Compliance News - 26 November 2010
The FSA has made a statement to clarify their Open Letter addressed to industry representatives headed “Common point of sale failings for PPI sales”. On 8 October 2010, the British Bankers Association commenced proceedings for judicial review of the FSA’s Policy Statement 10/12 dated August 2010 on the assessment and redress of PPI complaints. The FSA is defending those proceedings.
FSA stated:
“As a result of the British Bankers’ Association’s well publicised legal challenge to our PPI provisions, we have become aware that the Open Letter may have been misinterpreted. We are therefore issuing this statement.”
“We understand that the BBA interprets the Open Letter as meaning that the FSA considers that a sale in which any one or more of the Common Failings occurred would necessarily involve a breach of the FSA’s Principles for Businesses or other rules or the general law, without there being any further need to consider all of the relevant circumstances of the particular sale in which the Common Failing or Failings featured.”
“That is not the FSA’s position. Rather, it has been the FSA’s experience, based upon the thematic and enforcement work mentioned above, that sales in which one or more of the Common Failings occurred usually involved, on a proper consideration of all the circumstances of the sale, a breach of at least one of the FSA’s Principles for Businesses, or other FSA rules, or the general law.”
Source: Financial Services Authority
Sheila Nicoll, Director, Conduct Policy Division, FSA, addressed the Future of Retail Banking Conference in London in a speech entitled:
“Retail Banking: Getting the Right Framework and Regulatory Regime”.
Her detailed, informative and lengthy speech which covered the Banking Conduct Regime and Complaints concluded by summarising:
“There is going to continue to be a lot of activity and interest in banking for the foreseeable future:
- We expect the European Union to come forward with new measures to promote the single market and enhance consumer protection across the EU;
- The Banking Commission will continue its work, reporting in 2011 and;
- We expect a Consultation Paper from the government on the future regulatory regime for consumer credit.”
“We will watch, and where appropriate, actively seek to influence these wider developments. And we will also continue to play an active role as regulators in enhancing consumer protection and promoting better outcomes for customers in this extremely important market.”
“We as regulators and you as businesses all have the same interest: customers who trust and feel confident about the financial institutions they are dealing with. That’s good for society and good for business.”
Source: Financial Services Authority
Alexander Justham, Director of Markets, FSA, addressed the TradeTech Liquidity Conference in London with a speech entitled:
“Evolving market structures and the focus on speed – how the regulators should try to keep pace”.
He focused on one specific strand of the regulatory debate, the so‑called ‘micro-structural’ issues, such as:
- High frequency trading (HFT) and other algorithmic trading;
- The fragmentation of trading;
- ‘Sponsored access’ services; and
- The co-location of market participants’ trading systems with the systems of the trading venues they use.
The speech then went on to cover:
- Recent evolution of the markets
- The framework for regulatory change going forward
- Market efficiency
- Market resilience
- Market integrity
- Market fairness
- Action to mitigate risk
- International coordination by regulators
Mr Justham concluded:
“The FSA is committed to ensuring that markets remain fair, orderly and clean, and that regulation is targeted and proportionate and keeps up with market developments. We do not perceive anything fundamentally new in the issues raised by HFT or the range of other market developments I have touched on. But, they do present new challenges to maintaining market integrity, in particular by dint of the speed they involve.”
“It is vital that regulators and market participants – be they firms or trading venues – recognise this and act accordingly. We will work actively with our peers overseas to ensure a joined-up approach to regulation, and we look forward to continuing an equally collaborative approach with the industry.”
Source: Financial Services Authority
The FSA has obtained a High Court ruling appointing provisional liquidators over three firms that the FSA considers were engaged in insurance activities without FSA authorisation. The firms offered BSkyB’s (Sky) satellite TV customers a form of extended warranty which constituted insurance.
In return for an insurance premium of between £6.49 and £11.49 per month, the firms promised customers unlimited callouts covering all parts and labour costs. In the view of the FSA, the products described as warranties by the firms amounted to contracts of insurance and arranging and effecting contracts of insurance is a regulated activity. None of the firms had ever been authorised by the FSA.
Source: Financial Services Authority
The annual growth in the banks’ net mortgage lending was 3.5% in October, substantially ahead of the 0.8% for the whole mortgage market in September.
BBA statistics director, David Dooks said:
"Activity in the mortgage and consumer credit markets continued to be subdued in October, reflecting uncertain prospects for households and lower consumer confidence.
"Credit availability for viable businesses has improved, so a continued contraction in net lending growth reflects repayment behaviour, particularly by larger companies."
Source: British Bankers’ Association
With complaints about spread betting expected to reach 200 this coming year, the Financial Ombudsman Service has published technical help on their web-site. The FOS can consider complaints on spread-betting as it is a special type of bet and regarded as a Contract for Differences, thus regulated under FSMA 2000.
Source: Financial Ombudsman Service
The Financial Ombudsman Service deals with a significant number of cases from consumers who complain that they are in financial hardship and that their lender is not providing them with an appropriate level of help. This includes complaints that the lending was unaffordable from the outset, and should not have been allowed by the lender in the first place.
Complaints about financial hardship and affordability are often linked. The consumer’s financial difficulties may stem from unaffordable lending.
The FOS website explains how they approach complaints involving financial hardship and unaffordable lending related to consumer debt (for example, current account overdrafts, credit card debts, loans and hire purchase). It does not deal with complaints about financial difficulty in relation to mortgages. It does not provide debt advice.
Source: Financial Ombudsman Service
A section of the FOS web-site is devoted to giving small businesses answers to the questions they have most frequently asked by the smaller businesses they cover: from insurance brokers and independent financial advisers (IFAs), to pawnbrokers and retailers with a consumer-credit licence.
The FOS quick guide sets out what is needed if a consumer complains. The procedures largely reflect what is generally held to be good customer service. This includes:
- Carrying out a proper investigation into the complaint;
- Keeping in touch with the customer – and telling them what's happening on their case;
- Telling the consumer about their right to refer their case to the ombudsman service, if they remain dissatisfied.
Source: Financial Ombudsman Service
The Department for Business, Innovation and Skills (BIS) has launched a wide-ranging review of the UK’s corporate governance arrangements. The review, entitled: “A Long Term Focus for Corporate Britain”, will examine the UK’s existing capital markets regime with the principal task of establishing whether short-termism has gained the upper hand in the UK’s equity markets. As part of this review the relationship between directors, companies and shareholders will also be examined, along with some scrutiny of issues around takeovers.
The paper calls for stakeholders to come forward with evidence, or counter-evidence, for the assertion that short-termism has taken hold in the UK’s equity markets. It also poses a number of questions regarding beneficial ownership, engagement, agency issues, remuneration and accountability.
“I want a serious examination and debate” says Business Secretary Vince Cable, “into the role of investors and the time horizons over which they operate; the reasons for the growth of directors’ pay; the impact of the investment chain; why returns from equity have reduced and why takeovers that are economically damaging still take place.”
“The paper I am issuing is a call for evidence from across the corporate world and beyond to examine whether the system in which our companies and their shareholders interact promotes long-term growth – or undermines it.”
The consultation closes on 14 January 2011 and responses will be published on the BIS website by 14 April 2011.
Source: Department for Business Innovation and Skills
