Ian Johnston, who was appointed DFSA chief executive in June of this year, said he is very much in tune with UK regulator Martin Wheatley’s tough and more interventionist statements in recent months in which the FCA chief executive designate painted a picture of greed and irresponsible attitudes to customers in parts of the financial sector.
The DFSA had already identified, prior to Wheatley’s statements, the need for this focus in its business plan for next year, Johnston said, “but that’s because regulator are thinking about those sorts of issues and I’m completely in line with the approach that Martin has been taking in London.
“We will be having a close look at what the reward and incentive mechanisms are within financial firms for their client facing staff. If the wrong sort of reward and incentive programmes are in place at a financial firm, be it an advisory firm or any other type of financial firm, then the behaviour will follow where the incentive and reward programmes are.”
Though the DFSA can only regulate the 110 acres that is the DIFC as a distinctive jurisdiction, Johnston said “there are 350 firms doing business within here, and we regulate their activities, and that includes some of the biggest financial institutions in the world.”
The review will look across a number of different types of firms’ in terms of remuneration, including bonus and other incentive schemes, to see what sort of behaviour is being driven by those schemes in place.
“It’s not an enforcement based review because it’s looking horizontally across a number of firms but obviously if we see egregious conduct we would tend to take enforcement action in respect of that,” he said.
The aim is to find out what behaviour is occurring, publicise it, and “help firms to address any issues that we uncover. We will look at a number of client files and see what the outcomes are.”
If an adviser, who is earning commission for a product, had a number of complaints against him “we would expect the firm to be taking account of that and not rewarding behaviour that was purely sales driven.”
The firms should also be recording any complaints against advisers and should also have some customer redress mechanism in place, he said.
Before joining the DFSA in 2006, Johnston was special advisor at the Hong Kong Securities and Futures Commission, and prior that he was executive director, financial services regulation at the Australian Securities and Investments Commission.
