Recommendation 1: the FCA should direct staff responsible for authorising and supervising firms, in appropriate circumstances, to consider a firm’s business holistically.
Recommendation 2: the FCA should ensure that its Contact Centre policies clearly state that call-handlers: (i) should refer allegations of fraud or serious irregularity to the Supervision Division, even when the allegations concern the non-regulated activities of an authorised firm; (ii) should not reassure consumers about the non-regulated activities of a firm based on its regulated status; and (iii) should not inform consumers (incorrectly) that all investments in FCA-regulated firms benefit from FSCS protection.
Recommendation 3: the FCA should provide appropriate training to relevant teams in the Authorisation and Supervision Divisions on: (i) how to analyse a firm’s financial information to recognise circumstances suggesting fraud or other serious irregularity; and (ii) when to escalate cases to specialist teams within the FCA.
Recommendation 4: the senior management of the FCA should ensure that product and business model risks, which are identified in its policy statements and reviews as being current or emerging, and of sufficient seriousness to require ongoing monitoring, are communicated to, and appropriately taken into account by, staff involved in the day-to-day supervision and authorisation of firms.
Recommendation 5: the FCA should have appropriate policies in place which clearly state what steps should be taken or considered following repeat breaches by firms of the financial promotion rules.
Recommendation 6: the FCA should ensure that its training and culture reflect the importance of the FCA’s role in combatting fraud by authorised firms.
Recommendation 7: the FCA should take steps to ensure that, to the fullest extent possible: (i) all information and data relevant to the supervision of a firm is available in a single electronic system such that any red flags or other key risk indicators can be easily accessed and cross-referenced; and (ii) that system uses automated methods (e.g. artificial intelligence/machine learning) to generate alerts for staff within the Supervision Division when there are red flags or other key risk indicators.
Recommendation 8: the FCA should take urgent steps to ensure that all key aspects of the Delivering Effective Supervision (“DES”) programme that relate to the supervision of flexible firms are now fully embedded and operating effectively.
Recommendation 9: the FCA should consider whether it can improve its use of regulated firms as a source of market intelligence.
Recommendation 10: HM Treasury should consider addressing the lacuna in the allocation of ISA-related responsibilities between the FCA and HMRC.
Recommendation 11: HM Treasury should consider whether Article 4 of MiFID II or section 85 of FSMA should be extended to non-transferable securities.
Recommendation 13: HM Treasury and other relevant Government bodies should work with the FCA to ensure that the legislative framework enables the FCA to intervene promptly and effectively in marketing and sale through technology platforms, and unregulated intermediaries, of speculative illiquid securities and similar retail products.
239 See and