BCL partner, John Binns speaks to CDR (Commercial Dispute Resolution) magazine to discuss the implications of the FCA’s investigation and consequent fine for a major retailer over failures in its sales training for a regulated insurance product.
Following an investigation stemming from whistleblower reports, the UK’s Financial Conduct Authority has fined retailer The Carphone Warehouse GBP 29 million over failures in its sales training for a regulated insurance product.
Between December 2008 and June 2015, The Carphone Warehouse (CPW) breached multiple principles of the Financial Conduct Authority’s (FCA) Principles for Business after its sales staff were not given adequate sales training for an insurance and technical support product known as ‘Geek Squad’, which should have included an assessment of whether customers needed it.
Here’s a short extract from the article, which can be found in full on the CDR website*:
Speaking to CDR, John Binns, a business crime partner at BCL Solicitors in London, says it is difficult to tell whether the GBP 29 million fine levied against CPW is commensurate with the amount of product mis-sold: “This does seem a small fine compared to the apparent revenue from the policies, but that may be because there are details missing here. The FCA says some policies had little or no value and many were cancelled early, but the exact proportions aren’t clear: presumably the majority of the sales were properly sold? It would be helpful if the FCA could be clearer about this.”
Whether these latest enforcement efforts shed any light on the overall enforcement direction under Steward is also unclear, with Binns explaining that the period of transition and uncertainty for the FCA remains. “The FCA has said it doesn’t want to motivate firms solely through fear, but it’s not clear how far this will go,” Binns notes. “Certainly there is still a role for fines and we’ve seen a few in the last year, including the recent one under its new competition enforcement powers,” which saw its first decision issued last month against three asset management companies over price collusion.
In its November 2018 review of whistleblowing arrangements among firms in the retail and wholesale banking sectors, published two years after its whistleblowing rules came into effect, the FCA said it had observed good practice, but “there are some key areas for improvement, most notably in the provision of whistleblowing training and the requirement to produce an annual report to the firm’s governing body”.
“The programme is still very much in its infancy,” Binns states, “therefore it’s too early to make any concrete judgement as to its ‘success’. Of course we can never afford to be complacent about the issue of whistleblowers: the encouragement and protection of people making genuine reports is one of the biggest challenges in enforcement”.
* This article was first published by CDR on the 15th March 2019. To read the full article please visit their website.