Author: Syedur Rahman
17 June 2016
3 min read
A number of pensions providers were warned in 2016 by the Financial Conduct Authority (FCA) that they may be breaking competition law.
The warning will have been a wake-up call to those receiving it. But it can also be seen as a reminder to pensions providers, independent financial advisors and others working in financial services that if they are not legally compliant they are running a major risk of prosecution.
Compliance has to be seen as something worthy of immediate attention. As a firm that specialises in such matters, we can make sure that firms are legally compliant – and help them mount the best possible defence if they are found not to be.
As of April 2015, the FCA has been responsible for enforcing provisions of the Competition Act 1998. The FCA observed that a number of pensions providers were failing to ensure that commercially sensitive information was not disclosed to competitors.
Firms were not observing competition law when it came to marketing arrangements, leading to a lack of confidentiality among providers.
Announcing the warnings, the FCA added that the firms concerned had agreed to strengthen their competition compliance by:
Those who received the warnings may have considered themselves fortunate that they escaped without punishment. Such a lenient approach is rare. Punishments for recklessness, carelessness or ignorance of the law in this sector can be high.
Those involved in selling any type of financial product have to be fully aware of all aspects of the law as it applies to them.
Commentators have warned for years that the mis-selling of pensions could be the next boom industry for lawyers who made a hefty income out of the PPI scandal. PPI has cost the banks and associated companies huge amounts of money.
Many in pensions may believe, "It couldn't happen here.” But they would do well to think again.
The FCA has expressed concerns about the potential for annuities to be mis-sold. It has stated that it feels many retirees are not given enough information when it comes to annuities. Following an examination of the working practices of eight pensions providers - who account for 70% of the annuities market - the FCA also expressed concerns about selling practices and operating systems in some companies.
It is unlikely that the FCA will now walk away from the problems it has recognised. Now would be as good a time as ever for finance professionals to seriously consider their compliance strategies. The competition law warnings cannot be seen as a one-off or a blip. If anything, the FCA will be viewing this as the latest cause for concern regarding those who sell financial products.
If it is you who becomes the subject of an investigation, you need to be able to account for your actions robustly and in detail. This is where the right legal representation is important. Having represented professionals in all areas of the financial products market, we understand that it is not always easy to ensure you obey the law in your field of business.
There is no magic formula that makes it 100% certain that your staff, agents and other representatives are acting within the law at any given time.
But by seeking advice on how to be legally compliant, a firm or independent financial advisor can benefit from strong and appropriate compliance procedures: procedures which will reduce the risk of any breaches of the law and provide a strong argument against any accusations made by the FCA or any other investigating body.
By creating procedures that are devised, drafted and, whenever necessary, revised after careful examination of the way a company or individual functions in financial markets, a compliance policy can be the ultimate defence against wrongdoing in what is a demanding and involved area of work.
Should the FCA or any other body proceed with a prosecution, any compliance procedures that are in place can form part of a defence.
But such a defence has to be handled by solicitors with financial crime expertise. Only such experts will be able to dissect prosecution arguments, make the most productive use of disclosure procedures, extract the maximum possible value from evidence and use the likes of expert witnesses to produce the strongest arguments to counter claims made against their client.
We speak from experience when we say that everyone from independent financial advisors through to the largest institutions need the best, most appropriate, legal advice when it comes to allegations of wrongdoing.
The FCA is certainly not going to walk away from pensions. If anything, what it has learnt recently is more likely to make it take a longer, closer look at how those in the pensions industry behave. This means that everyone working in pensions will have to be able to show that they have taken all possible steps to prevent wrongdoing.
Only then will the FCA be satisfied that the pensions industry is working as it should. Failure to convince the FCA of this could see the industry paying a high price... far higher than the price tag attached to any compliance policy.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, civil recovery, cryptocurrency and high-stakes commercial disputes.