The Financial Services Authority (FSA) has been granted a new power to deliver prompt and effective redress for consumers. The new power was part of April’s Financial Services Act 2010, and has been activated today, along with other changes, by a Commencement Order laid in Parliament by HM Treasury.

 

Sally Dewar, the FSA’s managing director of risk, said:

 

"This is an important new tool for the FSA, which increases our ability to get redress for consumers when firms have not followed our rules. The power would obviously be used proportionately. It is not a substitute for working with industry where there is the potential to bring an issue to a fair and speedy conclusion. The FSA will, however, seek to use this power where necessary to ensure consumers are fairly treated."

 

The new power would be used in instances when there is evidence of widespread or regular failings that have caused consumer detriment. It is a rule making power, so the FSA must undertake cost-benefit analysis and consult each time it wants to establish a redress scheme.

 

The Commencement Order included a number of other changes:

 

• Removal of the FSA’s public awareness objective;

• Introduction of a requirement to have regard to the information provided by the Consumer Finance and Education Body in pursuit of its consumer protection objective.

• The power to publish decision notices as well as final notices. This means that the FSA can publicise enforcement actions earlier, rather than only at the stage of a final notice after a long delay where a person has appealed to the Tribunal.

 

Source: Financial Services Authority

FSA Website

This proposed guidance relates to the Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU 12) in the FSA Handbook. This guidance is likely to be of most relevance to Firms that will be non-ILAS BIPRU firms under our new liquidity regime.

 

The draft guidance was prepared in response to firms’ requests for additional information about the application of the new liquidity regime to non-ILAS BIPRU firms. Most of the material in the draft guidance paraphrases the requirements in the new liquidity regime, which apply to non-ILAS BIPRU firms. Some of the material ‘fleshes out’ the Handbook requirements that apply to non-ILAS BIPRU firms. For example, the draft guidance sets out some considerations that a non-ILAS BIPRU firm may wish to take into account when determining its liquidity resources.

 

Views on the proposed guidance are invited by Tuesday 26 October 2010.

 

Source: Financial Services Authority
 

 

Rosalie Langley Judd, Manager of Governance Policy, FSA spoke at the Financial Stability Institute Seminar on Corporate Governance Reforms on the Significant Influence Function Review in the United Kingdom.

 

After discussing the background to the regime, the impact of the financial crisis which led to recent proposals for change, a detailed analysis of the steps taken to approve a SIF, she concluded:

 

"It is clear to us that the financial crisis exposed significant shortcomings in the governance and risk management across numerous firms. And although poor governance was only one of many factors that contributed to the financial crisis, it was an important one. So, just as we are taking action on a range of fronts in our response to the crisis – from capital and liquidity, right through to asking questions about the very nature of our financial system – we are also addressing issues around governance and the culture within firms."

 

"… our governance work is within our overall programme to improve our regulation, and is part of our more intensive supervisory approach. We now have a much greater focus on making our own judgments, for example, about individuals performing key roles and the sustainability of business models of firms. We will and have intervened where we have concerns."

 

"We cannot simply rely on monitoring systems and controls or assuming that firms’ senior management are necessarily always best placed to make these judgments alone. And so our emphasis now is on supervising governance in action – and that means evaluating the outcomes of the processes and structures firms have put in place and greater scrutiny of individuals before they are in positions of influence, and once they are in place."

 

"We know that we won’t remove all risk from the system, but nor would we want to. We want to make sure that regulated firms are well-run, recognise the risks they face and put in place appropriate strategies, systems and controls. All of this work aims to respond to the lessons we have learned from the financial crisis and to make our regulation more effective to reduce the risk of the same problems happening again."

 

Source: Financial Services Authority

FSA Website

 

As the regulatory landscape in all industries continually changes, so do the compliance regulations and requirements to stay within industry rules.

 

The TCC team has a wealth of experience in reviewing client processes and procedures and has a proven track record of establishing clear and concise processes that provide clients with a time- and cost-efficient regulatory process.

 

To find out how we can help you please contact us on 020 7645 8808 or email info@theconsultingconsortium.com

 

Source: The Consulting Consortium

TCC Website

FSA have published CP 10/23 which closes for consultation on 14 December 2010. This CP will be of general interest, and will be particularly relevant to both the regulated community and unregulated persons against whom FSA may use our enforcement powers. This CP will not directly affect consumers, although its contents may be of interest to consumers and consumer groups to the extent that they benefit from, and so may wish to know about, FSA’s approach to enforcement.

 

The aim of this CP is to seek views on the amendments FSA are proposing to make to ensure that the Decision Procedure and Penalties manual (DEPP) and the Enforcement Guide (EG) continue to contain accurate and up-to-date statements of FSA’s approach to enforcement. In addition, the CP meets the public commitment FSA made in July 2007, when they first published DEPP and EG, to review those materials at least annually and to consult on all changes to EG even though, unlike DEPP, it does not form part of the Handbook and is not therefore subject to Handbook consultation requirements.

 

This CP also seeks views on FSA’s proposed imposition of a new rule in the General Provisions module (GEN) relating to the payment of financial penalties. FSA are proposing to impose a new rule in GEN that an authorised firm must not pay a financial penalty imposed on a present or former employee, director or partner of the firm or an affiliated company. This rule will not apply to sole traders.

 

FSA also propose to make the following changes to DEPP and EG:

 

• Include their policy for publishing decision notices in EG.

• Amend their policy for reviewing published notices and press releases.

• Apply the settlement discount scheme to the length of periods of suspension.

• Adopt a penalties policy and decision maker for using FSA enforcement powers under the Cross-Border Payments in Euro Regulations 2010 (the ‘Cross-Border Regulations’).

• Adopt a decision maker in relation to giving statutory notices under various parts of the Financial Services and Markets Act 2000 (FSMA).

• Describe the new enforcement powers FSA have been given under legislation other than FSMA.

• Update existing policies to ensure they are consistent with recent amendments to FSMA or other legal developments.

• Make minor clarifications to ensure EG and DEPP give a clear statement of FSA enforcement policy.

 

Source: Financial Services Authority

FSA Website

This proposed guidance relates to the Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU) – Section 4. This guidance is likely to be of most relevance to Banks and Building Societies.

 

As background to this consultation, FSA have explained that their reviews in the income-producing real estate (IPRE) asset class have covered a large number of firms and portfolios. As a result of these reviews, FSA believe IPRE is a particularly difficult asset class for which to build effective rating systems that are compliant with the requirements of the internal ratings based (IRB) approach.

 

In addition to formal model reviews, FSA have undertaken bilateral discussions with some firms so they can better understand the strengths and weaknesses of the firms’ chosen modelling approaches.

 

To summarise the key issues, FSA have stated that models should:

 

• Include all key risks for the portfolio being modelled;

• Have an appropriate level of calibration to reflect long-term average default rates and interaction with the model philosophy;

• Meet the appropriate model standards regarding calibration, discrimination and accuracy; and

• Be subject to robust validation

 

FSA have asked for responses by 29 October 2010.

 

Source: Financial Services Authority
 

 

The Financial Services Authority has confirmed that advisers will still be able to earn trail commission on retail investment business put in place before the end of 2012 but which continues after the new adviser charging rules come into effect. It will also allow trail commission to be transferred ("re-registered") to a new adviser, subject to the terms of the contract between the provider and the previous adviser and provided the new adviser is offering an ongoing service to the retail client.

 

The measures clarify an issue that was not fully dealt with in the FSA's final Retail Distribution Review (RDR) rules, published in March 2010. The final text is included in the regulator's quarterly consultation paper of 6th October.

 

 

Under the RDR rules, commission will no longer be payable by a product provider on new business after the cut-off date of 31st December 2012. A firm making a personal recommendation to a retail client in the UK to invest in a retail investment product will be paid an adviser charge agreed with the client in advance. However a new transitional rule proposes to allow continued payment of trail commission on "legacy" business after 31st December 2012, subject to the original contractual terms agreed between the provider and the adviser.

 

This would also apply where a firm gives advice on a commission basis shortly before the end of 2012 but the initial or trail commission is not actually paid by the provider until 2013. If the adviser firm or its book of business is subsequently sold to another firm, the trail commission will be payable to the new firm in accordance with the original contractual terms.

 

 

Re-registration is the process that allows trail commission to be switched to another firm when a client changes financial adviser. Some product providers' terms of business allow re-registration, others do not. Although the new adviser will not have provided the original advice service, the transfer of trail commission is usually justified on the grounds that the new adviser has taken on responsibility for the client's future financial arrangements. In some cases, but not all, the product provider specifically requires the new adviser to provide an ongoing service. The client will usually be made aware that a re-registration is taking place because the product provider requires the new adviser's application to be countersigned by the client. The FSA is proposing to allow this market practice to continue, subject to a few new conditions.

 

 

Similar provisions allowing trail commission would also apply to the consultancy charge earned by firms advising employers on group personal pension schemes. The consultancy charge operates in a similar way to adviser charging, except that the advice is given to the employer, not to individual retail clients. Firms assisting employers with the setting up and administration of group personal pensions after 31st December 2012 will agree a consultancy charge with the employer, rather than being paid commission set by the pension provider.

 

The FSA proposes to deal with trail commission in this market in much the same way as for retail investment products. Similar rules will apply requiring disclosure of information and an ongoing service but these will be provided to the employer who set up the relevant scheme.

 

The consultation closes on 6th December 2010. The trail commission rules will come in to force with the rest of the RDR rules at the end of 2012.

 

Source: Financial Services Authority
 

 

TCC provides support across all the examining bodies and is also an approved training provider for the ifs Diploma for Financial Advisers.

 

To learn more about the key elements of RDR please read our latest article here.

 

For more information on how TCC can help you cope with RDR and all the RDR Training requirements, please call us on 020 7645 8808 or email info@theconsultingconsortium.com

 

Source: The Consulting Consortium

TCC Website

The Committee of European Banking Supervisors (CEBS) has published a consultation paper including draft guidelines on remuneration. This is part of the implementation of the CRD3 provisions on remuneration. The draft guidelines will no doubt impact on the final draft of the extended FSA Remuneration Code in the UK, which is due to be published in final form towards the end of November before taking effect from 1 January 2011.

 

The consultation paper and draft guidelines, which can be accessed by clicking on the link below, are extremely general and overall contain little of surprise as much of CEBS’ reasoning and guidance already features in the FSA’s draft Remuneration Code and no doubt the FSA’s own consultation paper heavily influences CEBS’ own paper.

 

However, three points are worth highlighting:

 

• CEBS proposes that where there is a requirement to pay bonuses or other variable remuneration in cash and non-cash (usually shares) on the basis of a 50:50 split, a bank cannot pay cash first and then provide the shares as the deferred element. The FSA had previously indicated it was prepared to see shares paid subsequently so the prized cash element could be received first. CEBS’ interpretation means that where 60% of variable remuneration has to be deferred so that only 40% can be paid up-front, only 20% of a bonus can therefore be paid in up-front cash. The FSA will presumably have to fall in line with this guidance if it is included in the final version of the guidelines.

 

• CEBS has given no guidance on actual maximum ratios between fixed and variable remuneration, which could provide a cap on the multiples of salary which can be paid as bonus. It was feared that they might set a cap which banks would have to follow, but there seems no intention of them doing this at least in the short term.

 

• CEBS also seems to suggest that shares are required to be held even after they have vested. The FSA’s draft Remuneration Code had not addressed retention, although said that it was something that would be considered. In effect, this means that even up-front payments may have to be deferred, which has not generally been appreciated.

 

There is to be a public hearing in London on 29 October on these guidelines, and consultation is open until 8 November. This means that there will be a very tight timetable for the final version of the FSA’s Remuneration Code to take effect this year, although the FSA itself has said that the new deferral rules on payment in shares may not take effect until next year’s bonus round.

 

Source: Committee of European Banking Supervisors

CMCK Website

The BBA have published a press release stating:

 

"The BBA's members will continue to handle all PPI-related complaints in accordance with FSA rules. Where the assessment of the complaint would not be affected by the judicial review, these complaints will be handled in the normal way. If your complaint will be impacted by the judicial review, and cannot be resolved at this point, then your bank will write to inform you."

 

"Customers should be assured that all complaints will be reviewed - even those delayed by this judicial review process. There is no deadline for receipt of complaints. If customers have a problem regarding PPI they should contact their bank and, if necessary, complain in the normal way."

 

Source: British Bankers’ Association

BBA Website

Do you and your team have the time or skills to deal with complaints?

 

We offer a service that takes the pain out of complaints – we can design an end to end process and provide the skilled resources to support your firm.

 

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Source: The Consulting Consortium

TCC Website

Actions designed to help business thrive and grow have been published in the report of the Business Finance Taskforce.

 

The Taskforce banks have committed to 17 actions in three broad areas:

 

1) Improving customer relationships;

2) Ensuring better access to finance; and

3) Providing better information and promoting understanding.

 

John Varley, chief executive of Barclays and chairman of the Taskforce, said:

 

"As banks we have an obligation to help the UK economy return to growth. The private sector will play a key role in the recovery and it's our job to help viable firms to be successful. SMEs are particularly important as a source of job creation and growth. The Taskforce has agreed a range of measures to help businesses get the advice and support they need, provide wider access to finance and deliver better customer service. We look forward to working with the authorities and with business groups to take these initiatives forward."

 

BBA chief executive, Angela Knight, said:

 

"The Business Finance Taskforce demonstrates banks’ real commitment to helping their business customers. The proposals are substantial, wide-ranging and represent a real opportunity for the banks to provide finance, help and support both directly and through partnership with business organisations up and down the country. Our members appreciate they have a role to play in supporting the UK economy and are determined to play their full part in the nation’s economic recovery."

 

Source: British Bankers’ Association

BBA Website

Remortgaging accounted for only 25% of loans in August, the lowest proportion in over 10 years, according to the latest survey data from the Council of Mortgage Lenders. August saw 25,000 remortgage loans, worth £3 billion, advanced by lenders. The number of loans was down 13% and the value down 14% from July. Both were 19% lower than a year ago.

 

With interest rates expected to remain low for some time yet, there is little incentive for borrowers to move away from low reversion rates at the end of tie-in periods. And continuing tight credit conditions mean that some borrowers are unable to access new refinancing deals. So there is little prospect of a significant rise in remortgaging in the coming months.

 

There were 51,600 house purchase loans (worth £7.7 billion) advanced in August, a fall of 8% (by volume and value) compared to July. While this is in line with the usual summer lull in market activity, a rise of 3% (by volume) and 12% (by value) from August 2009 shows that 2010 house purchase lending is still proving slightly more robust than the low levels in the equivalent months of 2009.

 

Source: Council of Mortgage Lenders

CML Website

The chief ombudsman, Natalie Ceeney, and principal ombudsman, Tony Boorman, have been before the Treasury Select Committee as part of its enquiry into financial regulation.

 

Source: Financial Ombudsman Service

FOS Website