If one thing was certain when the FCA replaced the Financial Services Authority, it was that the new regulator would flex its muscles over complaint resolution.
Being formed in the midst of a banking collapse and the PPI scandal, the FCA needed to be immediately effective and now has the lending sector firmly in its sights.
The complaints procedures at 15 major retail financial firms have recently been assessed and new guidance on complaints handling suggests there are weaknesses in the management information required to handle an investigation successfully.
So, would you be prepared should the regulator come knocking? Would your systems and processes stand up to scrutiny and do you have a contingency plan in place for the inevitable impact on your business? Do you know who to call first?
Many financial business people aren’t even aware of the process or the risks associated with an investigation. It’s rare that you would be caught unawares and a letter outlining the reasons for a planned visit would be a normal starting point. But you should always expect the unexpected and unannounced visits, supported by warrants, are a possibility.
Also, where there are suspicions of criminal activity, a visit to a Director’s home with a police presence can’t be ruled out.
First impressions
The first impression the regulator takes of your business can have a huge effect on the direction of the investigation and it is essential that you, or the person you have designated to manage the investigation procedure internally, acts calmly, professionally and unobtrusively.
Of course, it’s difficult to act in such a manner if you’re caught by a bolt from the blue, so it would be a sensible proactive step to set up an internal regulatory ‘team’, all of whom are briefed on how to act, behave and call should an investigation materialise.
Your reception staff should be aware of the inspector’s name and be ready at all times to direct your visitor into a private meeting area.
Communication is key
Internal communications are critical and don’t underestimate the impact a whistle-blower sharing information with your employees can have. Have an internal communications specialist ready to allay any uninformed concerns or worries and be ready to give specific guidance to employees on what they are to do if they are approached to talk about the subject.
Having a crisis management plan is a no-brainer and will mean everyone knows their roles and responsibilities. Potentially catastrophic damage to your business can result from speculation and misinformation and a proactive media plan is essential.
Rather than seeing this team as a ‘protective bubble’, get the people together who can positively and effectively demonstrate to the regulator the systems and processes which are the foundation of your business.
Be proactive!
Most importantly, don’t wait for an inspection to put the wheels in motion.
Consider the potential interruption to your business and how you will manage this process.
When HomeServe fell under investigation it immediately suspended its outbound sales and marketing activity. Knowing what you can and can’t do, and how you implement actions effectively, will demonstrate a business with its finger on the pulse.
Get advice – but not too much
Take guidance now from a small number of specialists, including a solicitor experienced in regularity investigations and a PR consultancy which will guide you on how to handle the media should things escalate. It’s tempting to listen to too many people and it can get confusing.
Clarity of thinking comes from having fewer good advisers.
You’ll also need to factor in how and when to talk to clients as some may have contractual obligations to be informed of an investigation. If information such as this isn’t close to hand and easily accessible it could cause irreparable damage to customer relationships and immediately puts you on the back foot when you should be controlling the agenda.
Don’t panic!
Be confident, accommodating, co-operative and, most importantly, don’t panic. Even ill-founded worries or concerns will be apparent and suggest there is information being concealed. In fact, if you are considering changing a business practise or launching a new product or sales method, speak to the FCA proactively and invite their input ahead of a launch or seek specialist legal advice. Any opportunities where you can demonstrate proactivity in working with the Authority will be beneficial.
Your small in-house regulatory team should also be kept right up-to-date with the FCA’s current activities and objectives. This can flag topical issues that may need attention in your business and give you the opportunity to take decisive action proactively.
A well prepared business can also use the inspection to improve its own business practices. Use emotional intelligence to understand the motivations of the inspectors.
Listen for verbal signposts which can direct you to showcasing the compliance steps you have taken that will be of interest to the investigators and use their feedback to demonstrably affect improvements in your business.
Finally, try to view regulatory inspections and investigations as just another cost of doing business. If you’ve planned and prepared and get professional legal advice along the way your risks are minimised.
Attributed to Ian Lewis at LHS www.lhs-solicitors.com
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