FNG interview… Regulatory compliance is a cornerstone of reliability and operational integrity for financial services. At Finalto, Clelia Orfanidou leads these efforts as Head of B2B Regulatory Compliance. With her extensive expertise, she provides a clear road map through the complex regulatory landscape that must be navigated as a financial institution. In this interview, Clelia explains why compliance with regulatory standards in financial offerings is critical. It highlights the unique challenges facing financial institutions, emphasizing the need for clear and balanced information that incorporates consumer liability requirements.
In addition to these insights into the inner workings of industry leading compliance, you can also gain a deeper understanding of marketing and compliance through the latest entry in the Finalto Broker series available HERE.
FNG: Hello Clelia. How critical is regulatory compliance when it comes to marketing communications at a financial institution or investment firm?
Clelia: The UK has an established and defined financial promotions regime which requires companies producing financial promotions to comply with specific procedures, guidelines and requirements. This is critical as it all goes back to the principle of treating customers fairly, ensuring that information is clear, fair and not misleading. and that it supports consumer understanding. Communication must be factual, accurate and balance any advantages and disadvantages of a financial product. For example, if a financial promotion is related to the performance of a financial instrument, appropriate historical data must be provided to give a balanced view. The FCA has also recently issued specific guidance on social media, including the use of influencers (and other unauthorized persons). Companies are responsible for ensuring that any promotion via social media complies with the regulatory framework. The FCA is aware of practices such as hidden disclaimers and is updating the rules to prevent misleading communications. Social media can cause significant harm to consumers due to its wide reach and companies need to ensure their social media promotions are transparent and fully compliant with the FCA’s guidelines to avoid penalties and restrictions.
FNG: How does marketing in the financial industry differ from other industries in terms of tasks and expectations for customer outcomes?
Clelia: The financial industry has specific requirements due to the nature of the products and services offered. It is important to provide accurate and balanced information, especially when promoting financial products. Requirements may be more stringent depending on the high-risk nature of certain products (such as CFDs). In addition, the consumer tax, which includes the requirement to ensure good results in terms of consumer support and understanding, has imposed a higher level of duties on businesses. In addition, the task highlighted the requirement of an appropriate and defined target market and the importance of ensuring that any communication reaches the relevant target market. Therefore, communications must not only be fair, clear and not misleading, but also appropriate for the target market. This includes avoiding technical/legal jargon or limiting the marketing channels used if they are not appropriate for their intended audience.
FNG: What are the consequences of not complying with regulatory bodies such as the FCA?
Clelia: The FCA closely monitors financial promotions and communications produced by companies in general. There are several routes the FCA can take, depending on the severity of the problem identified and the company’s cooperation. The FCA has various powers under FSMA, including gathering information, appointing investigators and requiring a report to be made by a qualified person. If they find any problematic content, they can contact the company, requesting that the problematic communication be removed and that specific changes and corrective actions be implemented. Such procedures allow the company to improve internal controls with guidance from the FCA.
For more serious cases, they may use their powers under section 166 and require a company to provide a report from a qualified person or appoint a qualified person to prepare such a report, which is an expensive and time-consuming process . The FCA can also impose fines, place restrictions on a firm’s Part4A licences, including restricting the acceptance of new clients, or customers, or suspend a firm’s licence. The consequences are severe, affecting both reputation and operations.
FNG: What are the best practices for maintaining compliance in daily operations?
Clelia: The FCA has been very proactive in helping firms to understand and adapt to the new consumer duties regulations by issuing frequent communications such as ‘Dear CEO’ letters, publishing results from data collection exercises and peer reviews and holding webinars . The FCA has been clear that non-compliance will ultimately lead to repercussions.
It is important to monitor any new guidelines issued by the FCA and do a gap analysis to identify areas for improvement. Creating a culture of zero tolerance for non-compliance throughout the company is vital. Staff should be aware of the requirements they must apply in their daily work and the possible consequences of non-compliance. Although different rules may apply depending on the nature of the clientele, at Finalto, we still ensure that all communications are approved by the compliance department before they are released. Monitoring customer satisfaction and feedback is also vital, particularly when dealing with customers with additional requirements, as this helps identify any gaps and improve services. By monitoring relevant MIs, we can identify key trends. For example, where we identify repeat queries from customers, we can improve our communication to address these areas proactively. Internal communication with existing customers is just as important as external marketing, ensuring consistency and clarity.
FNG: Can you explain how your team manages compliance across multiple jurisdictions?
Clelia: Our team has multiple entities controlled in different jurisdictions, each with their own marketing communications requirements. While the overarching principle of fair, clear and non-misleading communication applies worldwide, jurisdiction-specific guidelines may vary. We have different processes for each jurisdiction and company, ensuring we comply with local regulations. Being proactive and maintaining a strong culture of compliance is essential for any financial institution to effectively address these complexities. Education is critical. Ensuring that all staff are aware of compliance requirements, how they differ across jurisdictions and the importance of compliance is essential. Ongoing training helps maintain awareness and understanding of any new requirements or changes to existing principles.