Through our close-knit relationships across our firm, our full range of expertise is at your fingertips. Helping you deliver first class service to your clients that transcends across their personal and business worlds. Jenny Sargeant, partner lead of our specialist private banking team sits down with regulatory law partners Kate Troup and Doug Cherry.
In a nutshell what’s your area of expertise?
Kate Troup (KT): I specialise in advising clients on their compliance with financial services regulations which, for private banks includes advising on the rules and regulations which govern the services offered by private banks including lending, current accounts, deposit accounts, investment services, financial planning and fund management. In particular I advise on the rules governing lending by private banks to their customers (e.g. regulations arising from regulated mortgage lending, credit agreements, Lombard lending, credit cards, overdrafts). I also advise private banks on their compliance with the FCA’s threshold conditions including the FCA’s principles of business and Senior Managers and Certification Rules. I advise banks, and their clients on issues regarding sanctions and money laundering requirements.
Doug Cherry (DC): I fix problems for clients, working together with them in managing regulatory issues and maintaining their regulatory relationship. This can include demonstrating regulatory compliance to FCA/PRA, responding to regulatory inquiries, assessing and framing regulatory notifications as well as contributing to internal investigations, skilled person reports and formal enforcement investigations. We work collaboratively internally and with clients to resolve the particular issue and with a view to preservation of our client’s regulatory reputation as much as possible.
When do you come across private banks or their clients in your practice?
KT: Many of our clients are private banks. We advise banks with UK headquarters and also overseas banks with UK branches or overseas banks who provide cross boarder services into the UK. I also regularly advise clients of private banks, such as family offices and private investments funds with their regulatory requirements and assist them in obtaining regulated status where needed.
DC: I come across them very often. I get involved because an issue arises as the result of a problem being identified through internal monitoring, whistleblowing or when the regulator approaches the firm with an inquiry. Examples of this in the past have been systems and controls concerns related to anti-money laundering matters, client asset protection rules, product mis-selling issues, as well as issues arising relating to SMCR staff at the firm.
Can you give an example of where you best add value?
KT: By having a real understanding of the particular requirements of a private bank as opposed to a mass retail bank. Often this is having the experience to help private banks comply with FCA rules when offering sophisticated products as the FCA rules were not written with those sophisticated products in mind e.g. regulated mortgages.
DC: I have worked as a regulator and responding to the regulator for two decades. This means I see things from all sides and understand client motivation as well as the regulatory mindset. Regulation can seem “woolly” and in my experience, clients want simple, clear and practical advice that moves them forward, which is what I always strive to deliver. We work in a streamlined team, resourcing appropriately to control costs and information on sensitive issues, and I consider it vital to look for solutions with the least acceptable impact and disruption to the client, whilst remedying the concerns of the regulator.
Do you have a mantra or saying that best describes how you work?
DC: Listen to the client to formulate and deliver a path to success.
What do you enjoy most about what you do?
KT: Cutting through the complex to distil things in a clear way. I enjoy helping people find an answer to a difficult problem by navigating complex regulations and unpicking knotty questions.
DC: I enjoy getting under the bonnet of our client’s business and getting to know them better. The intellectual rigor of solving complex problems on a variety of issues also keeps me in this field, as it has for the last 20 years or so. I get huge satisfaction working alongside the client on difficult matters, helping to identify and deliver the best outcome possible. I care about the outcome and bring my all, on every instruction.
What do you think is key to assisting UHNW families in your area of expertise?
KT: It is quite common for UHNW family offices to be carrying out such sophisticated businesses that they are caught by the UK’s regulated activities regime and so need advice in relation to their obligations to obtain authorisation from the FCA, or to ensure that they fall within an exemption. Sometimes they will provide services to another family, or fairly often set up an orphaned (standalone) family office which provides services to individual members of the family and their investment vehicles. In such case there is no “group exemption” available and so they need to think about whether they are providing regulated investment advice or other regulated services. The key thing is for the regulatory advice to be provided alongside the initial family office structuring advice so that regulated issues can be identified early, increasing the options available for dealing with them in the structuring. Sophisticated private client family office structuring should include regulatory advice which is why we have a unique offering at Fladgate that regulatory advice is integrated into our private client and family law offerings. We can also assist private banks in ensuring their range of services keeps pace with the expectations and demands of their UHNW clients. Increasingly, these clients might want to set up wider investment activities and private banks can explore setting these up in-house at the bank to ensure the bank retains the mandate.
DC: Ensuring good links with advisors to ensure that UHNWs trusted intermediaries are aware of regulatory pitfalls to ensure that investments either comply or are within the bounds of what is permitted outside of regulatory requirements to avoid entanglement.
How do you help private banks increase the quality and efficiency of their services?
KT: On a basic level we ensure private banks are aware of and comply with the FCA rules that apply to them. But how we really add value is by interpreting these in a sophisticated and intelligent manner taking into account the banks particular clients and service manner. Our client’s offering is personalised, high class products and their customer experience is key.
DC: Thinking about best practice and compliance with any consumer requirements for example, ensuring communications with clients meet FCA principles (i.e. they are clear, fair and not misleading) and that they meet the information needs of clients. This of course requires an understanding of the private bank and their requirements and client base as this differs for each private bank. Working this way, we can reduce the risk of problems or criticism down the line.
What would be the “one thing to watch out for” coming ahead in your area?
KT: I think one thing to watch out for is the impact that the changes to the FCA’s Senior Managers and Certification Regime will have on private banks.
DC: In particular senior management being able to demonstrate compliance and statements of responsibility in a way that satisfies the FCA but also meets corporate
governance requirements. There is a positive obligation to show an audit trail to demonstrate compliance.
Our connections across our firm are here to provide you with all the expertise you need so if you want to continue any of these conversations or have any regulatory issues that you are facing, please do get in touch with Kate or Doug.
For more information about the Regulatory team please click here.
For any Private Banking related queries please contact Jenny Sargeant.
