Prudential fined £30 million for secret AIA bid plans (Mar 2013)

- by Kelly Richards

It is the responsibility of leading companies to ensure that things are clear for their investors. When independent parties and companies invest their money in a venture, they put their faith in that company. If the business should let them down, they stand to lose millions of pounds, or indeed dollars. The problem is that some companies don’t put the interests of their investors first. Some companies are not transparent when they deal with clients. That in itself causes massive problems within the financial sector. In particular, it causes consumers to have a level of uncertainty about the investments that they make.

FCA Compliance series - Cashfloat

An affordable lender has a high level of responsibility towards its customers. In the general scheme of things, it needs to make sure that there is nothing standing in the way of the consumer’s rights. Problems arise, though, when the company fails to let people know what its plans are. It is difficult for consumers to put their trust in big corporations that don’t have a proven track record. That in itself means that many consumers avoid investments and short term loans when they have no evidence they will work.

Both the FCA and PRA work tirelessly to ensure that people understand their rights when it comes to financial issues. Much of the time, this process involves working with the large businesses to ensure that they meet the proper rules. When companies fail to adhere to the proper regulations, they could face action from the regulators. Much of the time, that means that these companies have to pay significant fines and even compensation to the customers.

When a consumer wants an affordable cash loan, they should have a wealth of opportunities available to them. Sadly, that is not always the case. There are many instances where companies have been less than honest when it comes to dealing with their clients.

When company officials decide to make a move that will affect the greater economy, they have a duty to inform the regulators. That way, the companies can keep track of what is happening in the financial sector. If a major business fails to provide the right level of detail, it means that it is jeopardizing the finances of individuals. It also has an impact on the economic state of the country. The FCA in particular seeks to ensure that there are no issues with the financial state of the UK.

If a responsible lender wants to do the best thing they can for their customers, they have to adhere to the rules that the regulators set. When they knowingly ignore these regulations, they could face significant action in the future. The regulations are there to protect both companies and individual investors. When company officials disobey them, it causes damage to the economy as a whole.

There have been an array of cases in which companies that provide short term loans have ignore the regulations. In fact, some of the most serious issues in recent history are a direct result of these instances. There have been many times when companies could have done more to protect the finances of their customers. It is then that the regulators have to step in and help out wherever possible. Cashfloat’s compliance team continue to produce lessons learned from famous FCA cases. We believe that by observing financial misconduct in the UK, we can better ourselves as a financial institution. Here we will look at one case in particular.

Case study: Prudential Plc fined £30 million

For many years, Prudential Plc were famous for offering affordable cash to people who needed it. Over many decades, the company founders jbuilt a strong and stable reputation that won them a great deal of business. That meant that they had many investors and backers, which helped them in many financial endeavors. What people prized highly about the company was the fact that they were always clear on their current status. That meant that people could make sure that they got secure returns on any investments they happened to make.

In 2010, though, the company officials did something that would tarnish their reputation for good. The officials planned an Asian takeover that was not as secure as it should have been. Ultimately, the takeover deal fell through, which meant that people lost more than £300 million.

Leaked information

The main thing that went wrong for the company was the fact that they failed to notify the regulators of the takeover. Prudential Plc feared that either the FCA or the PRA would leak information about the proposed deal. If that happened, it would jeopardize the logistics of the takeover. Despite this fact, not telling the regulators about their plans hindered the economy of the company. That meant that many people lost out as a result of the faulty deal. The offer might have meant big things for the company, but it had the potential to damage the investors’ finances. The financial stability of the company should have been a top priority for the company, yet they failed to meet the rules.

Ignoring the regulations of the PRA and FCA is a serious move, and one which can impact the finances of a business. When the CEO of Prudential made the decision to willfully ignore these rules, he put his entire empire in danger.

Fines and penalties

The FCA issued a fine of £30 million, one of the biggest in recent history, to the company. The CEO of Prudential was also publicly shamed for his part in the scandal. This case is just the type of offence that the regulators are there to avoid. The aim is to provide people with short term loans from lenders who they can trust. Without that level of attention, there is no way to be sure that people’s investments and loans will be secure. Since 2012, the government gave the regulators new rights when it comes to preventing this type of misconduct. That means that they can now fine independent companies on a case by case judgement.

Further action

This case has set an example for banks and financial services in the future. In fining the company a record amount, the regulators have made it clear that they will not tolerate this type of disobedience.

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About The Author
Kelly Richards
Kelly Richards is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog's creation. Kelly's passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly's insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!
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