Compliance News - 5 August 2011
CC:ME WEEK ENDING 5 AUGUST 2011
This guidance is of most relevance to all FSA-authorised banks, building societies and Capital Adequacy Directive (CAD) investment firms, and trade associations representing the above. Comments due by 2 September 2011.
The FSA’s revised Remuneration Code came into force on 1 January 2011, implementing the rules on remuneration contained in the EU Capital Requirements Directive (CRD3). These proposed 'Dear CEO' letters set out the FSA’s plans for monitoring implementation of the Code during the coming remuneration round. In an annex to the letter, FSA has also published proposed guidance for consultation on three policy issues.
There are two versions of the proposed Dear CEO letter:
· The version for firms in proportionality tier 1 sets out a detailed approach to monitoring their implementation of the Code, including the need for firms to submit a Remuneration Policy Statement (RPS) within a given timeframe. A draft RPS template is attached to these letters, also for consultation.
· The version for firms in tiers 2, 3 and 4 sets out a less onerous approach. The RPS template for these firms has already been consulted on and is being issued in final form on the guidance website. In the case of a small number of tier 2 firms, supervisors are likely to tailor the assessment approach more closely to the firm, taking account of its business model and risk profile.
The Annex to the letter contains three proposed items of guidance:
· Definition of 'Code staff' - how to identify staff whose remuneration falls into the 'same bracket' as senior management, control staff and risk takers and who have a material impact on the firm's risk profile.
· Long-term incentive plans (LTIPs) - to provide clarity on what we would expect to see in an LTIP that is used to pay part of variable remuneration.
· Structure of alternative instruments - the Code requires firms to pay part of variable remuneration in shares or equivalent instruments. For firms that cannot or do not wish to pay in shares, we aim to provide clarity on what we would expect to see in those alternative instruments.
Source: Financial Services Authority
FSA Website
FSA Website
The Financial Services Authority (FSA) has published rules on platforms regulation. This follows a review of the regulation of platforms in the context of the objectives of the Retail Distribution Review (RDR). The rules published extend the consumer protection elements of the RDR into a rapidly developing area of investment services. These new rules have two key aims; firstly, to ensure that consumers receive a better service and, secondly, for the market to be more transparent and operate more efficiently.
The key rules designed to provide better service for consumers:
· require platforms and other nominee companies to transfer, within a reasonable time and in an efficient manner, assets held on behalf of customers to another person, when requested; and
· require platforms and other nominees to pass on fund information to the end investor.
To enable greater transparency and efficiency in the market, the rules:
· require investment adviser firms using a platform service for the purposes of making a personal recommendation, or arranging the purchase of retail investment products for retail clients, to take reasonable steps to ensure that they use platforms services that present their retail investment products without bias;
· require platforms to disclose to professional and retail clients any fees or commission they arrange to accept from third parties in relation to retail investment products. These should be disclosed in advance of the platform providing services to those clients;
· extend the application of the RDR rules on facilitating payment of adviser charges to facilitation through platforms - for instance, if a platform has client cash accounts, it could enable payments of adviser charges out of such accounts; and
· require nominees to respond to information requests by authorised fund managers for liquidity purposes.
In respect of incentives, the FSA has decided that it would be desirable, in principle, to ban both cash rebates from product providers to investors and product provider payments to platforms. However, given the potential impact of these changes on the business models of platform service providers, the FSA has concluded that further research is needed to ensure that the implications for consumers are fully understood before proposing new rules.
Source: Financial Services Authority
FSA Website
FSA Website
The Financial Services Authority (FSA) has entered into a conditional agreement to sell its Approved Reporting Mechanism known as the Transaction Reporting System (TRS) to the London Stock Exchange (LSE) for £15m. The TRS is an Approved Reporting Mechanism established in the UK market for the reporting of transactions in regulated instruments by firms to the FSA in accordance with SUP 17 of the FSA Handbook and the Market in Financial Instruments Directive (MiFID). The FSA uses this information to detect and investigate suspected cases of market abuse, insider trading, market manipulation and is also used as part of its monitoring of supervised firm activity.
The introduction of MiFID in November 2007 increased the volume, scope and constituent of firms obliged to report and subsequently established a reporting regime and systems through which transactions are reported. The FSA developed the TRS to provide firms with a method for meeting their MiFID reporting obligations. There is now a competitive market for the provision of transaction reporting services to the industry, in which the LSE operates its own Approved Reporting Mechanism service through its UnaVista platform.
The FSA is confident that the Approved reporting Mechanism market is now sufficiently developed to enable firms to meet their reporting obligations to the FSA. The FSA therefore concluded that maintaining an Approved Reporting Mechanism no longer formed part of its core role as a regulator. Following a lengthy and competitive sales process the FSA carefully selected an established operator in the London Stock Exchange, which will enable existing customers of TRS to fulfil their ongoing reporting obligations. In addition, the LSE's UnaVista system offers additional services beyond those which are currently offered by TRS, which may be of benefit to TRS clients. The LSE plans to migrate TRS customers to its UnaVista platform on completion of the transaction.
Source: Financial Services Authority
FSA Website
FSA Website
The Merlin banks (Barclays, HSBC, Lloyds Banking Group, RBS and Santander) are on track to meet business lending commitments. The five banks delivered £100.4 billion in gross new lending to UK businesses during the first half of the year, including £37.4 billion to SMEs. The banks are committed to providing capacity of £190bn of gross new lending, including £76bn for SMEs, available in 2011.
A spokesman for the Merlin banks said:
“The Merlin banks are on track to meet their business lending commitments. The first half year performance demonstrates the banks’ commitment to providing businesses with the financial support they need to invest and grow and the significant progress made this year. The banks' efforts to encourage customers to come forward with borrowing proposals are set against the overall economic environment which remains challenging and business demand for credit which remains weak.”
Source: British Bankers’ Association
BBA Website
BBA Website
After a successful pilot Lloyd’s Claims Transformation Programme (CTP) is being rolled out in an accelerated fashion over the next 18 months. The pilot exceeded expectations and is already significantly reducing the time it takes to process new claims in the market.
Lloyd’s has the best pool of claims expertise anywhere in the world, says David Lang, who joined Lloyd’s as Head of Claims in April 2011. The market pays out £10bn in claims each year, handling 210,000 claims at any given time. However it would be a mistake for the market to sit on its laurels, says Lang. Claims handling is a high priority for Lloyd’s and is now far more visible than has been the case in the past.
“The market is investing and building on the pool of claims talent in the market, as well as improving underlying processes and systems,” Lang says. “The settlement of claims should be sufficient, appropriate, and reflect the nature of the claim - and this is what the CTP sets out to achieve.”
Source: Lloyds of London
Lloyds of London Website
Lloyds of London Website
