CSC's positive and pro-active approach has meant that the FSA has been able to conclude the matter within 3 months of CSC being referred to the FSA's Enforcement Division. This reflects the prompt and effective response from CSC and its parent company, Investec plc, which undertook a specifically commissioned comprehensive review of CSC's compliance arrangements.
Andrew Procter, Director of Enforcement, said:
"If a compliance department is to be fully effective it needs to keep up-to-date with regulatory requirements and market developments. The creation of the FSA has led to important changes in the regulatory landscape with which CSC had failed to stay fully apprised. Senior management need to be fully engaged in their compliance functions to make sure that they are an up-to-date and effective safeguard which ensures the proper application of FSA Principles and Rules and the protection of consumers.
"CSC cooperated with the FSA and moved quickly to agree the facts of the case and to settle the matter. Without this significant level of co-operation, the financial penalty would have been much higher to reflect how seriously we view compliance failures."
An FSA visit to CSC in July and August 2003 led to concerns about the adequacy of the firm's compliance arrangements. CSC then commissioned an internal audit review by its parent company, Investec, in September and October 2003. This report found that:
- CSC's compliance policies and procedures, and the monitoring of them, were inadequate and incomplete and had not kept pace with regulatory developments. It did not, for example, have a complete, adequate and up-to-date compliance manual and its branches outside London were not subject to regular visits by the Compliance Department;
- Reporting to management was informal. This meant that CSC could not provide evidence that its management has been made fully aware of and had considered all key compliance issues;
- CSC could not demonstrate that it had all relevant facts about its customers and so could not show that it had taken all reasonable steps to ensure that customers' portfolios or accounts remained suitable.
CSC has taken prompt and effective remedial action to address the issues identified by the FSA and the Investec Internal Audit review. This includes:
- Strengthening the resources in the compliance department and establishing a detailed procedures manual;
- Developing, with the assistance of a major accountancy firm, a detailed compliance monitoring programme. CSC will provide the FSA with reports setting out the findings of this ongoing monitoring.
- Ensuring its customer information is complete and accurate by writing to its 20,000 customers.
