Financial services firms in the UK will likely continue to face tougher scrutiny by the Financial Services Authority (FSA) in 2010, according to regulatory compliance experts at Wolters Kluwer Financial Services in London. At the same time, recent fines have tended to focus on breaches of the FSA’s Principles for Business, versus specific rules.
Not only is the financial crisis shaping the FSA’s actions, but political uncertainty is also playing a part, experts opined. As the 2010 election approaches, there is much debate over the FSA’s future in the UK.
Sue Berwick, senior compliance analyst at Wolters Kluwer, said: “Formerly, when a company was fined, it was typically for a breach of rules. Now we are seeing a stronger focus on the FSA Principles, which are high-level and cast a broader net since they can be interpreted in a number of ways.”
Steve Blackbourn, a compliance consultant at Wolters Kluwer, said: “The FSA has continued to show its teeth in terms of its ability and willingness to prosecute. With its first successful criminal prosecution for insider dealing, its ongoing responses to the financial crisis issues and threats under the Turner Review, and its work on governance changes under the Walker Review, there is no doubt the FSA is evolving a more rigorous approach in its supervision of financial services firms.
“If there is a change in government, there will be a greater appetite for changes to the UK regulatory landscape. That might include the transfer of certain supervisory authority and responsibilities back to the Bank of England and even the creation of a new and more focused consumer authority.”
John Horan, a compliance consultant at Wolters Kluwer, said: “Financial institutions need to gear up for tougher regulation. As more financial firms begin taking a closer look at their own organisations, I think we will see more and more cases of insider fraud come to light.”
More visibility may also be gained by the FSA’s announcement this year that it will publish compliance data at the sector level for the industry as part of its retail distribution review (RDR). This will allow consumers to gain more information about the pricing of products and services, commissions and the qualifications of the individuals working at financial firms.
With a strong focus on transparency, big changes are expected for nearly every sector of the financial services industry. And the adjustment period to those changes will likely last beyond 2010.
Mr Horan added: “If you look at recent examples, such as the 2007 regulations that codified and standardized anti-money laundering procedures throughout the EU, they typically continue to sting for the first few years they are in place. With even more regulatory activity expected, and the increased public focus on the financial services industry, firms are looking at a challenging road ahead.”
