The Price

of Breaching the FSA Principles A CEI Compliance Information Presentation

The FSA A Principled Regulator

The Financial Services Authority (FSA) issue Final Notices whenever they have disciplined or censured a firm or individual for whatever reason.

In November 2012 the FSA imposed a £10.5 million fine on Card Protection Plan Limited (CPP) for the mis-selling of insurance products.

The firm has also agreed to pay redress to its affected customers and it estimates that this will amount to approximately £14.5m, however, this figure could change depending on how many customers respond to CPP’s contact exercise. The total cost to the firm of the FSA’s investigation is estimated to be £33.4m, which includes the fine, redress and the overall costs associated with the investigation.

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The FSA A Principled Regulator

The FSA’s Final Notice to CPP details that the firm was found to have breached Principles 3 (Management and Control), 6 (Customers’ Interests) and 7 (Communications with Clients) of the regulator’s Principles for Businesses. CPP failed to treat its customers fairly and did not provide clear information to its customers:

• CPP sold its Card Protection product by emphasising that customers would benefit from up to £100,000 worth of insurance cover – when this was not needed because customers were already covered by their banks; and

• CPP overstated the risks and consequences of identity theft during sales of its Identity Protection product.

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The FSA A Principled Regulator

Whilst the details are interesting and obviously relevant to the company’s either ignorance or arrogance, the end result was due to a failure of the FSA Principles, a list of 11 time forged values that firms, even today still breach fairly consistently, and always at their cost.

Earlier in the same week they also fined another firm with a financial penalty of £412,000 in respect of breaches of Principle 3 (Management and Control), Principle 9 (Customers: Relationships of Trust) of the FSA’s Principles for Businesses (“the Principles”). So what are these principles?

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The FSA Principles for Business

1. Integrity: A firm must conduct its business with integrity.

2. Skill, care and diligence: A firm must conduct its business with due skill, care and diligence.

3. Management and control: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

4. Financial prudence: A firm must maintain adequate financial resources.

5. Market conduct: A firm must observe proper standards of market conduct.

6. Customers' interest: A firm must pay due regard to the interests of its customers and treat them fairly.

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The FSA Principles for Business

7. Communications with clients: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

8. Conflicts of interest: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

9. Customers: relationships of trust: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

10. Clients' assets: A firm must arrange adequate protection for clients' assets when it is responsible for them.

11. Relations with regulators: A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.

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The FSA A Principled Regulator

Not only Firms are bound by these Principles and there are a long list of people who have realised that regulatory censure can be costly, more recently such as;

October 2012

Martin Edward Rigney £117,330 for failing to comply with Statements of Principle 1, 2 and 7;

John Blake £100,000 for failing to comply with Principle 3

Graeham Stuart Sampson £17,850 for breaching Principle 6

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The FSA A Principled Regulator

Additionally, if the recipient is financially embarrassed and any fine would cause financial hardship then a public censure is promulgated as in the unrelated cases of Reverend Carmel Jones breaching Principle 1 (integrity) and Raymond Wagner for also breaching Principle 1.

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The FSA A Principled Regulator

The cost of complying with the regulations may seem expensive

and some even see it as a lost cost, however, if you fail to run your business compliantly due to ignorance, arrogance or some other reason be it personal, cultural or even political;

make sure you have plenty of spare cash in your savings account.

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This is a regulatory summary service provided by CEI Compliance Limited, The UK’s Fastest Growing Alternative Regulatory Consultancy

We can only advise on the salient points in this summary and if you want further details then we would suggest you access the full document from the BBA Website at http://www.bba.org.uk/downloads/bba/Streamline_Consultation.pdf

What Is This Presentation

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So Who Are CEI

Compliance? The Fastest Growing Alternative UK

Regulatory Consultancy

Provide a Discrete Service for Remedial and Proactive Risk &

Compliance

Have an Ultimate Goal of Improving

Our Client’s Position

CEI Compliance have been providing risk and compliance services to all sizes of regulated firms from start-up banks and FTSE100 companies to IFAs and small Wealth Managers.

The key to our success is that those who need to know refer us to others. We are a well kept secret who places confidentiality and honesty as two of their highest values.

