FCA Fines for Non-Compliance with its Recordkeeping Requirements

Contact Us

Contact Us

[contact-form-7 404 "Not Found"]

The Financial Conduct Authority (FCA) is an independent regulatory body that oversees over 56,000 financial services firm and financial markets in the United Kingdom, and the prudential regulator for over 24,000 of those firms.

Formed on April 01, 2013, the UK financial watchdog has already fined more than a few financial institutions for breaches of reporting obligations under MiFID.  While both EMIR and MiFID appy to all European member states and will be enforced by local regulators in cooperation with ESMA, FCA was granted a special authority given London’s position as the central financial hub of Europe. Their actions, therefore, deserve particular attention.

In 2017, the FCA levied 229.4 million pounds ($307 million) in penalties, which is a 10-fold increase from 22.2 million pounds in 2016. In the first days of 2018, the FCA has already fined and banned a former Royal Bank of Scotland derivatives trader over the Libor rigging scandal which peaked in 2008.

FCA Enforcement

These cases only prove that there are real and significant consequences for firms and individuals not complying with the FCA rules. According to the FCA Enforcement website, a wide range of enforcement powers can be used against financial firms and individuals that do not meet the FCA standards. These actions include:

  • Withdrawing a firm’s authorization.
  • Prohibiting individuals from performing regulated activities.
  • Suspending firms and individuals from undertaking regulated activities.
  • Issuing fines against firms and individuals who breach FCA rules or commit market abuse.
  • Issuing fines against firms breaching competition laws.
  • Making a public announcement when the FCA begins disciplinary action and publishing details of warning, decision, and final notices.
  • Applying to the courts for injunctions, restitution orders, winding-up and other insolvency orders.
  • Bringing criminal prosecutions to tackle financial crime, such as insider dealing, unauthorized business and false claims to be FCA-authorized.
  • Issuing warnings and alerts about unauthorized firms and individuals and requesting that web hosts deactivate associated websites.

FCA General Rules on Recordkeeping

The Chapter 9 of the FCA Senior Management Arrangements, Systems and Control (SYSC) handbook has defined the general requirements for recordkeeping:

“A firm (other than a common platform firm) must arrange for orderly records to be kept of its business and internal organisation, including all services and transactions undertaken by it, which must be sufficient to enable the FCA or any other relevant competent authority under the UCITS Directive to monitor the firm’s compliance with the requirements under the regulatory system, and in particular to ascertain that the firm has complied with all obligations with respect to clients”

In addition to this general requirement, the SYSC 10A.1.6 has also defined the obligations of archiving electronic communications such as SMS messages, emails, social media posts, and chats. These obligations aim to resolve issues on mobile compliance in the financial industry, and includes the following requirements:

  • Archive telephone conversations and all other types of electronic communications that relate to the activities in financial instruments. These include those that are intended to result in a trade, and that is made with, sent from, or received on a device provided by the firm to an employee or contractor; or by an employee or contractor who has been accepted or permitted by the firm.
  • Prevent an employee or contractor from making, sending, or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the firm is unable to record or copy.
  • Keep the records in a durable medium which allows them to be replayed or copied; and retained at least five years in a format that does not allow the original record to be altered or deleted.

Fines for Non-Compliance with Recordkeeping Requirements

The FCA has no universal amount of penalties that apply to all non-compliance cases. Instead, they use a five-step approach to determine the amount of penalty that will be imposed to a firm, which can be summarized as follows:

Step 1: The removal of any financial benefit derived directly from the breach;

Step 2: The determination of a figure which reflects the seriousness of the breach; The more serious the breach, the higher the level, with penalties imposed on firms as per the following five graduated levels:

  • Level 1 – 0%
  • Level 2 – 5%
  • Level 3 – 10%
  • Level 4 – 15%
  • Level 5 – 20%

Step 3: An adjustment made to the Step 2 figure to take account of any aggravating and mitigating circumstances;

Step 4: An upwards adjustment made to the amount arrived at after Steps 2 and 3, where appropriate, to ensure that the penalty has an appropriate deterrent effect; and

Step 5: If applicable, a settlement discount will be applied. This discount does not apply to disgorgement of any financial benefit derived directly from the breach.

Learn How our Archiving Solutions can ensure your full complance with FCA requirements.

FCA Fines for Non-Compliance

At TeleMessage, we offer our Mobile Archiver that can help financial services leaders to effectively manage data and content including enterprise SMS, emails, and web and social media content, with respect to compliance. Our archiving solution is equipped with versioning, and robust governance capabilities that ensure content across all digital channels is compliant and meets global regulatory requirements.

To learn more about mobile archiving solutions, visit our website today at www.telemessage.com

Skip to content