Do you know how to “do the right thing” (in financial services)?

Yesterday at City & Financial's FCA Investigations and Enforcement Summit, the FCA delivered a speech “Do the right thing: Part II”. Two years prior, at an earlier version of the same event, a similar speech with the same central message “the importance of doing the right thing”.

Woolly? Fluffy? 

The standard of doing the “right thing” is often bemoaned for lacking clarity, but in the words of the regulator in this latest speech, in financial services, “it's pretty cut and dried."

So, what does it mean “to do the right thing”?

Doing the right thing in financial services means:

• having suitably high ethical standards (notably, integrity);
• being able to accept it if something has gone wrong;
• taking appropriate responsibility;
• being willing to put things right;
• learning from mistakes and making sure that the same thing does not happen again; and
• being co-operative, open and honest with the regulator.

The current regulatory approach to enforcement

The enforcement landscape has changed significantly over the last two years. There are fewer investigations. Investigations are being conducted faster. More enforcement outcomes are being delivered. More criminal offences are being prosecuted. Redress for harm done to consumers is being prioritised where possible. In summary, the regulator is trying to direct its resources to where they are really needed.

The importance of co-operation when things go wrong

Enforcement outcomes speak to the fact that the FCA will reward those who are able to accept that things have gone wrong and co-operate with them to make things right. Notably, because doing so reduces the time and resources for everyone involved in concluding enforcement investigations. The reward for co-operation usually amounts to a lesser sanction, including the possibility of a reduced financial penalty, or in some cases, an entirely forgone financial penalty.

Effective supervision

Where firms co-operate with the regulator, accept responsibility and look to put things right, the FCA has the chance to use an alternative regulatory tool-kit and, in some cases, avoid the necessity for an investigation to be opened. 

A waste of resources

Time spent wrapped up in an enforcement investigation is not good for business. It is also not at all good for the careers or the personal lives of the individuals involved. For the regulator, resources not spent on a matter that could have been resolved, are resources that could be spent where they are really needed, in dealing with bad actors who threaten the integrity of the financial system. 

Ask for help where needed

Apart from being able to admit that something has gone wrong, it is also important to be able to ask for help where needed, and this may mean bringing in experts who have the skills and experience to navigate difficult terrain.

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doing the right thing isn’t a slogan, but a standard.....it should underpin every decision, response and relationship in the financial services sector – whether somebody is watching or not. But especially when they’re not. Those are the actions that shine a light on who we really are.......When firms do the right thing, we take notice – and they can benefit...... .....What’s the risk equation of not doing the right thing?........compliance comes with costs. But good compliance can save money.........not doing the right thing is far more expensive..... .....'doing the right thing' is more than ethical rhetoric. It leads to better outcomes for consumers; healthier markets; and clearer, stronger enforcement.

https://www.fca.org.uk/news/speeches/do-right-thing-part-ii