Fallout to British Steel Pension Scheme scandal shows how firms should react to failings: Therese Chambers
But let me tell you about a case where a firm not only took responsibility, but it took responsibility for a harm it did not cause. And then it offered redress and co-operation beyond what was expected of it.
Thousands of people were transferred out of their British Steel Pension Scheme after receiving faulty advice. The losses for many were huge, mounting into the hundreds of thousands.
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Hide AdLast month we censured Lighthouse Advisory Services for the unsuitable advice given to its customers who transferred out of their valuable defined benefit scheme.
Lighthouse should have treated these consumers with great care, given many of them were facing the vulnerable position of moving from a pension scheme that would give them a guaranteed income for the rest of their lives into a scheme that offered no such certainty and instead exposed them to investment risk, from which they had previously been shielded.
But in what is a highly unusual move for us as regulators, we decided not to impose a financial penalty on Lighthouse.
That is because the new owners of Lighthouse, Quilter, put in place a proactive redress exercise quickly.
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Hide AdQuilter took responsibility for the unsuitable advice given – advice that had been given before it had acquired Lighthouse. Quilter also took responsibility for improving the inadequate control framework that they found. And Quilter co-operated with us fully.
These circumstances are more unusual than they should be. Unfortunately, what we often encounter are firms who have to be strongarmed into making things right, who seek to evade their responsibilities, who duck and dive to avoid doing the right thing. Often running up large legal bills in the process. Money which would be better spent on remedying control failures and funding redress.
The amount of redress paid by Quilter was far more than the fees Lighthouse received for the unsuitable advice.
Quilter deserves full credit for taking responsibility and for the proactive way in which the firm and its staff worked with the FCA to put it right. They made the necessary improvements to their systems and controls. Their co-operation was exemplary.
A model example of how to behave.
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Hide AdEnforcement is about paying penalties where this is warranted. And punishment is of course a very important deterrent in our justice toolkit.
There must be real and meaningful consequences for breaches by firms and individuals. Madeleine Albright once said there was a special place in hell for women who don’t help other women. I share that sentiment when it comes to firms or individuals who carry out fraud while hiding behind their authorised status.
Early detection is always more effective – and that is where cooperation from those inside firms can also be extremely effective.
We are investing in our data and technology, and it is already harder than ever to hide. We will find out eventually, so it is always better to come forward first if you do have any concerns about activity or individuals.
Therese Chambers is the Financial Conduct Authority’s Joint Executive Director of Enforcement and Market Oversight. This is an edited version of a recent speech.