provide:
- Risk assessments & compliance audits to analyse and identify any higher risk areas of your business and any weaknesses in procedures
- Advice upon Business Evolution and development in compliance with regulatory requirements
- Assistance in establishing internal procedures and documentation for compliance
- Support in undertaking file audits and reviews, checking that systems and controls such as procedures are being followed and whether adaptation may improve these
- Specialist and technical advice with regards to specific products, markets and reporting and other regulatory requirements
- Response to Communication or requests from the regulator including any remedial undertakings
- Regulatory news and updates affecting your business including scheduling and horizon planning
- Regulatory training and guidance from one-to-one to group training sessions
Remember, your firm must have appropriate processes and controls in place. You must have a suitable framework for your business to not only for assess and cover its risks but to also ensure that you meet your regulatory requirements now and going forwards.
News & Views
Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.
Comment from the Regulator:
“When reviewing compliance with our requirements, we expect firms to have acted on recommendations from consultants where appropriate”
FCA, Factsheet:
‘Using Compliance Consultants’
Compliance Support from Compound Growth Ltd
Please contact our Compliance Support Team for a free no obligation discussion about your requirements if you’d like to discuss how our regulatory & compliance consultants can help your business move forward compliantly.
Call by Telephone:
(020) 3813 2890
Comment from the Regulator:
“The FCA is more likely to take action against firms that breach our requirements if they have not acted on previous recommendations from a compliance consultant.”
FCA, ‘Compliance and other support’
Compliance Support Team
With a wide range of prudential and conduct of business experience the consultants at Compound Growth are here to help with any problem large or small.
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