FTAdviser.com

The news on Wednesday (20 January) that Standard Life Assurance was handed a massive £2.45m fine by the FSA for serious failings in its marketing material for its Pension Sterling fund, may be the signal of more to come for the providers and lenders alike.

Since the City watchdog announced its intention to sharpen its claws and clamp down on the industry a year ago, the majority of fines handed out by the regulator have been to advisers.

But is this set to change?

Margaret Cole, head of enforcement and financial crime for the FSA, told Financial Adviser earlier this month that lenders and providers are very much on the FSA’s radar, in particular lenders.

According to Mathew Rutter, financial services partner for City law firm Beachcroft LLP, SLA’s fine stems from the FSA’s determination to show the industry the days of a “soft touch” regulator are well and truly over.

Mr Rutter said: “For some time now the FSA has been talking tougher – and the fine is an example of it acting tougher as well.”

The news the “big eye” of the regulator may be rotating towards providers and lenders is likely to be warmly welcomed by advisers.

In particular Dennis Hall, chartered financial planner for London-based Yellowtail Financial Planning, agreed that there would invariably be more things coming to light leading to complaints and fines across providers/lenders and advisory firms as things unfold.

However, he did not believe this was a targeted plan by the regulator to seek revenue from those with “deeper pockets”.

While the £2.45m levy will no doubt make a small dent in SLA’s books, is it right of the FSA to aim the punishment squarely on the lender itself?

Simon Webster, managing director of Kent-based Facts & Figures Financial Planning, questioned whether the FSA should effectively be fining shareholders who, most likely, did nothing wrong.

When it comes to misleading marketing information, or similar cases, should the directors of the firm be themselves fined, rather than impacting on the company itself?

A fine placed directly on the directors, Mr Webster said, would encourage them to do better and also stop investors from having to pay for the mistakes of management.

So can the industry to expect more fines levied on providers and lenders this year, and should directors step up and take more responsibility for the actions of their firms?

It is some time ago now that the FSA promised to come down hard on the mis-selling of Lehman backed Structured Products. They cited that three companies in particular were being targeted the most.
Since then no apparent action has been seen.

Companies never seem to learn and the Axa fine in 2004 raised similar issues about checking data and lack of ownership.

Companies should read these enforcement notices and carry out a thorough review of their processes and controls. The blame culture in firms means no one wants to take ownership.

Only an holistic approach to checking and approving financial promotions and customer literature will truly result in it being clear, fair and not misleading. The role of a competent approver is much undervalued.

Never mind the shareholders – why isn’t the fine divided up between the investors in the fund who were duped by SLA, a large proportion of whom have not yet received any compensation from the company for their losses.