Compliance News - 21 January 2011
FSA has published Guidance Consultation on Financial Promotions on advertising ISAs and adverts for investment professionals. Published on 20 January, the consultation ends on 11 February (two weeks in total).
The background to this consultation is that it is aimed at:
- ISA providers, as the 2011 “season” is approaching and firms may be planning ISA advertising. FSA is issuing guidance to remind firms of FSA’s expectations in relation to financial promotion rules.
- Adverts targeted at investment professionals as, following recent discussions with firms, FSA consider that further clarification is sought by the industry.
The guidance discusses compliance with the fair, clear and not misleading rule and issues of balance such as potential benefits and relevant risks.
Source: Financial Services Authority
The Financial Services Authority has confirmed that, after extensive consultation, retail investment advisers will need to hold a Statement of Professional Standing (SPS) if they want to give independent or restricted advice after January 2013. The statement will provide customers with evidence that the adviser subscribes to a code of ethics, is qualified, and has kept their knowledge up to date.
The SPS will be issued by FSA accredited bodies which satisfy the following criteria:
- They act in the public interest and further the development of the profession;
- They carry out effective verification services;
- They have appropriate systems and controls in place and provide evidence to us of continuing effectiveness; and
- They cooperate with the FSA on an ongoing basis.
The policy paper also sets out a requirement for investment advisers to complete at least 35 hours of Continuing Professional Development (CPD) each year, at least 21 hours of which must be structured. This could involve courses, lectures, seminars or workshops. All CPD has to focus on demonstrable change to improve advisers’ skills and knowledge. FSA research shows that over 70% of advisers are already achieving this amount of CPD.
When the RDR comes into force in January 2013, the FSA will start collecting information about individual advisers, such as the qualifications they hold and which accredited body they use.
However, in preparation for 2013, the first of the Professionalism rules will come into force in July 2011, and from this point firms will be obliged to notify the FSA if any adviser falls below the required standard of competence or ethical behaviour.
Sheila Nicoll, the FSA’s director of conduct policy, said:
“Rebuilding trust between customer and adviser is absolutely vital for the future prosperity of the retail investment market. In conjunction with the adviser charging rules announced earlier last year, today’s policy statement gives advisers the certainty they need to plan ahead for the RDR, whether that involves establishing a new business model based on adviser charging, working towards new qualifications, or filling gaps with CPD. Now is the time to prepare.
When advisers open for business in January 2013, a Statement of Professional Standing will be a vital indicator for customers that the person they are dealing with is subscribing to a code of ethics, has up-to-date knowledge, and is appropriately qualified.”
When advisers open for business in January 2013, a Statement of Professional Standing will be a vital indicator for customers that the person they are dealing with is subscribing to a code of ethics, has up-to-date knowledge, and is appropriately qualified.”
Source: Financial Services Authority
FSA have published a CEO letter on this topic, setting out examples of the good and bad practices FSA had observed during their Asset and Liability Management (ALM) review over the past year, suggesting steps that firms could take to make their ALM more effective and stating that smaller firms would need to consider what proportionate steps they should take.
Source: Financial Services Authority
The Financial Services Authority (FSA) and the Financial Reporting Council (FRC) have agreed a new memorandum of understanding (MOU) to enable a greater degree of co-operation and information exchange between the two regulators.
The MOU underpins the increased dialogue between the FSA and FRC on accounting and disclosure issues that has been in place since 2005 and follows the publication of a joint discussion paper on the audit of financial institutions published in June 2010.
The new agreement will deliver a closer working relationship between the FSA and the FRC’s Audit Inspection Unit (AIU) and will enable both organisations to improve their oversight of the audits of authorised firms. The AIU operates a risk-based system of audit inspections and its scope has been extended recently to include all banks incorporated in the UK to better support markets and the prudential regulator.
The FSA and FRC will assist each other in the performance of their respective functions by providing timely information, subject to any legal constraints. Where information shared is subject to confidentiality undertakings both regulators will handle the information in accordance with those requirements.
Source: Financial Services Authority
Wedged between Anthony Hilton and Alastair Campbell as fellow speakers at the Citywire and New Model Advisor event on 14 January, an FSA speaker only identified on their web-site as “Peter” covered the RDR and looked beyond that, addressing the following topics: Professionalism, Service Description, Adviser Charging, A More Sustainable Sector, Platforms, Making the Transition, Product Risks: UCIS, Structured Products and other changes such as those to the regulatory structure.
His closing remarks were:
“The RDR changes will mean that the retail investment market will be more competitive and transparent for consumers. Banks will not have a competitive advantage – they will have to abide by the same rules as IFAs. These changes, and others, will help us move to a well functioning market with competition, innovation and better consumer service its features. This will improve consumer outcomes and enhance the sustainability of the industry. Consumers will always need quality financial advice and products suited to their needs from advisers who display high standards of professionalism and expertise. This is what the RDR is all about.”
“The RDR changes will mean that the retail investment market will be more competitive and transparent for consumers. Banks will not have a competitive advantage – they will have to abide by the same rules as IFAs. These changes, and others, will help us move to a well functioning market with competition, innovation and better consumer service its features. This will improve consumer outcomes and enhance the sustainability of the industry. Consumers will always need quality financial advice and products suited to their needs from advisers who display high standards of professionalism and expertise. This is what the RDR is all about.”
An excellent speech worth reading for those in that sector. Also, Peter’s slides are available from the site, so click the link below and go to the “Related information” box to the right of the Introduction to download these.
Source: Financial Services Authority
