The Financial Conduct Authority has published its Business Plan for 2015/16.
The 2015/16 Business Plan will look at sales practices of pension providers and how firms are helping consumers make the right pension choice with the new pension reforms. It will also be considering the mortgage market and any barriers to competition.
In 2015/16 the FCA will also implement and review the consumer credit regime, conduct a wholesale market study into competition in investment and corporate banking, monitor developments in technology, contribute to international benchmark reform, and work with firms preparing for the implementation of MiFID II and the Market Abuse Regulation updates.
The FCA has also announced it will launch a market study on asset management that will examine charges paid by investors and what drives those charges.
This year’s Business Plan also included the FCA’s Risk Outlook, which sets out the top seven high-level risks the financial services sector should consider in the coming years.
The FCA will continue to look at: technology developments, culture and control, the impact of large back-books, consumer outcomes for pensions and retirement income products, poor culture and practice in consumer credit affordability assessments and the impact of the Consumer Rights Act coming into force in the autumn.
Commenting on the Business Plan, Martin Wheatley, Chief Executive of the FCA, said: "The Business Plan is set against the backdrop of the most fundamental changes to pension policy we have seen in over a generation. Therefore we will be looking at how the market is working and in particular, how the industry is adapting to this considerable change and what it means for consumers. This is exactly the sort of work that is expected of the FCA, and I believe is a fundamental benefit to consumers and industry."
The Financial Conduct Authority (FCA) has fined Aviva Investors Global Services Limited (Aviva Investors) £17,607,000 (€24 million) for systems and controls failings that meant it failed to manage conflicts of interest fairly. These weaknesses led to compensation of £132 million (€180 million) being paid to ensure that none of the funds Aviva Investors managed was adversely impacted.
“Ensuring that conflicts of interest are properly managed is central to the relationship of trust that must exist between asset managers and their customers. It is also a fundamental regulatory requirement. This case serves as an important reminder to firms of the importance of managing conflicts of interest effectively by implementing a robust control environment with effective systems to manage the risks. Not doing so risks customers’ interests being overlooked in favour of commercial or personal interests,” said Georgina Philippou, Acting Director of Enforcement and Market Oversight at the FCA.
“While Aviva Investors’ failings were serious, the FCA has recognised that its actions since reporting its failings were exceptional. The level of co-operation during the investigation and commitment to ensuring no customers were adversely impacted meant it qualified for a substantial reduction in the penalty.”
From 20 August 2005 to 30 June 2013, Aviva Investors employed a side-by-side management strategy on certain desks within its Fixed Income area whereby funds that paid differing levels of performance fees were managed by the same desk.
A proportion of these performance fees were paid to traders in Aviva Investors Fixed Income area who managed funds on a side-by-side basis. This type of incentive structure created conflicts of interest as these traders had an incentive to favour one fund over another. This risk was particularly acute on desks where funds traded in the same instruments.
Aviva Investors agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30% (Stage 1) discount under the FCA's executive settlement procedure. Were it not for this discount, the FCA would have imposed a financial penalty of £25.2 million (€34.2 million) on Aviva Investors.
Non-Executive Directors (NEDs) with specific responsibilities, such as Chairman, will come under the new Senior Managers Regime (SMR), the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have confirmed.
Following a detailed consultation across industry and with stakeholders it was also decided the regime would not apply to those NEDs who do not perform delegated responsibilities.
Martin Wheatley, Chief Executive of the FCA, explained: “Our approach is driven by wanting to ensure firms are managed in a way that reflects good governance and promotes the right culture and behaviours. Having a narrow SMR will also allow the FCA to focus regulatory resources on those responsible for key business areas and board committees. We want those senior individuals to be held accountable for the decisions they make and oversee. This is what people inside and outside the banking sector expect.
“NEDs play a vital role in providing challenge to and an independent oversight of the executive directors. Including all NEDs in the new regime would risk the unintended consequence of changing the whole nature of this vital role.”
The NED roles that will be in scope of the SMR are:
- Chairman;
- Senior Independent Director;
- and the Chairs of the Risk, Audit, Remuneration and Nominations Committees.
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The individuals performing these roles will be subject to all aspects of the Senior Managers Regime, including regulatory pre-approval, the FCA's and PRA's new conduct rules and the presumption of responsibility. Those NEDs who fall outside of the SMR will no longer be subject to regulatory pre-approval, will not be subject to the conduct rules nor the presumption of responsibility.
The Financial Conduct Authority (FCA) has announced it will regulate seven additional major UK-based financial benchmarks in the fixed income, commodity and currency markets from 1 April 2015. This extends the FCA’s initial regulation of LIBOR (the London Interbank Offered Rate), as introduced by HM Treasury in 2013.
Martin Wheatley, Chief Executive of the FCA, said: “I am determined to ensure that markets work well and preserve the UK’s reputation as a centre of excellence for financial services – this announcement is a vital step in achieving this. This builds on our work to strengthen LIBOR, and drive up standards on benchmarks across the board.”
The move extends the FCA’s approach to regulating LIBOR to the firms that administer, and where appropriate, contribute data or information to the following benchmarks:
- SONIA (Sterling Overnight Index Average) and RONIA (Repurchase Overnight Index Average), which both serve as reference rates for overnight index swaps
- WM/Reuters London 4pm Closing Spot Rate, which is the dominant global foreign exchange benchmark
- ISDAFIX, which is the principal global benchmark for swap rates and spreads for interest rate swap transactions
- London Gold Fixing and the LMBA Silver Price, which determine the price of gold and silver in the London market
- ICE Brent Index, traded on the ICE Futures Europe (IFEU) exchange, which acts as the crude oil futures market’s principal financial benchmark.
Benchmark administrators and firms that contribute to benchmarks will be FCA-authorised. Key requirements include identifying potentially manipulative behaviour, controlling conflicts of interest and implementing robust governance and oversight arrangements.
The consultation closes on 30 January 2015, the FCA expect to publish final rules during the first quarter of 2015.
