Number of FCA investigations into directors of financial services firms rises 29% in 2018

The number of investigations launched by the UK Financial Conduct Authority (FCA) into directors of financial services companies increased 29% to 58 in the year to December 2018, according to the latest data from City-headquartered professional services firm RPC. This is up from 45 in 2017.

RPC explains the increase in investigations partly by the FCA’s crackdown on financial services directors who operate companies targeting vulnerable or low-income individuals. This includes debt management advice companies, sub-prime lenders in areas such as car loans and other forms of consumer credit.

The FCA has been paying particular attention to unregulated products that are being missold as regulated products. This includes products such as mini-bonds, which may have a high risk/return profile. RPC anticipates pressure will grow on this area of the market following the collapse of London Capital & Finance (LCF), which offered its clients to invest in high-risk mini-bond schemes.

RPC also notes that the number of investigations launched into directors based on ‘culture and governance’ reasons rose to 27 in 2018 from just 10 in 2017. These investigations now represent nearly half of the total number.

The number of individuals banned by the FCA in the year to September 20, 2018, increased 28% from the preceding year, according to RPC data published last year. The number of such bans reached 23 in 2017/18, up from just 18 the previous year.

Back then, RPC attributed the rise in the number of prohibition orders to the FCA’s efforts to deter misconduct by individuals. The FCA also believes that punishments aimed at individuals may have a greater impact on improving the overall compliance culture at firms, rather than just issuing fines against the firms themselves.