Financial services investigations and enforcement monthly round up - October 2019
A round-up of recent enforcement actions and investigations in the financial services sector.
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On 30 September 2019, the FCA fined the Prudential Assurance Company Ltd (Prudential) £23,875,000 for failures related to non-advised sales of annuities.
Between 2008 and 2017, Prudential's non-advised annuity business focused on selling annuities directly to existing Prudential pension holders.
Prudential failed to meet its obligations to ensure that customers were consistently informed that they may get a better rate for annuities if they shopped around. Prudential was aware that many customers could get a higher income in retirement by doing so and was found to have failed to ensure documentation used by call handlers was appropriate and to have monitored calls properly.
Sales-linked financial incentives for call handlers increased the risk that call handlers might put their own financial interests ahead of ensuring fair customer outcomes.
Prudential volunteered to conduct a past business review and, as of 19 September 2019, has offered approximately £110 million in redress to 17,240 customers. The FCA's findings were not disputed by the firm, meaning it qualified for a 30% discount. The total fine imposed would have been £34,107,200.
Following an investigation, the FCA found that, between 2008 and 2010, Tullet Prebon's Rates Division had ineffective controls around broker conduct.
Lavish entertainment and a lack of effective controls allowed improper trading to take place, including ‘wash’ trades (trades involving no change in beneficial ownership and with no legitimate underlying commercial purpose) which generated unwarranted and unusually high amounts of brokerage for the firm.
Senior management wrongly believed sufficient systems and controls were in place, when in reality such systems were not adhered to or enforced. In addition, obvious red flags of broker misconduct were missed. Tullett Prebon also stalled in producing evidence in the form of audio recordings to the FCA when requested, breaching Principle 11 of the FCA's Principles for Businesses.
Tullett Prebon agreed to resolve this matter and therefore qualified for a 30% discount under the FCA's settlement discount scheme. Without this discount, the fine would have been £22 million.
A business in Chichester has had its premises searched by the Information Commissioner's Office during an investigation into pensions cold-calling.
Computer equipment and documents were seized under warrant and the ICO enforcement group manager noted that this "should serve as a warning to business owners that they must follow the law."
A ban on cold calling in relation to pensions (including electronic communications like emails and texts) was brought in in January 2019. No related fines or arrests have yet been made in relation to pensions cold calling, despite the ICO running numerous investigations.
The Pensions Scheme Bill published on 16 October suggests that failure to provide data for the pension dashboards could land pension providers with a £50,000 fine. Individuals could also be fined up to £5,000 for non-compliance with the legislation, which makes the supply of data to the dashboard project mandatory.
It appears that the regulator will also have powers to issue penalty notices and compliance notices to those who do not supply data.
The Bill also includes provisions for state pension data to be included in the dashboard project, however there is not yet any set timeline for the delivery of the project.
The average prison sentence length for tax evasion has increased by 10 percent, according to an industry source, as HM Revenue and Customs pushes for tax evasion to be considered a more serious offence.
Tax evasion, a criminal offence, is deliberate non-payment or underpayment of tax due to HMRC by individuals or businesses. The current maximum penalty for evasion of income tax is an unlimited fine or a seven-year prison sentence.
When determining an offender's sentence for tax evasion, a judge may deliver a longer sentence if they are persuaded by HMRC that the accused had, for example:
- played a leading role in coordinating the offence for personal gain
- deliberately concealed information when being investigated, or
- carried out the evasion or other fraud for a protracted time period.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions
