FSA – PUBLISHES ANNUAL REPORT FOR THE YEAR 2009/10

The Financial Services Authority (FSA) has published its Annual Report, outlining its performance against the priorities set out in its 2009/10 Business Plan and the FSA's statutory objectives. In his foreword, FSA chairman, Adair Turner, commented that over the last three years, the FSA has transformed its approach to regulation and supervision and as a result, has had to go through a process of intense internal change.

Key elements of this transformation process are:
• A radically changed approach to prudential supervision and in particular to the supervision of high impact firms, including stress testing, accounting reviews, challenges to business models, detailed liquidity assessments and reviews of remuneration policy.
• Dramatically increased involvement in international and European fora to help drive global agreement on the complete revision of the prudential regulatory regime, with recommendations for such major change set out in the Turner Review and associated discussion and consultation papers.
• A fundamental change to the FSA’s enforcement approach, aiming for “credible deterrence” and pursuing market abuse and inadequate management responsibility far more aggressively. Sustained investment in this over the last three years has resulted in major successes in 2009/10.
• The launch of a new approach to ‘conduct risk’; improving customer protection in retail markets by earlier intervention to reduce the scale and frequency of problems that lead to customer detriment.

The new '‘intensive' model has already demonstrated its value, with the FSA making a series of proactive interventions during the year, including:
• A comprehensive stress testing programme of the major banks, building societies and insurers.
• The facilitation of a number of key mergers in the building society sector.
• The implementation of the revised authorisation framework for senior management which led to 377 interviews being conducted, resulting in 27 applications being withdrawn.
• Issuing 46 fines with a record value of £33.6m and successfully completing two criminal prosecutions.

In addition, during the course of the year the FSA launched its new consumer protection strategy which involves earlier intervention and a more effective regime to secure redress. An early example of this strategy in action has been the mortgage market review with its proposals for much stronger emphasis on affordability assessments and its highlighting of the risks of self certification mortgages.


Source: Financial Services Authority

FSA Website

FSA – APPOINTS SENIOR ADVISER

The Financial Services Authority (FSA) has announced the appointment of Tom Boardman to the role of life insurance senior advisor. Tom has more than 35 years experience in the financial services sector, most recently as director of retirement strategy and innovation at Prudential.

Hector Sants, the FSA’s chief executive officer, said: “I am delighted to announce Tom’s appointment today as a senior advisor to the FSA. He has considerable experience to bring to bear on the regulatory changes and issues that we face in the insurance sector.”

Senior advisors are a core part of the FSA’s delivery of intensive supervision. The team provides experience on regulatory, market and consumer matters.

Source: Financial Services Authority

FSA Website

FSA – CONSULTS ON CHANGES TO THE TRAINING & COMPETENCE REGIME

The Financial Services Authority (FSA) has published proposals to strengthen its requirements on competence for individuals carrying out retail activities, while placing more emphasis on standards of ethical behaviour. Reflecting the FSA’s increased focus on competence, the proposals will introduce a 30 month deadline for individuals to complete all modules of a qualification required for their role. The proposals will also remove some transitional provisions which allow individuals to operate without formal qualifications, due to the arrangements under their previous regulator.

Further proposals clarify how individuals carrying out approved persons roles should demonstrate a good standard of ethical behaviour. They will be expected to act in the interests of their client, avoiding consumer detriment and taking responsibility for their own level of competence. The proposals seek to increase standards of professionalism across the industry, complementing the Retail Distribution Review plans and rules that are already in place for investment advice.

Sheila Nicoll, FSA director of conduct policy said: “Competence and ethics are key elements of our regulatory regime and we have increased our scrutiny of individuals working in the financial services industry over the last few years. Ultimately it is in a firm’s commercial interest to recruit, train and retain good quality individuals but regulation ensures that standards of competence and ethics are maintained at an appropriate level.

“We have designed these proposals to enhance consumer protection by strengthening our competence and approved persons requirements. We want to see firms operating robust training and competence schemes and individuals demonstrating good standards of ethical behaviour.”

Plans to publish lists of qualifications in the Handbook that meet FSA requirements will mean that firms and individuals will have an easily accessible and comprehensive source of approved qualifications.


Source: Financial Services Authority

FSA Website

FSA – SPEECH ON REGULATORY CHANGES IN THE US AND EUROPE

Dan Waters, the FSA's Director, Conduct Risk, and Asset Management Sector Leader, has spoken at the State Street Trustees Conference on regulatory changes in the US and Europe. Mr Waters spoke about changes to the supervisory architecture taking place in Europe and the ongoing negotiation of the Alternative Investment Fund Managers Directive.

Source: Financial Services Authority

FSA Website

FSA – SPEECH ON REGULATORY REFORM

Richard Sutcliffe, the FSA's Head of Prudential Banking & Investment Business Policy has spoken about regulatory reform to the London Stock Exchange. Mr Sutcliffe set out the FSA's position within the international policy-making context, explained how the FSA aimed to play its part to achieve regulatory reform in the UK and more widely and discussed the protection of client money and assets.


Source: Financial Services Authority

FSA Website

FSA – SALLY DEWAR TO LEAVE

The Financial Services Authority (FSA) has announced that Sally Dewar, Board member and managing director of Risk, has decided to leave the organisation in May 2011.

In a statement, Sally Dewar, said: “Over the last three years the FSA has been at the heart of dealing with the effects of the financial crisis on firms and markets, both in the UK and internationally. It has been at the forefront of policy development globally, and has implemented a significant change programme to strengthen its capabilities and effectiveness, whilst faced with uncertainty over its future.

“It has been an extraordinary time and one which has had a lasting impact both on the FSA but also on me personally. Having reflected and made the decision not to put myself forward for the chief executive role, regardless of future regulatory structure, I feel that now is the right time for me to step down from the FSA Board and pursue new opportunities.

“I am very privileged to have had the opportunity to help shape both the supervisory approach and agenda of the FSA as it exists today, and the future global regulatory framework of the financial services sector. But, above all, I feel honoured to have worked alongside colleagues who have shown such commitment and professionalism to improve both the robustness of the FSA and the financial system more generally. The FSA senior management team will have my full support over the coming months, as we work together to ensure an orderly handover.”


Source: Financial Services Authority

FSA Website

FSA – TAKES ACTION ON CLIENT MONEY ISSUES

The Financial Services Authority (FSA) has taken action against two insurance brokers for failing to adequately protect clients’ money and assets.

One was fined £77,957 and banned from working in financial services for putting clients at risk by failing to ensure their insurance premiums were passed onto insurers. The fine covers the estimated amount of client money and assets that was embezzled from the client money account to fund business and personal expenses.

Another Director was banned from working in financial services with immediate effect for knowingly transferring client money to his business account to fund its business expenses. He also failed to ensure the client money was managed in accordance with the FSA’s Client Money rules including failing to segregate client money from other funds. These failings left customers at risk of losing their money. The FSA has also cancelled the permission of the firm.

Both cases demonstrate a lack of integrity and honesty on the part of both directors in that they both failed to take responsibility to protect clients’ money and assets in compliance with the Client Assets Sourcebook (CASS) rules.

Margaret Cole, FSA director of enforcement and financial crime, said: “It is essential that customers have confidence their money and assets are safe and that firms holding their money have strong management oversight and control over their business. It is simply unacceptable that these two individuals have failed to ensure their clients have the appropriate protection in place and as a result we have taken firm action. Firms must take their responsibilities to protect clients’ money and assets very seriously and we have clearly set out our expectations in this area. In particular, firms must not mis-use client money, they must keep it separate from all other funds in an appropriate trust account, and client money must not be rendered vulnerable to loss or reduction.”

The FSA has established a new unit to enhance and strengthen the FSA’s existing capabilities in the area of client money and assets. The unit consists of teams responsible for specialist supervision, policy, data analysis and risk management.

There were additionally two further fines on client money breaches, totally £600,000.


Source: Financial Services Authority

FSA Website

ABI – DEFENDS TRAVEL INSURANCE

In an article in the Guardian on 5 June 2010, Nick Starling Director of General Insurance and Health wrote: “It is astonishing to read your consumer champions saying “small wonder that a growing number of people are starting to wonder whether it’s worth buying travel insurance” without adding the obvious rider that it is an essential purchase. It is essential because the core of travel insurance is health cover. It pays for emergencies which can be cripplingly expensive – even in the EU, where an EHIC card covers the basic treatment costs, and emergency medical evacuation can easily cost thousands of pounds. By all means challenge companies which do not treat their customers fairly, but it is irresponsible to use the problems of a few to imply that a vital product is not worth buying.

Source: Association of British Insurers

ABI Website

CML – response to FOS, FSA and OFT paper on consumer complaints

The Council of Mortgage Lenders (CML) welcomed the opportunity to respond to the joint FOS, FSA and OFT discussion paper. The CML is the representative trade body for the first charge residential mortgage lending industry, which includes banks, building societies and specialist lenders. Their 109 members currently hold around 94% of the assets of the UK mortgage market.

Given that the proposals are not home finance specific and are at a relatively formative stage of development, the CML will not be responding fully to the discussion paper. The CML has had sight of the British Bankers’ Association’s response and we wish to support its views.

The CML’s members are committed to the fair treatment of customers through adherence to the FSA’s TCF principles and the development of supplementary best practice such as the arrears and possessions industry guidance. Where there is a potential for consumer detriment, the CML and its members have played an active role in developing pragmatic solutions in conjunction with the regulator, such as for mortgage payment protection insurance and mortgage administration exit fees.
In respect of mass claims, we remain particularly concerned with the conduct of some claims management companies. They continue to draw the relevant regulators’ attention to the detriment that CMCs’ poor practice causes both firms and consumers.


Source: Council of Mortgage Lenders

CML Website

LLOYD’s - £6.2 BILLION INSURANCE FOR WORLD CUP

The most watched sporting event in the world, the football World Cup, will be insured to the tune of an estimated £6.2bn when it kicks off in less than a week according to Lloyd’s, the world’s leading specialist insurance market.
Only war has prevented a World Cup taking place since the tournament’s inception in 1930. Today the eyes of the world are on every game and with so much at stake, FIFA, broadcasters, the teams and the many other organisations with a financial interest take out insurance cover to protect against cancellation or other interruption.
While the focus is undoubtedly on the players, fans and footballers alike are keen to know that injuries and illness won’t jeopardise their chance for glory.
A player at the height of their career and playing in one of the top leagues for their country could be insured for £50 million, according to Peter Thompson, underwriter at Beazley. Assuming there are no pre-existing conditions, £40 million of this insures their entire body for sports disability, including accidental death and permanent total disablement, 24 hours a day.


Source: Lloyd's of London

Lloyd's Website

FOS – PUBLISHES NEW PPI RESOURCE AND CASE STUDIES

Including a consumer fact sheet, standard documentation, case studies, the Ombudsman’s service approach, an update on complaints to the Ombudsman, the wider implications referral and details on enforcement action.


Source: Financial Ombudsman Service

FOS Website