Big enough to be credible,

Small enough to care Call 0800 689 9 689

Areas of Working

62%

21%

9% 8%

Areas of Work

Remedial with NDA

Governance with noNDA

Source: CEI Stats June 2012

Because of our reputation of discretion and confidentiality we operate under Non-Disclosure Agreements for roughly 2/3rds of our work

External to this the breakdown of our work is roughly split with 50% Risk & Compliance and 50% Governance.

CEI Also trade under Compliance Consultant (www.complianceconsultant.org) and S166 Reports (www.S166reports.co.uk)

as separate businesses.

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Isn’t Bigger, Better?

Generally, No.

It’s usually just more expensive

Fortunately, there are more positive alternatives to using a niche consultancy compared to the Accentures, McKinseys or the big accountancy firms like Deloitte, E&Y etc.

We not only consider that size doesn’t matter, but large size can actually be a disadvantage in meeting your needs.

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Dealing with a niche consultancy

You are always dealing with the principal when you are dealing with my firm. This means that I, the MD, are the relationship manager and there is no junior partner to whom responsibility will be transferred. There is no decreased accountability, no "hand-off" to a less-informed colleague. If your interests are at stake continually, shouldn’t you reasonably expect my continual involvement?

We can usually provide resources on a "just in time" basis. That is, our projects do not have to cover excessive overhead, such as multiple offices, large administrative backup, recruiting, partner perks, etc. We are organised to efficiently provide everything that you, as the buyer needs, but nothing more than that which means that you are paying for value and results and only minimum overhead.

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Dealing with a niche consultancy

There is more likelihood of your privacy and confidentiality being observed with fewer people working on the project. We (and/or the few people we might also involve) are constant which means that there isn’t the need to sift through dozens of differing perceptions.

We’re faster. We can respond to requests quickly, and return all calls within four hours which means to you that there is no need to worry about a bureaucracy, delays and unknown people on the other end of the phone.

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Dealing with a niche consultancy

Since we handle fewer concurrent projects than larger firms, our attention is focused on the job at hand. This means that you don’t have to "compete" with another dozen or so of our clients, which may be larger, paying more or are more time-

demanding. We structure our work so that every client receives maximum attention.

Your investment is controlled. There is no "meter running". We work for a fixed, value-based, project fee.

Large firms can’t afford to do that as readily because of all the people involved and their own insistence on measuring their success by billable hours. We measure our success by client objectives reached, not in “time units”.

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Dealing with a niche consultancy

The expertise that larger firms use is often white-labelling for them by a pool of consultants available in the marketplace at any one time. We select our consultants

from practising subject matter experts which means that you obtain the same or better expertise for less money, because;

Inevitably, we are less expensive. There are economies to using someone who can base their fees on each situation and not on a pre-determined service scale or need for reaching a practice quota. This means quite simply better value to you.

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And, additionally

The benefits of dealing with the “Compliance Doctor” and CEI Compliance is;

A firm with experienced and qualified consultants;

A firm that can apply changes and needs in a common sense way that is practical and effective;

A firm that is considered and respected as independent and reliable by the FSA;

A firm that provides you with unfettered access to the principle immediately and on demand; Call 0800 689 9 689

We will conduct an initial appraisal at our cost – only charging for expenses

We will make a proposal based on our appraisal with your outcomes and needs

We will discuss the precise scope with you and provide you with a project price

We will complete the work to your original scope and satisfaction

What Makes Us Different?

Phase 1

Phase 2

Phase 3

Phase 4

Each proposal deserves to be as unique as a

fingerprint

text.

We have a wealth of Financial Services Experience, and due to the remedial and sensitive nature of our work forming over 60% of our business and that is conducted under a Non Disclosure Regime, we cannot demonstrate every client.

Who Are Our Clients?

We also have a large amount of experience in a number of other fields and industries within the major utilities and even Local Authorities.

Who Are Our Clients?

Questions? More Information?

CEI Compliance Limited www.cei-compliance-limited.co.uk

Call

0800 689 9 689

Email info@ceicompliance.co.uk