Compliance Corner - FCA, Bank Of Scotland, SEI,

Editorial Staff 24 June 2019

Compliance Corner - FCA, Bank Of Scotland, SEI,

A regular round-up of compliance news, such as fines, permissions, new technology solutions to make tracking risks easier, and other developments.

(This article originally appeared in Compliance Matters, sister news service to this one. To register on CM, see here.)

The Financial Conduct Authority, the UK regulator, has accused Bank of Scotland of not disclosing that it suspected fraud had taken place in one of its offices. The watchdog has fined the bank £45 million ($57.2 million).

BOS has since become part of Lloyds Banking Group.

The bank broke a rule called Principle for Business 11, which is about how regulators and firms interact. The rule says that a firm must deal with its regulators in an open and co-operative way and "must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice." This is the first time that the FCA or its predecessor has punished the firm for breaking this rule.

BOS identified suspicious conduct in its impaired assets team in early 2007. This was a part of the bank's commercial lending arm, the operations of which are not relevant to our readers. (Chris Hamblin: "Because commercial lending is largely unregulated, the FCA has restricted itself to invoking a vague principle. The bank's efforts to keep the fraud away from the regulators' eyes, however, are of concern to all regulated financial firms as the reach of Principle 11 is universal.")

The director of the team at its Reading branch, Lynden Scourfield, had been sanctioning limits and additional lending facilities beyond the scope of his authority and this had remained undetected for at least three years, the FCA said in a statement. BOS knew by 3 May 2007 that this misconduct had cost it dear financially. The FCA has also today banned Scourfield and three others from working in financial services because, it says, they took part in a fraud. The others are Mark Dobson, Alison Mills and David Mills.

The bank uncovered the "control breakdown," as the FCA calls it, in early 2007. By 3 May it had spotted suspicious conduct and some of its people suspected that fraud had been taking place. It was not, however, until July 2009 (five months after BOS had become part of the merged Lloyds Banking Group) that BOS provided the authority with full disclosure in relation to its suspicions and the report of the investigation that it had conducted. The Thames Valley Police later established that a fraud had indeed occurred.

BOS agreed to resolve the matter as soon as the FCA told it that a fine was in the offing. It has therefore obtained a 30 per cent (stage 1) discount from the figure that the regulator would otherwise have imposed (£65 million).

SEI, the US-listed investments and technology solutions firm, has developed a “costs and charges reporting services” via its SEI Wealth PlatformSM, in collaboration with FinoComp, a wealth management software development company. 

The service is designed to help managers keep up with the burdens of complying with regulations such as the European Union’s Markets in Financial Instruments Directive 2, which imposes heavy reporting requirements. Firms have to report costs and charges in cash amounts, as well as in percentage figures.

“The MiFID II disclosure rules are new and complex, and many wealth management firms have had to dedicate a significant amount of time and resources to achieving compliance. With this in mind, we went through a rigorous selection process to identify the best strategic partner to collaboratively innovate a solution to this challenge for our clients,” Brett Williams, managing director, SEI Wealth Platform UK, said.


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