Compliance News - 3 December 2010
In June 2010 as part of the Mortgage Market Review FSA announced that they would be extending the approved persons' regime to include anyone who advises on or sells mortgages.
Whilst FSA remains committed to making these changes to the approved persons' regime, as part of their ongoing reprioritisation of work - particularly around the regulatory reform agenda - they are deferring introduction of the changes to 2012/2013.
Once the rules are finalised, FSA will give firms sufficient time to put changes in place to comply with the approved persons' regime, as with any new rules. FSA will be publishing a full economic analysis of all their Mortgage Market Review proposals next year which will inform the final rules.
Source: Financial Services Authority
The Council of Mortgage Lenders welcomes the statement by the Financial Services Authority that it is deferring implementation of extending the approved persons regime to all those who sell mortgages.
CML director general Michael Coogan observed:
"With improved professionalism and a range of mortgage issues out to consultation, it is sensible to make changes affecting individual sellers all at the same time. Bearing in mind the fact that firms would prefer to be able to budget and plan ahead for change, we are pleased to see the FSA taking a sensible and pragmatic approach on this issue for 2011."
Source: Council of Mortgage Lenders
Sheila Nicoll, Director, Conduct Policy Division, FSA has written to all Compliance Officers of firms selling non-investment insurance protection products, with particular reference to oral disclosure.
Ms Nicoll explained:
“On 30 June 2010 we published our post implementation review (PIR) of the Insurance Conduct of Business Sourcebook (ICOBS) that came into effect on 6 January 2008. The review found significant failures by firms concerning oral disclosure in sales of protection products, in particular Critical Illness Cover (CIC). These findings were disappointing, particularly as oral disclosure rules were introduced in ICOBS, following the shortcomings identified in our thematic review in 2006: The sale of critical illness cover: results of thematic work.
We are therefore writing to all firms that sell protection products to reiterate our ICOBS requirements for all firms to:
- Make appropriate oral disclosures when selling a protection product to a consumer by phone or face-to-face;
- Provide product information in a way which is clear, fair and not misleading; and
- Be clear about the status and scope of service the firm is providing and that any advice given must be suitable.
All firms selling protection products are required to establish, implement and maintain adequate policies and procedures sufficient to ensure compliance with the rules in ICOBS.4 Firms have 6 months from 29 November 2010 to comply with FSA’s requirements. The letter has attached to it a helpful summary of key areas where firms are failing to meet ICOBS requirements which, although specifically based on the sale of CIC, may be interpreted as applying to other products.
Source: Financial Services Authority
FSA has invited comments on the draft text of a proposed Dear CEO letter which articulates detailed risk management requirements in relation to liquidity and funding risk in BIPRU 12.3 and 12.4. Other areas discussed in this letter are covered under BIPRU 2.3 (interest rate risk) and SYSC (senior management arrangements, systems and controls).
This guidance is likely to be of most relevance to all ILAS BIPRU firms, although smaller firms will need to consider the content of this letter proportionately and in the context of their own business model. This consultation sets out the ‘good practices’ FSA has observed during their asset and liability management (ALM) examinations over the last year.
The key issues have beeen summaries as follows:
- The role of the senior ALM committee, examining in particular the core purpose of this committee noting that, in many firms the function is also responsible for designing and implementing a funds transfer pricing mechanism;
- The composition and authority of the senior ALM committee, noting that the most effective senior ALM committees appear to be those that are chaired routinely by the CEO;
- The forward-looking nature of, and decisions made by, the senior ALM committee. FSA have noted that their reviews highlighted a focus on monitoring and commenting on the past rather than proactive management of the future;
- The degree of challenge observed at the senior ALM committee. FSA stated that they expected the minutes of ALM meetings to give non-attendees insight into the discussion and challenge which took place.
Source: Financial Services Authority
FSA has advised that they have closed their supervisory investigation into RBS and that no enforcement action will be taken.
The review concluded that the decisions taken regarding the acquisition of ABN AMRO in 2007 and capital raising in 2008 were not the result of a lack of integrity by any individual and they did not identify any instances of fraud or dishonest activity by RBS senior individuals or a failure of governance on the part of the Board.
Source: Financial Services Authority
FSA Website
FSA Website
This newsletter contains:
- Publications issued since the last edition including:
o CP10/24 – Regulatory fees and levies – policy proposals for 2011/12
o CP10/28 – Mortgage Market Review: Distribution & Disclosure
o CP10/29 – Platforms: Delivering the RDR and other issues for platforms and nominee-related services
o PS10/17 – Taping of mobile phones – Feedback on CP10/7 and final rules
- Information about recent Handbook–related and other developments
- Other publications – Guidance consultations
- An updated timetable for forthcoming publications.
Source: Financial Services Authority
Jonathan Davis has been appointed the new Director of Investment Affairs of the ABI. He will take up the role in January 2011 and will work closely with Alain Dromer, recently appointed Chairman of the ABI’s Investment Committee, to develop and promote the ABI’s point of view across a wide range of financial and economic issues.
Jonathan founded Independent Investor, a specialist website for private investors, and has been closely involved in capital markets for 30 years, including writing regular columns for the national media, most recently for the Financial Times and Spectator. He is currently a non-executive director at Agrifirma Services Ltd, Hargreaves Lansdown plc and Victoria Capital (UK) Ltd and the author of two books on investment.
In his new full-time role, Jonathan will lead a team of 12 people. ABI members have £1.6 trillion invested in assets, including control of 13.4% of investments in the London stock market and £200 billion in Government bonds. He will succeed Peter Montagnon, who left the ABI to join the Financial Reporting Council earlier in 2010.
Source: Association of British Insurers
Natalie Ceeney, Chief Ombudsman and Chief Executive has started the latest edition with an article on the value to financial services businesses of resolving compliants well. She states:
“When talking to financial services businesses – large and small, one of the most marked differences I’ve observed is in their attitude towards the complaints they receive. The more astute amongst them realise that effective and well-managed complaints-handling pays dividends for them – not just for their customer. There’s nothing new about this idea – and it’s what a number of researchers have been saying for quite a while. So it’s been a surprise to me to find some businesses still clinging to outdated and negative perceptions about customer complaints.”
Ms Ceeney went on the say:
“It’s clear that the way to generate positive ‘word of mouth’ is to make it easy for customers to complain – and to handle those complaints well. Businesses that succeed in doing this are those that are smart enough to learn from their mistakes. This idea is behind the FSA’s current consultation on the complaints-handling rules, where it is looking at:
- Requiring firms to identify a senior individual responsible for complaints handling;
- Abolishing the ‘two stage’ process – to shift the emphasis away from the mechanics of complaints-handling and on to the end result;
- Requiring firms to identify and remedy any recurrent or systemic problems with complaints; and
- Taking account of ombudsman decisions and previous customer complaints – and learning from the outcome.”
Other topics covered include vehicle related complaints, data on complaint figures from the second quarter of the current financial year, banking complaints involving the use of power of attorney, and the ever popular Q&A page.
Source: Financial Ombudsman Service
