The FCA’s new enforcement director has sent some clear signals about how the regulator intends to operate, and how the industry needs to engage with it. Therese Chambers told the City & Financial FCA Investigations and Enforcement Summit that “It should not be up to the regulators to come in and clean up the mess” and that the onus was on firms to “do the right thing”.

It was Chambers’ first speech since taking over as Co-Executive Director of Enforcement, a role she will carry out alongside Steve Smart, who joins the RCA from ther National Crime aganecy, where he was director of intelligence. “There really is nowhere to hide with him,” said Chambers, “so I would advise everyone to get their ducks in a row now, particularly given the extensive improvements we have made and continue to make in relation to data, technology and digital tools.”

Chambers said the regulator’s priority would be to “see the maximum possible penalty imposed on the firms and individuals that cause the greatest harm” and said “there must be real and meaningful consequences for breaches by firms and individuals”.

Creating a culture

But she spent some time explaining that the FCA was looking to create a culture in which early detection and cooperation was standard, and taking responsibility for problems was not only seen as the right thing to do, but the right business decision.

She used the example of Quilter, which took over a firm called Lighthouse Advisory Services. Lighthouse had been found to have given former members of the British Steel Pension Scheme faulty advice about transferring out of the scheme. Quilter took responsibility for the faulty advice, for improving processes, and for paying redress to customers that exceeded the fees charged for the unsuitable advice.  

Because Quilter did the right thing, says Chambers, “in what is a highly unusual move for us as regulators, we decided not to impose a financial penalty”. She continued: “Quilter deserves full credit for taking responsibility and for the proactive way in which the firm and its staff worked with the FCA to put it right … Their co-operation was exemplary. A model example of how to behave. I will let those words hang in the air for a minute – how often does the FCA praise anyone?”

Rob Mason, Director of Regulatory Intelligence at Global Relay, our parent company, agrees that “Unusually for the FCA, it starts with a ‘good-conduct’ story which focused on a client proactively redressing customer detriment alongside full cooperation with the regulatory inquiry.”

Tough message

Chambers also issued a tough message to those advising investors who lost out when Woodford Equity Fund collapsed that a private litigation fund would offer better returns than the compensation package secured by the FCA. She said: “I notice that there has been some self-interested criticism about this, and the suggestion dangled that there could be greater financial settlements if victims join a private litigation fund. This promises an unrealistic return.”

Mason said: “Specifically advising wronged investors in one case (Woodford) is not common within FCA speeches which are typically aimed to deliver messages across the broadest audience.”

Overall, said Mason, Chambers delivered an “unusual, interesting and diverse set of topics within this maiden speech. It’s possibly another sign that the regulator is getting back to full-strength after a senior staff churn, with more serious appetite and forceful intentions across a wide agenda.”