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Consultancy & Professional Advice: Firms take heed!
Today’s FCA Final Notice to Keydata’s former Compliance Officer shows the benefits of Compliance Consultants and why firms must take heed of professional advice.
19th May 2016
Why firms should take heed of professional advice:
The FCA have today issued a final notice informing that Mr Peter Francis Johnson the former Compliance Officer of Keydata Investment Services Ltd has been banned from performing any function in relation to any financial activity.
The FCA’s final notice highlights Mr Johnson’s breach of regulatory requirements and failure to act upon Professional Advice that has not only proven costly to his career, but also to the financial services sector, with the FSCS having had to pay out over £330 million to KeyData investors.
Furthermore, had it not been for his serious financial hardship, the regulator would have made him foot the bill of a £200,000 fine.
Mr Johnson was an Approved Person with KeyData and held the Significant Influence Controlled Functions for Compliance Oversight (CF10) and Money Laundering Reporting (CF11) as well as Customer Function (CF30).
However, despite this, Mr Johnson failed to adhere to the Statement of Principles for Approved Persons in carrying out his role by failing to act with integrity (a contravention of Principle 1) and failing to deal with the FCA in an open and co-operative way (a breach for Principle 4) whilst in his role as Keydata’s compliance officer.
The details in the FCA’s final notice provide a little more insight into the specifics of Mr Johnson’s failings and it seems things might have been different had he taken heed of advice received from industry professionals.
It is well known that a firm cannot outsource their compliance and regulatory obligations, in fact the FCA explicitly state to firms that:
“Compliance is your responsibility. If we find inadequate controls in your firm, we may take action against you, not your compliance consultant.”
(FCA, Compliance and Consultants)
However, professional advice from compliance consultants can prove invaluable to firms in establishing, reviewing, revising and determining the regulatory requirements specific to their business.
In his role as Compliance Officer at KeyData, Mr Johnson was responsible for carrying out the due diligence, overseeing the verification and approval of any financial promotions with regards to the firm’s products as well as the firm’s compliance with regulatory standards as a whole.
However, during Mr Johnson’s time at the firm, Professional Advice with regards to the following failings had been received:
In each aspect, the FCA’s final notice states that Mr Johnson “had failed to take the steps recommended by its advisers” to address theses failings. These failings ultimately resulted in a significant level of consumer detriment with 37,000 investors having invested over £475 million in KeyData products, which subsequently the FSCS has had to repay £330 million to investors.
Much is at stake not only for firms, but for individuals also, should they lose sight of their regulatory obligations.
It is clear that today’s final notice not only acts as a reminder to firms to take heed of the professional advice they receive, but also a suggestion to others that seeking professional advice or insight into their business practices may prove beneficial in the long run.
In failing to take action, Mr Johnson showed he is not fit and proper and thus he must now seek out a new career - having been prohibited from performing any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm.
Furthermore, had his financial standing been better, he would also have been required to pay £200,000 in fines.
Compliance consultants, like the specialists at Compound Growth, often have many years of industry experience from having dealt with the ongoing response to ever-changing and developing regulatory standards over time.
This regulatory experience can be drawn upon, tailored and applied to the needs of your business to help you ensure your controls are appropriate.
If you should have any regulatory query or requirement you would like professional advice or assistance upon, please feel free to contact our helpful team of specialist for a no obligation discussion.
Our team of compliance specialists are able to provide:
Remember, your firm must have appropriate processes and controls in place. You must have a suitable framework for your business to not only for assess and cover its risks but to also ensure that you meet your regulatory requirements now and going forwards.
Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.
“When reviewing compliance with our requirements, we expect firms to have acted on recommendations from consultants where appropriate”
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“The FCA is more likely to take action against firms that breach our requirements if they have not acted on previous recommendations from a compliance consultant.”
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